FEDERAL TRADE COMMISSION

I N D E X

AGENDA ITEM: PAGE:

Bart Gordon Remarks 4

Welcome-- Ms. Harrington 9

Chargebacks 41

Chargebacks for International Audiotext 104

Impact of Changes on Chargebacks 125

Billing & Collecting Issues 148

Billing Entities 198

Solutions 244

FEDERAL TRADE COMMISSION

In the Matter of: )

Workshop on Pay-Per-Call )

Rulemaking. )

------------------------------)

Thursday, June 19, 1997

Room 432

Federal Trade Commission

6th Street and Pennsylvania

Ave., NW

Washington, D.C. 20580

The above-entitled matter came on for

conference, pursuant to notice, at 9:00 a.m.

APPEARANCES:

FROM THE FEDERAL TRADE COMMISSION:

EILEEN HARRINGTON

ALLEN HILE

MARIANNE SCHWANKE

MARK HERTZENDORF

ADAM COHN

FROM THE INDUSTRY:

PETER J. BRENNAN, TPI

R. J. GORDON, R. J. Gordon & Co.

LINDA A. GOLDSTEIN, Hall Dickler

J. ALAN TAYLOR, Florida PSC

BARBARA MAJESKI, SNET

ALBERT J. ANGEL, ICN Limited

JON W. SHAUB, AT&T

JAMES H. BOLIN, JR., AT&T

DAVE GILLIS, NAAG

JILL SANDFORD, NAAG

REBECCA G. BOWMAN, NAAG

SUSAN GRANT, National Consumers League

KIM WILLIAMS, Southwestern Bell

WALT STEIMEL, JR., Pilgrim

JOEL R. DICHTER, Klein Zelman

DON KLUG, MCI

RONALD S. GOLDBRENNER, PMAA

TODD LESSER, JARTEL, Inc.

GARRETT L. PASSON, NTS, Inc.

PHILLIP MELLO, Telecompute Corp.

IAN K. EISENBERG

P R O C E E D I N G S

- - - - -

MS. HARRINGTON: Good morning, everyone, and

here we are again. I am Eileen Harrington with the

Federal Trade Commission's Bureau of Consumer Protection

staff. I am going to be moderating these sessions, and

as General Haig said, don't worry, I am in complete

control here, and I am going to demonstrate that by

making a switch on the agenda right off the bat.

Before we do welcome announcements and cover

process and ground rules for the next two days, we are

very honored to have with us this morning Congressman

Bart Gordon of Tennessee who long has had a very

thoughtful interest in issues concerning audiotext

services, telecommunications and consumer protection,

among others.

Congressman Gordon is on a very tight schedule

this morning, and we are going to turn to him for his

remarks. He has filed a comment and otherwise played by

all of the rules that all of the rest of you have. We

are delighted to have his input in this rulemaking, and

I now turn to the Honorable Bart Gordon from the state

of Tennessee for his comments, and then my understanding

is that the Congressman has a hearing and will be

leaving right away.

REPRESENTATIVE GORDON: I have a hearing on

electronic or Internet privacy, which we were just

talking about, so I will have to go back to the ranking

member on that committee, but first let me just -- I

want to thank you, Eileen, for the good job you've done

and the FTC in both implementing TDDRA as well as taking

this next step to try and finetune it and for all of the

folks here at the table, many of you I have been working

with over the years.

This is a very complicated issue in a lot of

ways. It reminds me what a former math teacher of mine

told me that there were three kinds of people when it

comes to arithmetic, those that understand it and those

that don't, and so I hope that you're ones that

understand this, because I know it's very complicated,

and I'm glad to join you.

I have included some formal remarks that go into

specifics on some of the questions that you asked, so

I'm not going to spend a lot of time on that, but to

give you a little background on how I became interested

and how really TDDRA got developed, as a member of

Congress, I have a lot of open meetings, and I went

through a period of time where I continued to hear

people complain about scams from 900 numbers, parents

who would find that a slumber party would result in a

lot of unknown bills being run up on their charges,

business individuals that would find that maybe a

delivery boy would come by and make a variety of calls

or a motel operator would find that a lot of

unauthorized calls were made and bills -- were coming in

to them that they didn't know anything about, and it was

something that the more you would ask about it, the more

you found it was out there, and so I tried to find a way

to what I think is restore the credibility of a very

important commodity, and that is electronic commerce and

800 numbers and 900 numbers.

In 1992, when TDDRA was first passed, the

teleservice business was less than a $1 billion

industry. Now it's more than a $6 billion industry, and

I think that if we maintain the credibility in the

service, as well as the potential for the Internet

coming online, it is just going to explode with the

0-800 numbers also coming online soon, and it's very

important, and I think this meeting is very important,

that we set those ground rules so that this industry can

continue to move forward.

As a result of TDDRA -- and also, I don't -- I

want to -- Lisa Fox is here. Lisa worked with me,

because I know -- there is Lisa -- was working on my

staff at the time, and we didn't try to dictate through

these rules. We just -- we tried to bring people from

all parts of the industry and talk about it, and Lisa

was very helpful.

Robin Mahl is -- has taken up the banner and is

working with my staff or is my legislative director

working on this issue now, and she will be here today,

and I want you to know that if there are -- whatever may

be concerns about the original intent of the law, please

contact me, I'll come back, I'll call or send whatever

information that you might need, and Robin will be here

to help on that.

But we found a real difference at home, the

complaints have gone down. I noticed in all the

comments they said the complaints have gone down. In

Tennessee, over 300,000 people now are using call

blocking, and I think -- I don't know whether it was

AT&T said that -- no, I'm sorry, another group said that

something like a third of their customers --

MS. WILLIAMS: Southwestern Bell.

REPRESENTATIVE GORDON: Yeah, used 900 blocking,

which is really amazing to me that you can communicate

that information. I'm someone who has learned that you

have to just say it over and over and over to make

people know something, and not only do they know it, but

they act upon it, which I think is very good and again

gives that additional credibility for the -- for the

industry.

Really the telephone now is an instrument of

electronic commerce like the POS, and we are going to

see more and more I think electronic commerce, and I

think as this comes about, we have got to recognize that

it's sort of a two-edged sword, that the original

purpose of TDDRA was to provide consumer protections to

give the industry a credibility so that it could

continue.

I think now we have got to be concerned that

with the protection the consumers have received, that

they also have a responsibility. If they know what they

are getting into and buy a service, then they need to

pay for that service, and that's something -- one of the

charges of this committee is to look at the billing and

collection procedures. Chargebacks I think now amount

to 40 or 50 percent of the industry, and so I hope that

that will be something that will be looked into. I have

presented some specific recommendations.

And although the Internet is something that when

we -- when we put TDDRA together, we thought that that

was something that would come along, and we gave you a

little hook there, and I think that we all recognize

that probably the -- it's like a doctor, do no harm. We

don't want to do any more than necessary, but I think

there is going to be some efforts to have some ground

rules in the Internet, and I think what we have learned

with the 900 industry can be taken over there.

Serving on both the Commerce Committee and the

Science Committee, we are going to be dealing with these

issues, and I am also working with Howard Magaziner. So

I would hope that outside of the specific

recommendations that you have, that as a group, you will

feel that you can come to me and to my office with

recommendations that may be outside this charge, of

things that you think we need to be looking at maybe in

a different way and things that we need to be sure we

don't meddle with, but please let me have the benefit of

all of your expertise and thoughts on that end.

So, with that I'll get out of your way and let

you get on with your job. And again, I thank you for

the good job you're doing and look forward to continuing

to work with you.

MS. HARRINGTON: Thank you, Congressman Gordon.

With that very helpful and I think focused

beginning, let me offer some observations as we begin

from the staff of the Federal Trade Commission and then

also go over with you what the ground rules are going to

be for this workshop conference.

As I look around and say, well, here we are

again, many of you participated in the original

rulemaking that interpreted portions of TDDRA. I was

thinking back on that last night and realizing that -- I

guess that that was four years ago that we were here

about the same time of year, figuring out what the

ground rules for the industry ought to be in regulatory

form.

That rulemaking proceeding was the first time

that the Federal Trade Commission had used this kind of

process in connection with regulatory work; that is, we

had previously, as most agencies had, I think, stayed

true to the somewhat dry and rigid process of notice and

comment, comment, comment, comment. What we found in

the 900 number rulemaking where we first used this

process was that, first of all, we, the staff people who

are responsible for doing this work, had much better

information upon which to rely as a result of the

dialogue that occurred at the rulemaking workshop.

Secondly, we were very impressed with the

efforts of the participants in that workshop to really

listen to one another and to modify positions where that

was appropriate. And so third, we found that when we

actually promulgated a rule, we had a rule that just

about everyone who had an interest in the issue was

comfortable with. It was almost but not quite I would

say a consensus rule. And so that was, I think, a very

positive experience, and I hope that the next two days

will be equally helpful and positive for all of us as we

try together to do the right thing.

Secondly, I was thinking about the rule itself,

and along with Congressman Gordon, who reports that he

has received hardly any complaints from his constituents

about 900 number scams since this rule took effect, we

at the FTC have also seen a huge drop-off in complaints

about -- about scams that are associated with the 900

number dialing.

Unfortunately, we have seen a huge increase in

pay-per-call and complaints about pay-per-call services

that are delivered outside of the 900 number dialing

pattern. And one of the hard issues that we have to

deal with is whether and how there might be a way to

extent TDDRA-type protections to consumers who avail

themselves of those services that don't use the 900

number dialing pattern. But in terms of a rule that has

had some positive effect in laying ground rules that

legitimate players have followed to the benefit of an

industry and consumers, we I think have been generally

pleased with the results of our rulemaking work last

time around.

The other thing that occurred to me as I was

thinking about this work is that the TDDRA legislation

and the rule that followed were the first efforts to

provide the state attorneys general, who are our most

important partners in the law enforcement field, with

access to the federal courts for enforcement proceedings

and to obtain relief for their citizens, and that

legislative and regulatory model has now been followed

in several other important consumer protection areas,

telemarketing sales, fair credit reporting and home

equity protection.

And so really this regulatory effort that began

with the enactment of TDDRA from our perspective brought

about a number of firsts. First in opening up the

process to one that involves more dialogue; first in

providing shared legal authority to the states to make

access -- to have access to the federal courts; and

really, I think, a first in -- in my anecdotal

recollection of rulemaking at the FTC, we weren't sued

over this rule, and we expect that we won't be over

whatever modifications we make either.

So, with those comments and observations, let me

tell you a little bit about how we are going to

operate. First of all, I'll be sharing the moderating

duties with my colleague, Allen Hile, who's an assistant

director in our division. So, either Allen or I will be

facilitating and moderating throughout.

We are joined by the excellent staff that will

be doing the actual work here, Carol Danielson, Adam

Cohn, Marianne Schwanke, Mark Hertzendorf. Throughout

the session, they will be asking questions of you and

trying to get you to talk to each other and respond to

each other.

As is always the case in these session, a very

high premium will be placed on participation that is

responsive and a very low value will be placed on

participation that's simply restates, positions taken in

written comments or otherwise is not really responsive

to what is being discussed at the table.

The process for being recognized is simply just

put your name tent up, and I will be calling on people

in some order but will be somewhat arbitrary about

that. I'll be keeping track of who wants to participate

but also recognizing people sometimes out of turn if the

interest that they represent seems particularly well

suited to respond to something that has just been said.

Hopefully everyone will feel that they have had an ample

opportunity to participate in the discussion.

I will also be recognizing staff people from

the Commission so that they can follow up with questions

in close proximity to the comments that have been made

by the person to whom they wish to address the

questions. So, please be patient. We will get to you,

but we will also be trying to facilitate dialogue here

rather than just a series of monologue presentations.

We will stay on schedule strictly. We need you

to do something for us right off the bat here, and that

is to identify yourself by name and affiliation. We

have a stenographer who is a making record of this.

This is part of a rulemaking proceeding, so we are

making a record, and it's very important that we know

who you are and who you represent when you speak, and so

we would like you, please, to do this once at the

beginning, and then I will try to call on you by name,

but if I don't, please state your name every time you

speak so that our reporter can keep a record of who is

saying what, and we may interrupt you if the reporter is

having difficulty identifying you.

The other sort of housekeeping point is that we

know that some of you represent organizations that have

more than one representative here and that you will be

switching off. We need you, before you switch off at

the break -- I'm assuming that you are going to be

switching at break times, and so at the break, please

see our reporter and tell her that you will be replacing

so and so on behalf of such and such group at the table

for the next session.

Is that all agreeable to everyone?

All right -- oh, and please wear your name tags

all the time, all the time. Thank you.

There are rest rooms on this floor almost

directly outside of the room. There is a telephone in

the anteroom area, although I would remind you that the

doors are open into that area. So, if you need to use

the telephone, if you could speak softly, that would be

helpful.

Does anyone have any questions before we begin?

Any questions about the process?

Okay, I would like first of all for the

reporter's benefit to ask each person to just say your

name and say what organization you're representing and

do it slowly. So, I'm going to begin.

I am Eileen Harrington from the Bureau of

Consumer Protection of the Federal Trade Commission.

MR. HILE: Allen Hile from the Bureau of

Consumer Protection with the Federal Trade Commission.

MR. COHN: Adam Cohn of the Bureau of Consumer

Protection of the Federal Trade Commission.

MS. DANIELSON: Carol Danielson, Bureau of

Consumer Protection, Federal Trade Commission.

MR. BRENNAN: Peter Brennan, Tele-Publishing

Incorporated.

MR. R. GORDON: Richard Gordon, chairman of the

Teleservices Industry Association.

MS. GOLDSTEIN: Linda Goldstein, Promotional

Marketing Association of America.

MR. TAYLOR: Alan Taylor with the Florida public

service commission.

MR. ANGEL: Albert Angel, ICN Limited on behalf

of ISA, Interactive Services Association.

MR. SHAUB: Jon Shaub, AT&T, Multiquest 900

Services.

MR. GILLIS: Dave Gillis, I'm with the Wisconsin

attorney general's Office and with me is Jill Sandford,

who is with the New York attorney general's Office.

MS. GRANT: Susan Grant, National Consumers

League.

MS. WILLIAMS: Kim Williams, Southwestern Bell

Telephone Company, representing Southwestern Bell and

Pacific Bell.

MR. STEIMEL: Walt Steimel, Junior, Hunton &

Williams, representing Pilgrim Telephone, Inc.

MR. DICHTER: Joel Dichter on behalf of the

International Telemedia Association. With me are Roy

Elliott, Executive Director and Toby Padgham, Associate

Director of the organization.

MR. KLUG: Don Klug, MCI.

MR. HERTZENDORF: Mark Hertzendorf, Federal

Trade Commission from the Bureau Of economics.

MS. SCHWANKE: Marianne Schwanke, Bureau of

Consumer Protection, Federal Trade Commission.

MS. HARRINGTON: Good.

Now I would like to take as brief a period of

time as we can but certainly no more than the next 35

minutes for each of you to introduce yourselves and to

make a very brief statement of what your interest is in

this proceeding, and we would like to hear from you.

One of the requirements, as you know, for all of you to

be seated at this table is that you not only file a

comment but read the comments of others. So, you should

assume that we all know everything that you have written

in your comments, and we don't want you to rehash that.

What we want to know, I think, is what you care

about most, what your group is most concerned about. We

are interested -- we are all stakeholders. We are

interested in appreciating the most important concerns

of each of you stakeholders, and I am going to just

randomly begin here with Susan, if that's all right with

you.

MS. GRANT: Sure. The National Consumers

League --

MS. HARRINGTON: Could you say your name again?

MS. GRANT: Oh, Susan Grant, vice president of

public policy at the National Consumers League and

director of the National Fraud Information Center.

The National Consumers League is the oldest

nonprofit consumer organization in the U.S., and we have

been involved for some time in protecting consumers'

interests with regard to telephone services. We operate

the National Fraud Information Center, which is a

telephone hotline and a web site through which consumers

can get advice about telephone, online and Internet

solicitations and report possible fraud, and we route

consumers' reports of possible fraud to law enforcement

agencies to alert them to them.

I have read everybody's comments, and I have

done a short list of what I think are major concerns.

The first is that presubscription agreements for calling

800 numbers should be confirmed in writing. Documenting

the agreement would reduce fraud and disputed charges.

Second, consumers need as much information and

protection in pay-per-call services using international

phone numbers as in 900 number calls. Frankly, if we

can't find a good solution at this time, perhaps the use

of international numbers for these purposes should be

banned.

Third, pay-per-call promotions on the Internet

must clearly state all terms and conditions, and I feel

that this is a very complex issue but one that the

industry can work with us all on in developing

guidelines to ensure adequate disclosure for consumers.

And finally, consumers should not be intimidated

from disputing pay-per-call charges or unfairly barred

from access to telecommunications services. Information

providers have chosen this particular medium to sell

their services and collect payment. The burden should

be on them to show that consumers made the calls and

understood the terms. If they cannot do that, consumers

should be given the benefit of the doubt for disputed

charges.

Thank you.

MS. HARRINGTON: Well, one of the reasons that I

called on Susan first is that I knew she would be the

model pupil.

MS. GRANT: Thank you.

MS. HARRINGTON: And clearly and succinctly

stating interests. That was perfect, so all of you

should do it just like Susan.

Now, I am going to randomly call on someone

arbitrarily, who might have a slightly different

position.

MR. ANGEL: I am here representing the

Interactive Services Association, and the ISA has been

an active participant in virtually all of the issues

that concern telephone information services and the

emerging area of online and Internet services. We have

several interests.

We would like to essentially refine the rules

that were adopted in order to institute some reforms

that will make possible more effective and efficient use

of these services. The types of reforms that we're

looking for are modification of the advisory that is

contained in the bill insert.

We're looking to finetune and enforce the

standards and operating procedures that are used by

billing agents in order to deal with dispute resolution,

in order to have a well-oiled machine that promptly

administers justice and gives timely notice to all

parties involved.

We are also participating to ensure that the

investment that we have made in this industry is not

diluted by rules that are not in the public interest.

So, we are really participating from a prophylactic

sense to keep things as good as they can possibly be.

And at the same time, we're trying to encourage

innovation in our industry, invite other parties that

might use different dialing patterns into the industry

but to play by the same rules that the rest of the

industry is playing by.

That's it.

MS. HARRINGTON: Excellent. Thank you, Albe.

Let's turn to a different perspective yet again

and here from the Florida Public Service Commission.

Alan Taylor, would you tell us what your

interest is?

MR. TAYLOR: Yes, thank you.

I'm here because in my opinion consumer

safeguards that currently exist are not effective. The

dialing blocks that are allowed in the current rules do

not stop consumers from being billed for information

services.

I think that what I would hope would happen here

is if calls are going to be -- if the definition is not

amended to include these other access codes, then we

need to send a clear message that the responsibility is

on the information provider to obtain -- to obtain

authorization for any calls that originate to any other

service access code.

I would like to make sure that the rules that

are adopted allow for a billing block option should the

Federal Communications Commission adopt this method of

giving consumers additional safeguards, and I see that

as allowing consumers who have 900 blocking -- I see

this as giving them the tools to block billing for other

service access codes if they so choose on an affirmative

basis. I'd like to make sure the definition is

broadened or that all calls are restricted to the 900

service access code.

MS. HARRINGTON: Thank you, Alan.

While we're hearing about calls outside of the

900 dialing pattern, let's turn to Joel Dichter, who

represents some of the interests that are using non-900

dialing patterns, and hear what your group's interests

are.

MR. DICHTER: Thank you, Eileen.

I represent the International Telemedia

Association, which consists of service bureaus, carriers

and providers of international audiotext services

through the various other dialing patterns like 011 and

809, et cetera, and we are aware -- the industry is

aware of the concerns that have been raised by the

groups around this table, including Susan and Mr. Taylor

from Florida, and we are here because we want to address

them. We have tried to come out with a code, set some

standards in the industry.

We want your input. I am sure with Susan we can

get together and find solutions to these areas and in

such a way that the industry can continue to grow on a

global scale and protect consumers at the same time.

MS. HARRINGTON: Thanks, Joel.

Well, let's hear from yet another perspective,

that of the LEC.

Kim, do you want to talk to us about

Southwestern Bell's interests?

MS. WILLIAMS: Yes, Kim Williams.

From my perspective, I think Southwestern Bell

believes that the 900 rules were effective in cleaning

up 900, and we applaud those efforts; however, we think

that everybody jumped to other dialing codes as soon as

those rules went in, and that's where our concern lies

now, is that there is always a way around whatever

protections are afforded consumers.

The complaints we see today about 900 have just

about disappeared. The only ones that do seem to come

in are those where 900 calls were never made but billing

was submitted for 900 calls. So, monthly fees and

things similar to that are being submitted under 900

number dialing patterns when no calls were ever made.

We're concerned about those things coming in on

our bill. We don't think the LEC is the place to stop

that, because we can't tell whether a call was a good

call or a bad call when it comes in to us for billing.

We can only trust that our billing customers are

submitting to us legitimate billing.

In the same respect, international causes the

same problem. A call to another country is a call to

another country when it's submitted to us for billing.

We can't tell if it is similar to a pay-per-call service

or if it's truly an international call, and we think

that issue needs to be addressed so that consumers can

be protected.

The same rules that have applied to the 900

pay-per-call services we think need to be applied to all

pay-per-call audiotext services to protect consumers,

and I don't think the LEC is the place to stop.

Stopping the billing from the LEC doesn't stop the

customer from being billed. There are alternative ways

to bill these services.

The LEC is not the only option for billing, so

how do you stop a customer from being billed for

something? You really need to stop the call from being

made or stop the service from being provided in a manner

that is not on the up and up.

MS. HARRINGTON: Thank you, Kim.

All right, a different perspective from Richard

Gordon.

MR. R. GORDON: I'm Richard Gordon, chairman of

the Teleservices Industry Association, and our purpose

here today and what we're trying to do, I think, is in

concert with everyone at the table in that while this

may be officially known as the Federal Trade Commission,

we on the TSIA front believe that it's really known as

the "Fair Trade Commission."

One of the things that's happened as a result of

the pendulum -- and when I speak of the pendulum, what I

mean is back in the late eighties and early nineties,

there were a lot of -- there was a lot of confusion and

there were a lot of consumer abuses where some unsultry

characters did take advantage of people because they

didn't understand -- the consumer didn't understand the

technology. TDDRA came along, and it set a standard,

but it didn't do the job completely.

As an example, the regulations say that the

consumer has a right to charge back a transaction within

60 days; however, there is no enforcement of that.

There have been multi-million dollar businesses

destroyed in the mid-nineties when chargebacks came back

that were a year, year and a half and two years old.

I challenge anyone at the table, including the

various state attorney generals, to stay in business if

a year after you've collected your taxes, suddenly half

of them disappear in the form of some form of

chargeback. I think Congressman Gordon has become very

sensitive and very aware to the fact that what's

happened here is chargebacks have become so easy that it

is actually a situation where the consumers are now

taking advantage of the industry. I don't know of any

industry in the world that can support a 50 percent

chargeback rate or a 50 percent refund rate.

Secondarily, we are working with hindsight. The

work that was done here in 1992 and 1993 certainly was

responsive to and a reaction to what was happening. The

TSIA didn't exist at that point in time. The TSIA was

formed a year and a half ago at the request of 15

industry leaders because we felt it was important as an

industry to self-regulate and to self-police.

Today, we represent over a thousand different

companies in the industry, a fact that I think is

important that everyone know about, is the TSIA sends

out on average a letter a day to people in the industry

that the TSIA staff find are in some way violating the

code of ethics, a voluntary code of ethics. I don't

think there is any funding in any government agency that

would support the level of research, self-police and

self-enforcement that is happening as the result of the

TSIA's efforts. And part of our mission here today is

to communicate to all of you exactly what we as a trade

association are doing.

When it comes to enforcement, there is nothing

better as a method of enforcement than to stop the

money. If people are promoting something and they can't

get paid for their promotion, the promotion will stop.

Again, on a voluntary basis, there are many, many, many

of our representatives here today that will be able to

testify about the fact that as soon as a violation is

found, the money is stopped on a voluntary basis. The

service bureaus and the international players freeze the

accounts of the companies that are, in fact, violating.

I don't think anyone today would be able to find

in any of the publications the use of the word "free"

because the industry has banded together in order to

make sure that consumers recognize that these are not

free services. The use of the word "free" has been

eliminated from 99 percent of all the advertising. In

fact, the publishers call and talk to each other

frequently about this.

The problem is that while we have eliminated the

word "free" from the advertising, because the wording on

the consumer disclosure notice is not uniform, is not

precise, and is not concise, the consumer reads that

notice of their rights and says, Oh, this is free.

We need to bring the pendulum back into the

middle where the consumer and the provider have adequate

balance, and it's our effort here and it's our intent

here to try to educate and to learn so that we will be

able to work with the Commission and truly have a Fair

Trade Commission.

Thank you.

MS. HARRINGTON: Thank you, Richard.

Let's hear from Don Klug.

MR. KLUG: Don Klug, senior manager for 900

services at MCI. Thank you, Eileen.

MCI's interests in this proceeding are to review

and modify TDDRA as appropriate to ensure that the

pay-per-call industry can continue to grow at a healthy

rate.

Kim Williams mentioned that consumer complaints

on 900 are almost nil. MCI in 1991 had about 20,000

consumer complaints on 900 calls. In 1996, we had 200.

That's under 1 percent. That's quite a drop in five

years, and I think that's much to the credit of the FTC

and the industry in terms of recognizing abuse in the

industry and implementing legislation to change that.

Representative Gordon also said it's a two-edged

sword. We need to be concerned about consumer

protection, but we also need to recognize consumer

responsibility. As Richard Gordon pointed out, the

pendulum as, indeed, swung.

And I think another thing to keep in mind in

these proceedings is not only has the industry changed

in the five years, but I think some of the applications

have changed, as well. Last year, MCI co-sponsored a

fund-raising 900 application with the Hearst publication

Le Clair and were able to raise over $50,000 for breast

cancer research. So, I think people are finding

innovative ways to use the technology for other

purposes.

MCI has a 900-77 -- 733 prefix dedicated to

business-to-business applications and AT&T has an

800-955. So, for those reasons I think the industry has

much changed.

MS. HARRINGTON: Thank you, Don.

Let's hear about other uses and interests from

Linda Goldstein.

MS. GOLDSTEIN: Thank you, Eileen.

The PMAA represents many of the Fortune 500

companies in this country in connection with their

various advertising, promotion and marketing

activities. So, our primary concern really relates to

the aspects of the rule as they might impact upon the

use of this medium by our members and the manner in

which the programs that our members might design would

be advertised and promoted to the public.

We basically have three primary interests -- or

I should say four primary interests in this proceeding.

One is that we do believe that the rule has been highly

effective in eradicating many of the abuses that

prompted the implementation of the rule, and we have a

strong interest in seeing that for the most part the

rule is maintained as status quo. In that regard, we

would be sorry to see much additional regulation or

additional burden imposed, particularly in the areas of

advertising or promotion or any additional regulations

relating to sweepstakes.

I think that our experience with sweepstakes

would parallel the experience that Don Klug mentioned in

that the incidence of complaints in that area has

certainly dropped, the number of applications have

dropped, and the elimination of many of the abuses has

now opened the way for many of our members who were not

as prone to utilize 900 as a medium to begin to use it

in increasing numbers today.

I would also point out that the telephone, while

there has been obviously much expansion in the use of

online, the telephone remains an attractive medium for

our members, because its reach still exceeds that of the

computer. So, to the extent that it allows our members

to conduct interactive types of promotions and programs

with its consumers as a way of building brand loyalty,

it remains an important issue to our members.

In terms of the substantive areas of the rule --

and in this rule review, there are really three

principal areas that we have an interest in. We support

the ISA's proposals in terms of reform to the billing

notice and a review of the LEC billing and collection

procedures. To the extent that we can -- we also have

found that the high chargeback rate continues to act as

a disincentive to certain of our members to embrace 900

number as a medium, and to the extent that some

reduction of the chargeback rate can be accomplished, we

believe that the integrity of the medium and its

attraction to our members will be further restored.

The second area in which we have a concern

relates to the offering of free periods of time or what

we refer to as some sort of a premium or sampling

program related to interactive services. We believe

that there is presently an ambiguity in the rules, that

that ambiguity should be corrected to allow providers of

audiotext services to allow consumers to sample or try

the service much the same as they are allowed to try and

sample other forms of product or service offered by our

members without the additional restrictions that the

advisory opinion issued last spring might suggest.

And thirdly, we have a very strong interest in

whatever position the Commission may take vis-a-vis

regulation of online services. And that is not such --

certainly the PMAA does not want to see the online arena

become fraught with any of the types of abuse that

plagued this industry in 1992, but our concern really is

that any advertising types of restrictions or

regulations or type size or placement requirements that

might be imposed in the context of this proceeding would

have precedential impact beyond the confines of

pay-per-call, and we feel that the whole issue of online

advertising and promotion is an area that really should

be looked at, if at all, in the context of a separate

proceeding in which the aspects unique to that medium,

the specific technological aspects and the technological

differences that are unique to that medium can really be

explored. So, we would hope that the Commission would

act with caution in that regard.

MS. HARRINGTON: Thank you, Linda.

Peter, let's hear from you.

MR. BRENNAN: Thank you. I'm Peter Brennan from

Tele-Publishing in Boston, Massachusetts.

I've participated in these hearings, in the

testimony before some of the Congressional and Senate

committees that led to TDDRA initially, so I was part of

the alumni, I suppose. So, welcome back. I have a

little bit less hair than most of us and more gray, but

here I am.

Tele-Publishing, our company, is the world's

largest supplier of voice personals. I won't embarrass

any of you by asking if you have tried them, but if you

have tried a voice personal on the television, radio or

Internet, this is a mainstream product. Ninety-six of

the top hundred daily newspapers in the United States

use them, and the percentage is higher when you get into

top than the top hundred newspapers.

Voice personals account for about 35 percent of

the current 900 number domestic business, and about 12

to 15 percent of singles above college age in the United

States use these services. It also is a service that

historically has among the lowest rates of chargebacks

in the industry.

Our primary concern here is a fair marketplace

and integrity of the billing and collection process and

the billing and collection system. So, our interest is

in pursuing that.

I would also -- just two additional notes. I am

also the chairman of the board of directors of the

Interactive Services Association, so even though we are

-- the ISA is ably represented to you by Albe and by

Warren Miller, I wanted to raise that notice, as well,

and I also wanted, since I have told you who we are, to

tell you who we are not. Please, make no mistake,

accept no imitations, Tele-Publishing is not the

Telephone Publishing Corporation which was recently the

subject of a huge liability and played a huge fine for

their problems. That's not us, that's them. Thank

you.

MS. HARRINGTON: Thank you, Peter.

Jon, what about AT&T's interests?

MR. SHAUB: Good morning, I'm Jon Shaub, product

manager for AT&T 900 services. AT&T's interest in this

is stimulating healthy, positive perceived growth in the

900 industry. For reasons similar to MCI, I'm sure, if

the industry doesn't grow, AT&T can't grow in this part

of the business.

Very much in line with that growth is perception

of people who are not using 900 services, businesses

that are not using it, perceptions that may still exist

as to the high chargeback rates that are agreed to, also

perceptions that it is an entertainment-only service and

does not have valid business use. So, we are willing to

help with anything that works to disspell that

perception.

MS. HARRINGTON: Okay, thank you.

Walt, can we hear from you and Pilgrim's

perspective?

MR. STEIMEL: Hi, I'm Walt Steimel with Hunton &

Williams representing Pilgrim.

We participated in this four years ago, I was at

the table for Pilgrim at that time, so I thank you for

the opportunity for letting us come back.

Our primary interests are, one, recognizing that

information services encompasses a number of services,

enhanced, pay-per-call, information, telemessaging,

voicemail and others and that whatever rules are adopted

should equally affect on a nondiscriminatory basis all

of those services, and that's the breadth of information

services that are out there. It's really, really large

and continuing to grow.

Secondly, we want to ensure the effective

operation of all the platforms, the dialing and billing

platforms permitted under statute. It seems like to us

that there are at least three platforms that were

recognized and permitted, 900 access, 800 and other

access with credit cards and calling cards, and then 800

and other access with written presubscription. So, you

have a written with notification only once of all the

conditions; you have a nonwritten access, non-900,

nonwritten with notification on every single calm; and

then 900 access. We want to make sure that whatever

rules come out of this forum continue to ensure the

effective operation of all these platforms.

We also want to ensure the nondiscriminatory

provision of billing and transport for all information

services, regardless of the dialing platform and the

accounting.

Should I wait for the police to go by?

MS. HARRINGTON: Yes, please. It could be an

important person. It might not be the police. We're in

Washington on Pennsylvania Avenue.

MR. STEIMEL: We also would like to see

encouragement of full access to 900 and other blocking

information. Blocking information is currently provided

at four different points in the dialing system. There

is 900 blocking in the local exchange carrier CO, which

is not available to interexchange carriers and

information providers. They are information digits that

are taken downline.

Then interexchange carriers and information

providers have their own blocking data base, then there

is the information contained in LIDB. All of those

items should be available to every party who is carrying

any information service call so that they can use that

-- use that blocking information to prevent consumers

that don't want access and information services from

getting onto those platforms.

So, that would be more of our request for full

competitive parity between all information service

providers and interexchange carriers. We would like

full provision of the billing options to permit the

TDDRA-required disclosures to be provided to consumers

for all information services, not just the ones that

have traditionally been provided, and without

restrictions on the dialed number, description, content

or any other restriction in the computerized billing

process, so that carriers can at their discretion always

provide the disclaimer to consumers for anything that is

not simply 1-plus calling your grandmother.

Those are our primary interests in participating

in this proceeding, and we look forward to the comments

of the other parties over the next two days.

MS. HARRINGTON: Thank you, Walt.

I mentioned that our most important partner here

at the FTC is the National Association of Attorneys

General in the states in enforcement and in sort of

needling out these policies, and I have saved the last

word on this opening statement of interests for David

Gillis, who is representing the state attorneys

general.

MR. GILLIS: Thank you very much, Eileen.

It's good to be here today. I also was here

some time ago when the first rule was the subject of a

similar workshop, and at that time, the state attorney

generals were involved and under the auspices of the

National attorney general Association, which has a

specific subcommittee involving representatives of 40

states, and Jill and I serve on that subcommittee, and

that's what brings us here today.

As the chief law enforcement officers in the

states, consumers look to the state attorney general to

deal when they find problems with -- in the marketplace,

when they feel they have been treated unfairly or

someone has taken advantage of them. And unfortunately

from the inception of the 900 number industry there has

been a considerable number of complaints that have been

filed with the offices of state attorney generals.

Fortunately, through the efforts of the Federal

Trade Commission and the Federal Communications

Commission, as well as industry representatives, the

complaints about 900 numbers have declined, but as

everyone has noted, we have seen problems migrate to

other dialing patterns.

There are three initial points I would like to

stress. The first is that we believe the approach taken

by the 900 number rule has been very effective, and the

reason why it's been effective in our view is that it

requires up-front disclosure so that people know what

they are getting.

Secondly, it provides a mechanism to stop

unauthorized call through call blocking in the Federal

Communication rule, and thirdly, there is a dispute

resolution procedure that is readily accessible to

people who feel they have been treated unfairly.

We want to see those protections and those

provisions continued. To look at solutions to these

problems simply as a problem for enforcement is not

enough. The ability of people to get into this industry

who are inclined to use sharp practices is simply too

easy, and the prospect of enormous gain resulting from

those practices continues to be an attraction. And this

I submit to you is what we have seen when we see

providers go to other dialing services.

The second point that I want to make is that the

problem of chargebacks should not be a basis to dilute

the protections of the rule. State attorneys general

prosecute businesses that engage in fraud. We certainly

don't support consumers that engage in fraud.

Having said that, though, we would point out

that there are alternative systems that information

providers could use that could eliminate their specific

problem for chargebacks. I would also note that in a

deregulated market, there are few guarantees, and that

the risk of who information providers want to deal with

should be borne by them, not the local exchange company

and certainly not the consumer. So, again, the second

point is that the problem of chargebacks should not be a

basis to diminish the protections of the rule.

Finally, we support -- the state attorneys

general, support expanding the definition of the rule to

cover pay-per-call services that are available through

other dialing patterns. Once again, we are seeing the

same sort of consumer frauds that were characteristic of

the early use of 900 numbers and international numbers.

We are seeing work-at-home schemes, scam travel

offerings and related types of services that do not

provide the service they promise to provide.

So, in conclusion, we're here today, and we

believe that by undertaking this effort, the Federal

Trade Commission will provide a firm basis for the

growth of legitimate pay-per-call services, yet

continuing protections for consumers that want to use

those services and protections from unauthorized and

unwanted charges.

Thank you very much, Eileen.

MS. HARRINGTON: Thank you, Dave, and thank all

of you. We are three minutes ahead of schedule. You

all were just superb in this first session. You are

following the rules well.

Let me just give you all an opportunity to stand

up and get more coffee. It's excellent, it's free, it's

in the back, and we are just going to take a

three-minute stretch, and right at 10:00, we are going

to pick up, and the first discussion is going to be a

discussion of the industry perspective, which doesn't

mean industry only, but we want to discuss their

perspective on this chargeback problem.

Thank you.

(A brief recess was taken.)

MS. HARRINGTON: All right, let's reconvene,

please.

As the agenda indicates, we would like some

discussion during this next segment on various

assertions that are raised from industry members about

the problem of chargebacks, and I guess I'd like to

begin with just a quick check on a simple factual

question, and that is, what is the rate? We hear 20

percent, we hear 50 percent.

Mark, do you want to phrase that question? Oh,

Mark's got his mouth full.

MR. HERTZENDORF: Yes. ISA in their comments

indicated that the overall chargeback rate was 20

percent. Perhaps they were referring strictly to 900

numbers and maybe the 40 and 50 percent figure that's

been touted refers to particular services or

international. So, I'm just wondering, is the figure 20

or 40 or 50 percent, and is it different for

international versus the 900 number?

MR. R. GORDON: If I may?

MS. HARRINGTON: Richard? And let me remind you

again that if you want to be recognized, just turn your

tent up. Thanks.

MR. R. GORDON: I think one of the problems here

is what is a chargeback or the definition of what's a

chargeback, and if you're taking a look at the technical

definition of what a chargeback is, the chargeback rate

may actually be 20-25 percent; however, we as

businesspeople look at how much revenue goes back, and

it's not just chargebacks. It's uncollecteds, it's 1001

different adjustments that happen, and I would be

delighted to defer to some of the experts behind me in

the billing and collection area. It's not just

chargebacks.

The other thing is that getting a true rate is

almost impossible, because what's happening and what has

continued to happen is that the 60-day provision in the

regulations is totally ignored. If a consumer calls in

six months, eight months, nine months after they have

been using pay-per-call services and they tell their

local exchange carrier, I never did this, that entire

block of transactions winds up being charged back.

I certainly agree with the various comments made

by the consumer protection groups and the attorney

generals where, you know, if there is someone that's

made four or five or if there is four or five billings

on a statement or maybe statements for a month or two,

that that's something that could be a billing error, it

could be some sort of mischievous behavior by someone,

but we're seeing more and more and more in the industry

that some of the LECs are actually using the extremely

loose interpretation of the rules almost as a way to

offset their own bad debt.

There is a number of cases -- and again, I

believe that the people here with the TSIA would be able

to testify to this -- where when we research these and

we find nine months' worth of pay-per-call chargebacks

suddenly come back, we actually find that a consumer

hasn't paid his phone bill or her phone bill for three

or four months. And somehow, they realize that if they

got a chargeback for $600 worth of pay-per-call, the

$200 deniable call records for which they could lose

their services was suddenly offset by this credit,

because they paid for five or six months on their phone

bill their other charges, and then suddenly they are

disputing the entire thing.

There is a problem here with perception, and the

perception is that the 900 call is a completely

refundable event irrespective of how long it's been on

the statement. So, when you ask about chargebacks, it's

very hard to come up with a real hard number, because

today it might be 30 percent, but tomorrow you might get

a year's worth of chargebacks back on somebody that

drives that particular program up to 35 or 40 percent.

I hope I've addressed the issue.

MS. HARRINGTON: Let's hear -- yeah, I was

actually hoping, Kim, that you would have something to

say on this.

MS. WILLIAMS: Yes, Kim Williams. I would like

to explain how our billing contracts work and how a

chargeback can occur.

MS. HARRINGTON: Can you before you do that

answer the question about what is the rate in your

view?

MS. WILLIAMS: I honestly don't know per -- I

mean, we track it per carrier on a 900 basis, and that

has dropped from -- we used to have highs of 40-45

percent. I would say that has dropped for some carriers

under 10 percent, some still run at 15 or 20 percent.

That's on 900.

Again, on the international audiotext side, we

can't really track it. One international call is like

any other international call in our billing system. We

can't tell which ones are audiotext and which ones

aren't. They are all international numbers. So, there

is no dialing code or no way for us to differentiate a

call to Guyana.

MS. HARRINGTON: And Richard, yes or no on

this: Is your assessment based only on 900 dialing

pattern calls when you talk about this chargeback issue

or are you including something other than --

MR. R. GORDON: No, right now this is only on

900. That's the only thing we have done the full

research on.

MS. HARRINGTON: Okay.

Kim, go ahead.

MS. WILLIAMS: Okay. When we set up a billing

and receivables contract, we basically purchase the

receivables of a company submitting billing to us. So,

if they submit a hundred dollars worth of billing to me,

I purchase that hundred dollars at some discounting

rate. I discount it for uncollectibles, and for each

carrier that's set for whatever that carrier's rate is.

If it's 3 percent, then I deduct the 3 percent for

uncollectibles. I deduct another percentage for an

adjustment rate. So, out of the hundred they sent me, I

pay them 90. Does that make sense?

MS. HARRINGTON: Question: Do you mean carrier

or information provider?

MS. WILLIAMS: I am saying carrier. Billing and

collection customer, which in my opinion is not an IP.

It is a carrier or billing clearinghouse who may also

provide some information services, probably bills from

many companies who do provide information services.

MS. HARRINGTON: Thank you.

MS. WILLIAMS: So, when I purchase that accounts

receivable, I am taking it minus a certain level of

uncollectibles and adjustments. I bill it to an end

user customer and get payment from them some number of

days later, and it -- truthfully, my payment to the

carrier is based on a number of days later that I know

that customer is going to pay. So, I may pay that $90

40 days after I receive it from the B&C customer. So,

is everybody following me on that?

So, when I do that, I purchase it, but I don't

purchase it expecting to eat that -- any of that money

that's not paid. As I said, I get -- I don't pay them

for what I think adjustments and uncollectibles will

be. So, I bill the customer, the customer I'm assuming

is going to pay his charges. If he calls me and asks

for an adjustment, depending on whether I do that

carrier's billing inquiry or not, which means handle the

end user customer's questions, I may issue an

adjustment, or if the carrier -- if the B&C customer

handles the billing inquiry, I may refer him back to the

carrier or customer who bills to me.

So, if an end user calls me and says I didn't

make these 900 calls, if I do billing inquiry, I handle

that complaint. If I don't, I pass him back to the B&C

customer. If he said he didn't make the calls, I go

through certain steps to try to sustain the charges to

see who could have made the calls, what time were the

calls made, does this customer normally make 900-charged

calls.

In the end, if the customer still refuses to

pay, I don't really have an alternative other than to

remove those charges from the bill. I am not going to

eat the charges myself, Southwestern Bell, and the

customer, if he's not going to pay them, I can't take

away his local service for nonpayment. So, I either

leave the money out there forever or I send it back to

the carrier, and -- or to the B&C customer. So, in this

case, I would send it back if the customer can't pay.

When he calls me today, 60 days from now, 90

days from now, a hundred days from now, I don't really

have a choice other than either leave that balance out

there forever, and in that case I've purchased the

accounts receivable, so it's my money now that I'm not

getting collected, or I send it back to the company who

sent it to me for billing.

MS. HARRINGTON: Do you ever -- do you ever

explore the option of bringing some sort of action to

collect?

MS. WILLIAMS: On 900 charges -- well, on -- as

far as collection goes, my action is to threaten

disconnection of nonpayment of the service. I mean,

that's truly what we get to, is either pay your bill or

you lose your service. Well, I can't threaten that with

900.

MS. HARRINGTON: That's why I'm asking if you

might be slightly more imaginative in this area. I

mean, that is, most creditors also consider or resort to

some sort of legal process.

MS. WILLIAMS: I don't do that on 900 charges.

I send them back to the carrier -- to the provider to

take that action themselves. So, I send them back with

recourse to that carrier, so that he can collect those

charges.

MS. HARRINGTON: Okay.

MS. WILLIAMS: If there are not -- if there are

deniable charges that aren't paid, then I pursue

disconnection for nonpayment of charges. If some

portion of that is 900, that 900 still goes back to the

provider. I don't send that to an outside collection

agency. The providers usually want it back as quick as

they can get it back so they can take their own

collection action, but we don't send those off to an

outside collection agency, only the deniable charges

that are there.

So, there is two ways I could send them back, an

adjustment on a live account or a write-off. When I

finally say this customer is never going to pay this

whole bill, which includes deniable charges, I write off

the charges, and I send them back for collection to the

B&C customer. So, the 60-day rule doesn't -- still

doesn't -- can't hold true for what we do. There is no

other choice after that, and my understanding of the 60

days is that you have to give the customer 60 days.

From a LEC perspective, we don't look at it as that's

all that customer can have.

MS. HARRINGTON: All right, Joel?

MR. DICHTER: Thank you, Eileen.

Let me see if I can explain how international

chargebacks have worked a little differently than having

900, and they are starting to more mirror 900 nowadays

than they have in the past.

With an international call, it's a direct-dial

call generally where the consumer uses his normal long

distance carrier, whoever his picked carrier is to make

a call to the overseas location. That call is then

billed by their interexchange or long distance carrier

as part of their costs and as part of their bill and

paid to them. So, there is -- wasn't a separate billing

page like on a 900. So, the incidence of chargebacks

wouldn't be available to the provider of the services.

It would be between the long distance carriers and the

consumers.

The industry -- as we are starting to work more

and the foreign telephone companies have worked more

with the long distance carriers to bring about changes

in that relationship to a point now where a number of

companies have entered into arrangements with

international long distance carriers, such as AT&T, to

pass back chargebacks to consumers, and in turn they

have taken a more liberal approach with their customers

in handling chargebacks for international long distance

calls. This is not a real old phenomenon, it's a fairly

recent phenomenon, and we have seen in that short time

span chargeback levels in the 10 to 20 percent range.

When you talk about international, we also -- I

think we need to make the distinction that there has

been a change through the Telecommunications Act of

1996. A lot of international calls prior to that time

went through a gateway, such as a 500 area code, a 10XXX

exchange or an 800 number and then was rebilled through

a tariff filed with the Commission.

In the Telecommunications Act of 1996, that

exemption for filing tariffs was removed, the gateways

through 500 and 10XXX were no longer permitted and have

been stopped. So, now when we talk about international

we are really talking about just a direct-dial type of

situation, and in that situation, there are increasing

arrangements of handling chargebacks between the long

distance carrier and the foreign telephone company.

MS. HARRINGTON: Mark, did you have a question?

MR. HERTZENDORF: I'm sorry, did you say that

the EXEs are -- have been negotiating different kinds of

arrangements so that they can pass customer chargebacks

to -- who is it? Is it the IP or the foreign telephone

company?

MR. DICHTER: It would be the foreign telephone

company. As part of the arrangement, the way the

compensation with a foreign telephone company works is

they receive a settlement rate as part of an accounting

arrangement where AT&T or MCI or whoever pays an amount,

a per-minute amount, to the foreign telephone company

for terminating the call, for using their facilities to

terminate the call, they pay them a settlement rate.

So, what we are talking about when we are talking about

a chargeback is on that settlement rate paid to the

foreign telephone company.

MR. HERTZENDORF: And this is becoming a lot

more common, and do you know anything about how often

these contracts are negotiated -- renegotiated?

MR. DICHTER: I would say these negotiations are

constantly ongoing, and there has been a lot of effort

by the Federal Communications Commission in this area

dealing with trying to reduce the accounting rates that

are -- go between the foreign telephone, foreign

countries and the long distance carries. So, it's an

ongoing process of negotiation.

MS. HARRINGTON: I'm going to ask us to hold on

international now. That's sort of the next issue that

we're going to get to, and before we hear from Don and

Peter, Adam, do you have a question?

MR. COHN: Yes, a point that was coming up

earlier with regard to LEC billing practices, I just

wanted to ask, do you feel that it's a -- well, I want

to hear from other parties, as well, how they feel about

the practice of LECs refraining from exercising the

creditors' rights with regard to the -- with the 900

number chargebacks and whether that is a reasonable

practice to send those charges back after that long

period of time instead of taking an action that they

would with regard to their own charges. I wanted to

hear what the LECs had to say about that and also --

actually, what the LEC -- the other LEC is not here --

MS. WILLIAMS: The LEC.

MR. COHN: -- had to say about that.

MS. HARRINGTON: And I guess we understand --

with respect to their own charges we understand they

have the option to terminate service, but perhaps the

question is is it reasonable to refrain from exercising

other creditors' rights here? So, we would like to hear

a comment on that.

Don, do you have anything on that? You're next,

and we will come back to you, Kim.

MR. KLUG: I was going to comment on the part of

the question about what is the level of chargebacks.

MS. HARRINGTON: Okay.

MR. KLUG: I think that it's a good question.

It's also a very difficult question. It would be like

asking what the average weight of the people in the room

were. You have some distribution over some mean, and

the factors that --

MR. HERTZENDORF: What's the mean?

MR. KLUG: Okay, I'll give you the mean, but let

me give the caveats before I give you the mean. I think

the level of chargebacks is a function of three things.

Number one, it's the price per minute or price of a

call. Chargeback rates for a 50 cent call are going to

be lower than chargebacks for calls that average, you

know, $30. It's also a function of the application.

Chargeback rates for entertainment-oriented applications

tend to be higher than those for, for example, polling

applications.

And the last factor is I think the experience of

the person making the call. Someone that has used 900

calls repeatedly as a regular user will I think

understand how the -- how the system works and how they

can get refunds easier than someone that doesn't.

To answer your question, Mark, MCI's experience

is that chargebacks across the board are in the, you

know, 10 to 15 percent range, and because our mix of

customers changes and our mix of applications changes,

that's a fairly fluid number.

MR. HERTZENDORF: Now, when you say that, are

you referring to a broad definition or are you just

talking about incollectibles or is this a narrower

definition than people have made the call and never

paid?

MS. HARRINGTON: Mark, could you use the

microphone so everybody can hear you?

MR. HERTZENDORF: I'm just asking about sort of

the definition you're using here with regard to

chargebacks. Is this -- when you say -- you are saying

10 to 15 percent of billings are uncollectible?

MR. KLUG: No, I'm referring -- I'm taking out

of that bad debt, you know, customers that simply move

or, you know, for whatever reason the RBOCs cannot --

cannot collect from. So, these are calls that were

made, people acknowledge the call and have been billed

by a LEC and get refunds for whatever reasons.

MR. HERTZENDORF: Do you have any idea what the

percentage would be for a much broader definition that

would be -- basically be percentage of -- percentage of

--

MR. R. GORDON: Revenue, revenue.

MR. HERTZENDORF: Okay, that will do it, maybe

the revenue -- the ratio of the revenue collected to the

revenue you have tried to bill?

MR. KLUG: No, I have -- not offhand. I would

say it's probably another 3 to 5 percent, something in

that range.

A couple other caveats, one is these figures

don't include applications for which MCI does not

provide billing and collection services. Those tend to

be adult-oriented applications, sweepstakes, games of

chance, job lines. We have several categories that we

don't provide billing and collection services for.

The other comment is this pertains only to 900

calls, not international-dialed calls or other dialing

plans, such as 800.

MS. HARRINGTON: Thank you, Don.

Peter -- I'm sorry, Adam, do you have a

question?

MR. COHN: I just had a question to follow up on

those points, which I thought were very interesting.

You mentioned the three factors that -- that worked to

affect a chargeback rate, and I was wondering, one of

them you mentioned was familiarity of the caller with

the way the system works. How does that work? Does

that mean that the more familiar a caller becomes with a

system, the less likely there is to be a chargeback or

more likely?

MR. KLUG: I think it's the more likely. More

often than not, when we get a chargeback back from the

LEC, and last year I think our average looked like about

$62 per ANI or per subscriber, that doesn't represent a

single call. That represents multiple calls. So, it's

not a case of one person making a 900 call and asking

for a refund. More often than not, it's multiple

calls.

The other point, just to emphasize the

experience of the user, we found that last year, 1

percent of the people that we gave refunds to

represented 21 percent of the total dollars that we

refunded. So, it's very skewed in terms of, you know,

people who get refunds.

MR. COHN: Is that also a factor of the type of

service that -- the thing I'm trying to get at actually

is, you mentioned two other factors, the function of the

application was one of them. To what extent do you

think that the application affects the chargeback rate

alone and to what extent does the function -- does the

application attract a repeat caller, thereby sort of

working into the other factor that you mentioned? Is

there something inherent about a product that's being

offered that increases the rate of chargebacks?

MR. KLUG: Well, all of these factors are

somewhat related. The entertainment applications that

tend to have higher chargeback rates also tend to have a

higher price per call. They tend to be, oh, anywhere

from $3 to $5 a minute, and the average end user

billing, you know, can go anywhere from $25 to $50, in

that range, versus a short holding time duration call,

like you might see on NBC DateLine or something, vote

whether you think O. J. Was guilty or something, might

be 50 cents, a dollar, and people see less -- I guess

there is a utility associated with that, as well.

MS. HARRINGTON: Is anyone aware of a

higher-priced information service not in the

entertainment category?

Don?

MR. KLUG: We have some business-to-business

applications. One of our customers is a bank, and they

use 900 service for their clients to submit mortgage

information when they are buying and selling mortgages,

and it's a -- it's a $50 transaction.

The State of Ohio has a 900 application for

their Brady Gun Control Bill. They require gun dealers

to call 900 numbers to determine if the person

purchasing the gun has a prior criminal record, and I

believe that's about a $35 flat-rate call.

MS. HARRINGTON: Do you have any information on

chargebacks for those types of accounts?

MR. KLUG: They are -- they are pretty small,

I'd say single digit.

MS. HARRINGTON: Okay.

Dave?

MR. GILLIS: As far as the information about

chargebacks, I guess -- I think it's important to get

what the facts are as opposed to the level of

generalization that we usually see reported in the

press, and to follow up on that, I'm curious whether the

industry maintains statistics that would identify

chargebacks by type of billing system that's used.

It's my understanding that there are a variety

of ways that people can agree to pay for pay-per-call

services, either through subscription arrangements or

other sorts of mechanisms simply than on a per-call

basis, and it would be significant to me if chargebacks

associated with presubscription arrangements were

considerably less than those associated with sort of the

other forms of billing systems.

The other thing that would be helpful, I think,

is to understand what the information providers

themselves do to follow up with respect to

uncollectibles and chargebacks and what efforts they

make to pursue their own creditor rights and what their

experience has been.

The third thing and the point I'd like to make

in this area is an inquiry as to what efforts have been

made by the industry to identify at the front end of

this transaction who are going to be chargeback

candidates. Most businesses select who they are going

to offer their services to, and most -- many businesses

decline to offer services because they don't know that

they are going to get paid for those services.

I think this industry is rather unique as one

that is simply willing to offer its services without

undertaking any particular examination of who it's

expecting payment from.

So, I think those are sorts of issues that

certainly as state attorneys general we don't have

access to, and I would expect that the industry would

have access to that sort of information that would

enable policy makers to address in a reasonable way the

problem of chargebacks.

MS. HARRINGTON: I think several of the

questions you raised, Dave, are highlighted in the

agenda for later today, and I appreciate knowing that

they are foremost on your mind, as well.

The question about data maintained by the

industry I think is an important one, and this is an

open record in this rulemaking, and we would encourage

any of you who have additional data on the chargeback

issue, by application type, by collection method, to

submit that for the record.

Peter, I think you're next.

MR. BRENNAN: Thank you. This is Peter

Brennan.

Tele-Publishing has prepared in writing and in

digital form some case studies, because we felt that we

had the unique ability to do that. Our services, which

I mentioned are personals services, which in the United

States we offer to about 600 newspapers. In order to

make this manageable, I took seven different newspapers

from various parts of the country, four major daily

newspapers, three weeklies, because there are some

verities there. I took four papers that had experienced

a very high level of chargebacks and three papers that

experienced what we consider an acceptable level of

chargebacks.

Historically, our chargebacks have run in the 4

to 5 percent range. Lately -- and when I say lately, I

mean in the last six to nine months -- those chargebacks

have risen on an overall basis to 8 to 9 percent. And

the reason for those, when we look at them, there are

specific areas, specific problems, specific clients that

we have, for example, The Tampa Tribune, where the

chargebacks are 26 percent sometimes, where the

chargebacks in The Memphis Flyer, which is a weekly, are

12 percent, and a number of those.

And so what I am able to provide is -- is actual

data right down to the call records from your analysis,

and I will attempt to -- to also make that -- make some

assumptions and break it down from our point of view,

but I will provide you with the raw data for that.

MS. HARRINGTON: That's excellent, Peter.

MR. BRENNAN: What I wanted to say, though, as

one -- well, the other important thing is we consider

chargebacks -- our company considers chargebacks more

than anything else a measure of how well we are doing

our job. If people are pleased with the service and the

customer is satisfied, the chargebacks are generally

low. There are those who abuse, and they -- and there

will be. To some extent, we have looked at that as a

cost of doing business, all things being equal.

The other thing is that we market -- because for

our services we provide the newspapers in this instance

with camera-ready artwork, so we have six different

tracks going at any one time. Essentially the same

marketing goes all across the country to any of our

outlets. So, we are unwilling to accept that a consumer

in Florida, for example, was less willing to understand

the obligations and the price and less willing to pay

for the service than a consumer in New York or a

consumer in some other part of the country.

So, we are left with the conclusion, based on

that and on other factors, that the problem with

chargebacks is primarily a problem that the local

exchange carriers are too cavalier and too willing to

treat chargebacks, treat these issues on a timely

basis. We notice chargebacks coming in months and

months and months late. We notice significant variance

on a LEC-by-LEC basis, and with -- and we think for that

reason that -- that we need -- we need better control of

the data base, which we will talk about later, and

others, and we seek the Commission's help in that

regard.

MS. HARRINGTON: Thank you, Peter.

Richard?

MR. R. GORDON: Yes, first and foremost, I would

like to acknowledge the testimony and the statements

made by Southwestern Bell, because the clear admission

that the 60-day provision is only a guideline in their

perspective is I think part of the salient issue here,

the fact that 90 or 120 days later, if the consumer

says, I don't want to pay for this, they are still going

to bring it back to the industry is based on my

interpretation and a reading of the Federal Register --

and I would like to read the record -- a clear

misunderstanding that must be immediately corrected.

I'm on page 387 of the Federal Register from

1993. "Initiation of billing review. A customer may

initiate a billing review with respect to a telephone

billed purchase by providing the billing entity with

notice of a billing error --" important words "-- no

later than 60 days after the billing entity transmitted

the first billing statement that contains a charge for

such telephone-billed purchase."

We happen to be privileged to have Robin Mahl in

the audience here, and I believe that if you would like,

she could comment on Congress' intent on the 60-day

rule. I don't believe that it's Congress' intent that

that be a soft date that the LEC can move at its

discretion to keep good consumer relations. I believe

that this is a firm, established policy in the written

record, and I think it mirrors the intent of Congress.

MS. HARRINGTON: Thank you, Richard.

Albe and then Walt -- actually, Mark?

MR. HERTZENDORF: I just have a quick question

for Peter Brennan. I was just wondering with regard to

the chargebacks, are a lot of your customers repeat

customers that are requesting chargebacks? Is that

something you know anything about?

MR. BRENNAN: We know that customers --

generally our customers are repeat customers, not

usually on a -- on a month-after-month-after-month

basis. Usually the way -- the way personals work, they

usually they find some dates and then a few months later

they are back again. So, we do have repeat customers.

There is a higher -- and I can -- I will provide

you with the actual statistics about this when I can

check, but there is a higher incidence of repeat

customers for chargebacks. Chargebacks generally -- for

example, I have -- I have a report of the same user

charging back the same amount for three consecutive

months, which is -- which is rather astounding, on an

anecdotal basis, but I will need to do a little more

research before I can --

MS. HARRINGTON: Actually, I overlooked Jon in

the order of people who would be called on, so Jon,

let's hear from you, and particularly, there is a

question here about what measures carriers and providers

could take to reduce the level of chargebacks, and I --

if we could get some discussion on that question, as

well, it would be helpful.

Jon?

MR. SHAUB: I was just going to share some

information, and again, with caveats, this is not

mathematical precision and very much the same caveats

that MCI mentioned.

Our experience with chargebacks from various

billing channels, primarily various LECs, does vary by

several percentage points LEC to LEC, is generally a few

percentage points -- I would characterize in the 20

percent range. That applies to 900 services where AT&T

is the billing entity but does include the bad debt type

write-off with all detail when handled properly. So, a

slight difference in percentage, to some degree an

inclusion that was not in Don's data.

MS. HARRINGTON: Thank you, Jon.

All right, Albe, Walt and Kim, in that order,

please.

MR. ANGEL: I will try to pick up some loose

ends in terms of points of fact that have been requested

here.

In terms of industry statistical information,

the ISA did conduct a bit of market research, and we

have I believe appended to that our comments. What it

helps to show is the order of priority in terms of the

chargebacks, and just to recount that, we see that adult

services and psychic services are up towards the top of

high chargeback ratios, that other entertainment

services follow that. Then we get into areas of voice

personals and at the bottom would be applications like

polling and pure information.

Now, don't read too much into various factors

that have been identified here, because although price

is a determination, you really have to look to the

application. There was a specific question as to

services that are high priced that have low

chargebacks. A couple that are worthy of consideration

are the FCC auction line where industrial players are

essentially bidding on Spectrum and had to remain on the

phone for a long time, incur very large charges, the

chargeback ratios are very low.

MR. HERTZENDORF: The FCC auction?

MR. ANGEL: Yeah. In effect, what happened was

FCC was conducting an auction for Spectrum.

MR. HERTZENDORF: Oh, okay.

MR. ANGEL: And people could participate in that

auction by monitoring a 900 call. Our company provides

services to handicappers, and some of those services

might be $50, $75 a call, traditionally very low

chargebacks, because the people who are calling perceive

value and don't challenge the number. So, you have on

the other end of the spectrum high-priced services that

are low chargebacks.

But the most salient point that I want to make

is that the industry is united in the belief that

chargebacks as a whole have increased significantly over

the last two years, that if you look at the mean, you're

going to see it creeping up for every category and that

the only way that we can explain that is to say that

there are structural factors at work. It's not the

applications but the way in which the billing insert

advisory causes consumers to essentially question and

withhold payment, the way in which the local exchange

carriers implement their billing procedures, and what we

really want here is a way of tightening up those

procedures in order that we can regain efficiency.

The --

MS. HARRINGTON: Albe, do you mean those two

items in the order that you listed them? That is --

MR. ANGEL: That's a very broad question, I'll

answer it.

The billing insert is really the first line of

defense, and anyone who's going to question a charge is

going to look to that first to determine what the rules

of the road are.

Now, there is probably going to be some very

spirited debate on whether the local exchange carriers

should accept, you know, a request for removal of

charges after 60 days, but at least if the advisory said

you must bring these to the attention of the local

exchange carrier within 60 days, the vast majority of

consumers are going to be responsive to that 60-day

period, irrespective of what the actual treatment is

subsequently. So, you know, that's a really important

sign post to give the right signal as to timeliness.

Now, on the issue of the practices, you know,

the industry has been groping here trying to pull

together information that would show the experience on a

LEC-by-LEC basis. We are not looking to point fingers

as much as identify practices that are working and

identify parties that are not adhering to reasonable

practices, and we're hoping that this is a vehicle for

bringing these things in focus.

MS. HARRINGTON: Okay, quick question, Mark?

MR. ANGEL: The industry average, if I had to

say what the industry average is, I think it's, you

know, 15 to 20 percent is a realistic number in the 900

industry. If you look to the non-900 forms of access,

which are typically billed through clearinghouses but

administered by local exchange carriers, the rates are

higher, probably 25 to 35 percent, and it would still be

in the same order that we've previously published.

MS. HARRINGTON: Quick question?

MR. HERTZENDORF: Is Southwest Bell going to go

next or is someone ahead of them?

MS. HARRINGTON: Walt and then Southwest Bell.

MR. HERTZENDORF: Let me go in between them,

then.

MS. HARRINGTON: Okay, Walt?

MR. STEIMEL: I would like to concur with the

last gentleman's remarks, that in our experience, to

some degree, there has been a lot of interpretation of

policy that the LECs are completely different depending

on who you are talking to, but essentially the LEC's

policy encourages chargebacks, and a lot of consumers

look at their bill and say this is basically a free

service. I can basically say I am not going to pay it,

the LEC charges back, and that's it, and while we

believe that the provider should absorb that risk, and

Pilgrim certainly when it sends a bill out and it gets a

chargeback, it absorbs the risks of those chargebacks,

the mechanism it seems like right now encourages

consumers to charge back even when we have had evidence

of fraud.

We have had difficulty getting the LECs to go

along with this and continuing to sustain billings when

we can demonstrate fraud exists. In the most extreme

instances, we had a district manager at one of the LECs

that was actively engaged in a fraud. We eventually

turned him in to the Pennsylvania police, he was

arrested and convicted for stealing service. I believe

he was convicted. I know he was arrested and there was

a trial.

And in the other instance, we have a number of

instances in which customers will change their phone

numbers or engage in other dialing platforms to get back

to an information service to evade blocks. I mean, this

is not uniform, and there is certainly many instances in

which consumers have legitimate chargeback requests, but

it seems that right now the system may be a little

biased to encourage chargebacks.

One question I had for everyone generally is

whether or not presubscriptions are actually used in

conjunction with LEC billing anymore. It has been our

experience that LECs do not bill for written

presubscription agreements, so that's kind of a

nullity. Those two together are kind of a nullity.

Finally, as far as measures to lower the level

of chargebacks, if -- we believe that if 900 number

blocking were made available to all of the interexchange

carriers and all the information providers and the FTC

and FCC could require the use, could require the polling

of 900 number blocks, as well as LIDB, that would help

lower chargeback rates substantially. It would make it

much easier to identify people that more than likely

would charge back from going to any kind of information

service platform.

MS. HARRINGTON: You are talking about blocking

going the other way?

MR. STEIMEL: Right, well, just making that

information available, because right now it's impossible

to know if someone has a 900 number block.

MS. HARRINGTON: Right.

MR. STEIMEL: The only way you can know is if a

call is coming from the customer through the CO and it

blocks in the switch, but there is no way for anyone to

look down at the switch and see if there is a 900 number

block, and sometimes there are defects in the system and

it lets calls go through. Technologically, there are a

number of things that can go wrong.

We think the system would work much better if

interexchange carriers and service providers were able

to look down and see a 900 block just like we could look

across and see in LIDB a collect-calling block or a

third-number-billing block or get information that --

information data. There is a lot of information we can

get, but we cannot get 900 blocking information.

MS. HARRINGTON: We have got a question from

Allen and then one from Marianne, and I will get back to

you, don't worry, Mark.

MR. HILE: My question is for you, Albe. You

said there are two different levels of chargebacks, and

I -- one is 15 to 20 percent and the other is 25 to 35

for calls that go through clearinghouses?

MR. ANGEL: Yeah, let --

MR. HILE: What accounts for the higher number

in the latter?

MR. ANGEL: You have heard the carriers identify

those services that they will bill for and those that

they will not bill for, and the carriers that I'm

referring specifically to are AT&T and MCI, which have

the lion's share of 900 numbers that are used for pure

information, voice personals and psychic lines, for

example.

At the same time, there are clearinghouses,

third-party billers, that aggregate billing and

collection agreements with local exchange carriers.

Integretel, OAN, ITA are some believers in that

industry.

Now, if someone wants to subscribe to a 900

service from a carrier, the carriers are obligated to

provide that 900 service, but if it's an area, such as

adult services, they typically will not provide billing,

and the person who is providing the adult 900 service

will turn to a third-party biller who has all these

billing and collection agreements in place, and the

experience that they are seeing is that their chargeback

ratio is higher than that of the carriers, and it's, you

know, in some instances can be as high as 50 percent,

and that's a function of the application, it's a

function of the service, it's a function of the LEC

billings and collections practices, and it may be a

function of the consumer, who is very familiar with all

of the above and chooses to consume the services with no

intention of paying for them.

MR. HILE: Okay.

MS. HARRINGTON: Marianne, then Mark, then Kim.

MS. SCHWANKE: I have a question for Kim. To

follow up on what Walt said about the 900 blocking

information, can you address what the reasons are why

the 900 blocking information isn't currently available

and are there ways that it could be made available in

the future?

MS. WILLIAMS: Yes, I think this has been

something that a lot of people have asked for over the

years. Number one, I think to just give a wholesale

list of customers who are 900 blocked is a concern from

a privacy perspective, a CPNI issue. So, we have always

been against just making a list available of every

customer who has 900 blocking. That's not to say that I

don't think it couldn't be provided on LIDB. I mean,

LIDB does have information on other types of blocking.

However, LIDB is an operator services call

verification system, which 900 -- you know, 900 blocking

is not an operator-handled call. It's a direct-dialed

call that can't be made or shouldn't be able to be made

if the customer has 900 blocking. So, it's customers or

carriers who are providing services on platforms other

than 900 who I think want the 900 blocking lists so that

they can block their customers when a customer has

chosen 900 blocking.

MS. HARRINGTON: Time. Is that a safe

assumption? Is it --

MR. ANGEL: No.

MS. HARRINGTON: Is it customers who want to use

this information for different platforms? Okay, so we

just -- just to clarify for the record, there is some

dispute among the participants about that assumption.

MS. WILLIAMS: Okay, well -- and I guess my

question to those people would be if the customer has

900 blocking and can't make a 900 call, that stops the

problem right there. I don't -- I don't know why a 900

provider needs to know that that customer is

900-blocked. The call is stopped at the switch.

MR. HERTZENDORF: Perhaps I misunderstood, but I

was -- from the comments I got the impression it was

that they wanted to use the 900 number blocking to maybe

block international calls or other dialing prefixes. Is

that correct?

MS. HARRINGTON: Well, let me go to the people

who are saying no. Albe --

MR. HERTZENDORF: But that wasn't my whole

question, and maybe I should go on with the other

question before it gets --

MS. HARRINGTON: No, just a minute, Mark, and we

will get back to you.

Albe, would you quickly say what need -- would

you respond to Kim's question, please.

MR. ANGEL: The point I would like to make is

this: That the people that are in the business of

billing for -- whether it's information services or

operator services are typically the same people. The

third-party billers, the clearinghouses -- the billing

clearinghouses already have access to line data bases in

connection with operator services, but they may want to

have access to those same data bases vis-a-vis

information service calls, and there's no reason that

these billing entities shouldn't be provided that

information.

MS. HARRINGTON: That's not an answer to the

question. The question is what use could a billing

entity make of information about who's got 900 number

blocking if people can't make 900 number calls, they are

blocked. What do you need that information for?

MR. ANGEL: Okay, the example that I would give

is of a service provider who offers its service via 800

access arrangement and intends to bill either to a

credit card or through the telephone invoice and wants

to have a further indicator as to whether that household

has chosen 900 blocking as a factor to consider whether

or not they are going to offer service.

MS. HARRINGTON: What about the privacy interest

that the consumer has that Kim talks about? What's your

answer to that?

MR. ANGEL: Okay, the privacy issue is easily

addressed. The providers of the service are not going

to be breaching any consumers' right to privacy, nor are

they going to be making information available to the

public or to others that would compromise that

consumer's privacy. The wall of defense that's been put

up here by the local exchange carriers and to a certain

extent the carriers is based on suspicion and concern

rather than facts. They are concerned that consumers

are going to be compromised. At the same time, the

providers of service are fully well aware of what the

privacy standards are and will use the information in

order to limit abuse.

MS. HARRINGTON: Well, let me just flip that and

say as a consumer who chooses 900 number blocking, that

choice is not made with the intent that the information

would be used to limit choice.

MR. ANGEL: I'm sorry, say it again.

MS. HARRINGTON: I am saying if I make a choice

as a consumer to have 900 number blocking on my phone,

I'm not intending that that will be further used to

limit my choice when I go into the marketplace to obtain

additional services.

MR. ANGEL: That's a legitimate point. You

know, the problem is with the extent of the data base,

all right? Let's say you're a hospital and you've

directed your telecommunications manager to institute

every known block in order to avoid charges back to your

lines. So, you institute this 900 block, and all of a

sudden you see 800 access calls being billed to your

account, and you inquire, what can I do to stop these

calls?

Well, that's part of why we're here, and an

entity that might be billing to such an entity would

want to know, oh, well, this is a hospital. I wish I

had some data base that would enable me to know that

that's a hospital before I billed to that hospital.

MS. WILLIAMS: Eileen, can I interject? If they

had a valid presubscription agreement with the valid

billing party, that call would never go through, and

that's been my one point. I don't say giving out 900

information is bad as far as on LIDB goes, but if you

had a valid presubscription arrangement, if your service

was really provided over 900, where it should be, it

wouldn't be a problem.

MS. HARRINGTON: Okay, Mark?

MR. HERTZENDORF: Yes, okay. There's been a lot

of complaints about the LECs' billing practices, and I'm

just sort of wondering, how are these determined? Are

they unilaterally determined by each LEC or are they the

result of contract negotiations, and which parties are

we dealing with? I would like to hear a little bit more

about these billing and collection -- what is it --

billing and collection --

MS. WILLIAMS: Contracts, right. I can address

our contracts, but I didn't want to -- are there other

comments on the 900?

MS. HARRINGTON: Let's keep Mark's question in

mind, and we have got some people waiting to answer

earlier questions, I think.

MS. WILLIAMS: That's what I was wondering, if

they were getting at the 900 blocking.

MS. HARRINGTON: We are going to come back to

you on that, Kim, but Don, can we hear from you,

please?

MR. KLUG: I just wanted to make a comment on

Kim's statement about concerns about privacy making 900

block information available to the industry. I think

there is an analogy here with the Direct Mail

Association in terms of blocks. I'm either receiving

junk mail or receiving unsolicited phone calls, which I

happen to get a lot of, and I think the whole premise of

that system is that that information is shared among

people in the industry so they can take advantage of

it.

If 900 blocks are made available to the

information providers, I think they could use that

information in terms of marketing, looking at certain

areas that perhaps had a high incidence of blocking.

You mentioned a 30 percent in Southwest Bell territory.

It may be higher in other particular geographic areas,

and information providers could take advantage of that

to tailor their programs, to not market to people who

didn't want to take advantage of the service.

I think the other thing that's worth mentioning

is there could be a consent with that block and asking

consumers if that could be shared with people.

MS. HARRINGTON: And Jill?

MS. SANDFORD: Yes, hi, Jill Sandford from the

New York attorney general's Office.

On this issue of blocking, one thing that comes

to mind is an issue of phantom billing of 900 number

calls, and it appears though a consumer can block an

actual call at the LEC level, is there any blocking from

a 900 number call appearing on a consumer's phone ball?

Because we receive complaints from consumers who say

I've done everything, I put the block on my call, but

yet I'm still being billed.

MS. HARRINGTON: Jill, we have got a section

this afternoon that's going to cover that issue, if

that's your -- your question now. Could --

MS. SANDFORD: It is.

MS. HARRINGTON: Could we defer that for this

afternoon?

MS. SANDFORD: Sure.

MS. HARRINGTON: Thank you, but we will be

discussing that.

Richard?

MR. R. GORDON: Yes, I would like to go back to

one of the opening comments here, which I think is

exactly on point, and that's from the attorney general's

office that Dave made.

You suggested that it was important that the

industry know its customer, and I believe that that is

dead on, and what we're talking about here is the fact

that there is a tremendous amount of information

available to the LECs and to the phone companies who

extend credit to consumers, and because they extend

credit, they are doing so based on the information that

they have, and when the consumer says, I don't want to

pay the bill, they have a right, under both state and

federal law, to collect on that debt. This is a

commercial transaction.

What we have here is a problem where the LECs

are not downstreaming sufficient information -- and I

agree with you 100 percent on the -- there has to be a

protection of privacy, but as an example, is it an

invasion of privacy to tell someone who's going to sell

something on the telephone in an instant response mode

where they can't check to see anything more about the

customer how long have they had that phone number?

Is it an invasion of privacy to put a data

packet in the record that says this phone went into

service yesterday or this phone has been in service for

three years, because when you talk about knowing your

customer, which we again support and encourage, if we

know this phone number has been around as an industry

for three or four years, we're going to give a much

higher rating in our realtime risk management systems,

because it hasn't been turned off.

One of the problems that we have is that

consumers know what's going on. The phrase that I like

to say is the educated consumer is our most dangerous

enemy, because they will go and run up $500, $1,000,

$2,000 worth of charges and then call the phone company

and say, I'm getting a lot of annoying phone calls. The

attorney generals say if you get annoying phone calls,

you have to change my phone number, and guess what, we

get the chance to let them steal thousands and thousands

of dollars of services again.

MS. HARRINGTON: Richard, let me make an

observation, that if you analogize what the providers

are doing here as extending credit to the consumer for

instantaneous purchase and then state a wish to have

adequate information that may be available out there

consolidated so that the providers who are making

decisions or who are extending credit can make informed

decisions essentially about the creditworthiness of the

caller, I would just point to the very careful regimen

of regulation that exists in connection with the use of

consumer payment information and other related

information in making determinations about

creditworthiness under the Fair Credit Reporting Act.

And so if you are suggesting that this

information about who has blocking service might be in

some measure a proxy for whether a consumer ought to be

deemed creditworthy to participate in this kind of

instantaneous grant of credit and purchase situation,

then I'd like to hear you all address the question of

what kinds of protections ought to exist in terms of

notice to the consumer, opportunity for the consumer to

review the record that the credit grantor has available

to it in making its determinations of creditworthiness;

notice where a decision has been made not to provide

access to the consumer to that system of credit in the

form of referring them to the source of information; and

opportunity for the consumer to correct incorrect

information in those data bases.

I think that's -- I think from our standpoint,

if you are going to come at this that way, then it would

be very difficult for the FTC staff to distinguish

between this situation and the more conventional credit

situation and the protections that consumers receive.

MR. R. GORDON: The answer is in hand, Eileen,

because what we are talking about is we are talking

about immediate and instantaneous access versus diverted

access. In other words, if we see an ANI coming in

that's three days old and it's the fifth call in the

last hour to this particular information provider from

that ANI, we are not saying deny the customer service.

We are saying the software is sophisticated enough to

then interrupt that call, put a live customer service

person on, and ask the consumer, are you aware of the

fact that you have made five calls in the last one hour,

and get a recording of their voice. This is all done

realtime.

These are the types of things that the industry

is doing to proactively prevent the denial of credit but

also to restrict access to people that when you say did

you know you have made five calls, you don't hear a

response, you hear a click. The problem is that unless

we have this data available, it becomes a

self-fulfilling prophecy.

Don made a very excellent point about the

chargeback rates being higher as a result of the cost of

the call being higher. This has become a

self-fulfilling prophecy. If chargebacks are 30 to 40

percent, those costs have to be borne back by the

consumers who are actually paying for these services.

So, rates of $2 a minute, which were commonplace in the

entertainment industry three years ago, now, by default,

are $3.50 to $4 a minute, because the chargebacks are so

high.

So, consequently, what happens is the propensity

to charge back increases, because the dollar value of

the call increases so dramatically. Again, I want to go

back and compliment the attorney generals for

recognizing how important it is that we as sellers of

services have a right to know who we do business with.

That's the key here, and the LECs are the ones that

control this data.

I believe the industry at large would love to

get away from LEC billing if they could get all the

information necessary from the LECs and bill this as a

commercial contract. That's something that we would

love to have, but we don't have all the access that we

need. We don't have all the data. It's there, but it's

-- it's diverse, and it's not available to us.

MS. HARRINGTON: Okay, we are going to hear from

Alan.

MR. TAYLOR: Thank you.

I want to go back just briefly to the dialogue

about the -- the LIDB billing system. I certainly

understand Kim's comments about why you need to know

this information if you are using the 900 code.

I guess I want to sort of support the

information industry's position, however, if the

different service access codes are going to continue to

be allowed to be used, then I think the LIDB system is

-- it would be beneficial for these folks to have

access to it, and I think the LIDB system is where the

billing block option could be made apparent to the

industry so that those folks who say in advance we don't

want services from anyone else, that information could

be made available to them through this LIDB system.

MR. R. GORDON: If I may, just --

MS. HARRINGTON: No, just one second. We are

going to hear from Susan, we are going to have a

question from Allen.

MS. GRANT: I'm wondering -- sorry, I'm

wondering if another approach to this whole concern,

rather than creating essentially a black list of

consumers, would be to use the wealth of demographic and

marketing information that's out there to target-market

your services to particular consumers who you think

would be most interested in them and invite them to

subscribe to participate in them.

MS. HARRINGTON: Allen?

MR. HILE: My question is a bit related to that,

the issue of targeting. What would prevent, if a data

base were available that showed everyone with 900 number

blocking, what would prevent someone from flipping that

around and targeting those folks for international calls

where they don't enjoy the protections of having the 900

number blocking?

In other words, using it for exactly the

opposite purpose that you're talking about. Can anyone

respond to that?

MS. HARRINGTON: I would like to hear -- I have

got an order here, but who has responses to either of

these last two questions?

MR. R. GORDON: I have a response to the black

list. We are not talking about a black list. What

we're talking about is an informed list.

MS. HARRINGTON: Okay.

MR. R. GORDON: Again, I want to go back and

support the attorney general position. Know your

customer.

MS. HARRINGTON: Richard, I think you are

pressing your luck here.

The answers to these questions, Walt?

MR. STEIMEL: Yeah, I think it would be

virtually impossible, if 900 were loaded in the LIDB, it

would be virtually impossible for somebody in the

industry to develop any kind of list they can use for

marketing, black listing or otherwise. What you are

talking about is a call comes in, you take the ANI, you

bounce it off LIDB and it comes back and lets you know

if there are blocks.

You would have to build a computer system that

sequentially went through every phone number in the

country on a regular basis and collected all the

blocking information. This isn't something you dial in

and you look up and say, I want to know everybody in

Southwestern Bell territory that's got collect calling

block or third-party billing block. The other blocks

are already in there. The 900 block is the only one not

in the system.

If an ANI was coming in, a provider looked at it

and said this call is going to a service that we think

is an information service that we want to extend TDDRA

protection to, then they would just like to see if the

block was there, and they would shunt the call off

somewhere else, either put a live operator on, deny the

call, something like that, but it would be almost

impossible to build a data base.

So, these privacy concerns and target marketing

and building data bases is virtually impossible when you

are talking about LIDB look up on an instantaneous call

that's coming in, and if you restrict it to just that

kind of look-up in the data base, the industry will not

be able to abuse that and there is no real privacy

concern here.

MS. HARRINGTON: Kim?

MS. WILLIAMS: As far as LIDB goes, my

understanding is some LECs are working towards a service

called a get-data request, and if you get down to should

900 blocking be out there, this could be an area where

it should be looked at. I think Southwestern Bell is

working on it, I don't know if.

Every LEC is going to add it to their LIDB or

not, but you would be able to do a check on LIDB on a

phone number, and it's a get data, what does this

customer have, you know, it will tell you, he has

collect blocking, third number blocking and certain

types of other things. He's a hotel or it's a

dormitory. Every blocking as far as I know is not set

up to be out there yet. It's not -- but I think if 900

blocking were going to be there, that would be a good

place for it. You are talking about, though, the LECs

spending the money to put this stuff out there. If you

all want to come up with a pool of money to get all the

LECs to do this and to get this -- the information out

there, it could probably happen. I don't think there is

a privacy concern if it's on LIDB.

I'm saying there is a privacy concern for us to

give you a wholesale list of every customer who has 900

blocking. So, I'm not saying LIDB is -- that there is

no way it can be done, although I don't want to speak

for every LEC in that. It's a decision that has to be

made by the LECs and whether they want to spend the

money on it, but what I'm saying is it's not a cheap

thing to do, and to say the LECs must provide it, well,

who is going to pay for it?

Am I going to be able to address some of those

other billing issues?

MS. HARRINGTON: Um-hum, sure.

MS. WILLIAMS: Okay.

MS. HARRINGTON: Albe?

MR. ANGEL: The question of who is going to pay

for it, we have got a fact here that hundreds of

millions of dollars are being charged back. It's a

structural problem. The LECs are in a position where

they can do something about it, but they are passing the

pain down the line. The industry is asking for data

bases that are responsive, information that gives them a

choice to make intelligent decisions, very sensitive to

the issue of the consumers' choices being heard.

We all are familiar with credit card systems and

the way in which if you're somehow spending a lot, you

may at a merchant location be asked to talk to the

credit card company and say, yes, it's me, I'm doing

some holiday shopping now. We want the same sort of

flexibility in the audiotext environment, and it's not

enough to say who is going to pay for it. It's enough

to say what systems are necessary and how do we

implement them to reduce the chargebacks.

MS. HARRINGTON: Joel?

MR. DICHTER: Just responding quickly to Alan, I

want to agree partly with -- altogether with what Walt

had to say and add to that a little bit, that the way

LIDB usually works is through a separate data base, and

it is not information that is available to the specific

information provider. There is this company called

Cartel who maintains a data base, you can send

information or billing tapes to them, and they can clear

it to see whether their customer has blocking

information, et cetera.

So, it's something that's not necessarily in the

hands. You also can put protections in place. For

example, if you want to go to a local phone company and

say I would like to know the billing name and address

for a certain person who called, I think there is a

contractual provision between the local phone company

and the person who gets it to who says this information

will only be used for billing and collection purposes,

it will not be used for any other marketing or targeting

information.

And also, Alan, I think it's right that people

want to target a customer who will call and pay for

their services, and that -- and that's who you're

targeting to, not to someone who is going to use but not

pay for your services.

MS. HARRINGTON: Marianne has a question.

MS. SCHWANKE: What conclusion can you draw from

the fact that somebody has a 900 block? If you had that

information available, do you draw the conclusion that

they don't want access to any other kinds services or

that they just don't want someone in their house to pick

up the phone and incur costs but that they might want

access to other services? So, what would that

information do and how would you use that?

MS. HARRINGTON: Okay, let's -- Don, you're next

anyway.

MR. KLUG: I wanted to respond to Allen's

question, also to Marianne's question. In terms of if

900 ANIs were made available, couldn't marketers then

use that information to market other dialing plans, I

think it just goes back to Joel's point, is if people

were blocking, they obviously are not good target

prospects, so why try and market to them with another

dialing plan?

MR. HILE: Well, in an analogous situation, we

see a lot of folks who have been turned down for credit

targeted by credit scams. That's exactly the same

thing, and you have -- you have a big gun here. You can

deny service if consumers fail to pay these

international charges.

MR. KLUG: I'm not sure I buy into your analogy,

but that's all right.

In terms of Marianne's question -- sorry, I just

forgot it.

MS. HARRINGTON: What assumption do you draw

from a 900 block?

MR. KLUG: I would assume that people do not

want unauthorized access, and I would think it's

primarily -- primarily kids, not to call those 900

numbers. I would think that adults have the, you know,

don't need a block, because they can choose who they

call, or other people -- other people might have access

to their telephone.

MS. HARRINGTON: Okay, Adam, a question?

MR. COHN: Relating to this issue of what does a

900 number block mean, I would like to put out the

question of what is to stop industry or someone from

adding data to this data base of 900 number blocks and

basically asking the consumer whether they want -- what

type of blocking they want, and right now, there doesn't

seem to be any real centralized option for a consumer to

say I want to block all access that you can dial

automatically without a credit card. You can -- you can

block all international sometimes, apparently. You can

block 900 numbers pretty much all the time if you want

to, but why not ask the consumer what do you want to

block and then give them the option of blocking,

although I don't think we necessarily have to determine

what to do with 900 if the consumer is given the option

of determining what types of blocks they want.

MS. HARRINGTON: Okay, that's another question

out there.

Linda, you have had -- do you have anything on

these questions, because I will come back to you.

MS. GOLDSTEIN: I don't remember which question

it is, but it's responsive to some question.

MS. HARRINGTON: We are talking about data

bases, blocking, information about who has blocking, how

it's used, what assumptions are drawn, whether it's

analogous to a credit situation. That's the general

subject on the table here.

MS. GOLDSTEIN: Okay, there were really a couple

of points floating that I wanted to address. I don't

really view the provision of this information as

analogous really to sharing credit information. It

really is more analogous to determining who may be

interested in the service and who is likely to be a

responsible customer, which I think is slightly

different --

MS. HARRINGTON: Two different matters there,

Linda, who is interested and who is likely to be

responsible. One is consumer opting in, the other is

creditor making judgment.

MS. GOLDSTEIN: There is a credit implication to

it, there is no question about that, because of the

nature of the service, but I think it -- I think we also

have to step back and recognize the uniqueness of the

service, that this is still the only type of service

that's offered instantaneously and for which the

consumer can obtain the full benefit of the service and

then determine not to pay with no obligation really to

return.

So, the measures that we then take to protect

the competing interests I think still have to be

measured against that unique aspect of this service. I

think the industry's need to have this information is

outweighed by any privacy concerns. I don't frankly see

a privacy concern here. There -- the -- to the extent

that the information may be made available, I think that

there are ways to handle any privacy concerns that may

arise.

One, there could be some sort of notice at the

time that the consumer institutes the blocking, simply

to the effect that this information will be made

available on a limited basis, and secondly, there could

be an agreement on the part of those to whom the

information is made available that they agree not to use

it for any marketing purposes.

I think everyone around this table has made it

clear that there really isn't an intention to have this

information to conduct other marketing programs. I

don't see the analogy here to a situation where this

information is going to be then given to some

information provider who is going to target those

consumers who have, you know, a bad -- a secured credit

card program. That doesn't seem to be what's driving

the information here, and it seems to me that it's a --

it's a relatively simple step to take.

Experience in other industries and practices has

shown that chargeback rates in general will go down when

your marketing efforts are targeted at those consumers

who have indicated a desire or likelihood they want to

avail themselves of those services, and to the -- I

think every incremental step that you can take to reduce

chargebacks will help, and I just -- I don't see the

privacy issue here as a really significant issue, and I

think it's one that could be dealt with with relatively

simple measures.

The other point I just wanted to make, and this

goes back to a point that you really raised much

earlier, and I don't know that I can give you the

specifics for the record, but I will go back and see if

we can, because I think it would be instructive, goes

back to things that can be done really at the LEC level

when the -- when the customer first calls in, and we do

have one member that actually conducted a test program

wherein specific questions were asked, not in any

threatening or harassing manner, but some probing

questions of customers that called in to deny charges

about is it possible that your husband made it or

additional questions asked that made the consumer

respond in a little bit more detail about why the

charges were being denied.

And the results of that test program were rather

significant, and if I recall, I think the reduction was

in the neighborhood of 10 percent, and I will see if

that's something that could be made available on the

record. At this point, I offer it simply anecdotally,

but I think, you know, we have sort of gotten off track

of additional measures that could be taken at the LEC

level to try to address this problem, and I do think

that's still another area of inquiry.

MS. HARRINGTON: Okay, we have an hour and ten

minutes left in this session. We have not explored the

international dialing pattern issues that are raised in

the agenda, nor have we discussed changing the notice to

consumers in the statement, and those are very important

issues raised by commenters, and I want to have full

discussion.

I am going to ask Richard and Albe, do you have

anything new to say -- and I don't mean that in a rude

way, because what I would like to do is take a

ten-minute break, we said there would be a break around

11:00, and then we are going to resume at 11:30, and

just a minute.

I know I said I was going to get back to Kim,

but Kim, is there -- do you have anything new on --

MS. WILLIAMS: Well, I wanted to respond to some

of the earlier issues about billing and collections that

came up and some of I guess the accusations against the

LEC that --

MS. HARRINGTON: Can I give you five minutes

after the break to do that, and then we are going to

move off of those issues, because we do have other

important issues that we want to cover in terms of

industry perspective on the chargeback issue in this

industry.

We will resume promptly at 11:30, and there is

more coffee, and the rest rooms are right outside.

Thank you.

(A brief recess was taken.)

MS. HARRINGTON: Barbara, could you take your

seat, and we are going to ask you to introduce yourself

for the record. We have a participant who was delayed

by a late flight taking her seat at the table, and for

the benefit of our participants and our stenographer,

would you identify yourself, Barbara?

MS. MAJESKI: My name is Barbara Majeski. I

represent SNET from Connecticut. We represent only a

single state. I work in the regulatory affairs group,

and part of my function is to respond to FCC

complaints.

MS. HARRINGTON: SNET is?

MS. MAJESKI: Southern New England Telephone.

MS. HARRINGTON: Just for the record, thank

you. There is lots more that can be said on all of the

issues that we have just discussed, but now we are going

to focus on some different issues, but Kim first is

going to give us no more than five minutes on the other

issues.

MS. WILLIAMS: Thank you, Kim Williams.

I guess I wanted to address, number one, some

carriers' concerns or IPs' concerns that the LECs are

cavalier about the 900 charges, and I can't speak for

every LEC, but I know when a customer calls in to us,

whether it's 900 or not, we go through the process of

trying to sustain the call, and I think some of the

things down at the end of the table suggested were did

you make the call, did somebody else in the household

make the call, and we do all those things. We just

don't do you don't want to pay it, we will take it off

the bill.

And, in fact, I used to support the business

office before I had the job I have now, and I have

talked to many service reps, and it angers them to have

customers run up thousands of dollars worth of charges

that they don't want to pay, but we are in the middle of

that situation where we have already bought those

receivables from you. If we did it because of a reduced

rate because of adjustments, that doesn't mean we don't

send it back to you.

I might have confused that issue before, but

however, one for one, we don't eat write-offs. It goes

back to the company who sent it to us to bill.

Southwestern Bell does not take that loss.

Number two, I guess the issue of customers

calling back more than 60 days later, I don't want to

make it sound like that's only a 900 thing.

Southwestern Bell gets calls from customers about

regular toll charges more than 60 days later --

MS. HARRINGTON: Well, except there is a

regulation on the books here.

MS. WILLIAMS: And I guess I need to look into

further what that says, and I don't want to address that

incorrectly, but our billing contracts give us the

authority to remove charges from our bill, and when our

billing contracts are signed, carriers know what their

-- or our customers know exactly what they are

signing. We have the sole authority to remove charges

from our bill if they are not going to be paid in most

instances, and 900 or not, we are going to take it off

the bill if the customer is not satisfied.

If the customer can't pay, won't pay, we will

either take it off or he is going to be disconnected for

nonpayment and his charges will be sent out to a

collection agency. So, the issue is not just an issue

of 900 in that case. We do that for all charges.

In the case of 900, if he won't pay it, what do

I do with it? Then it's a balance on his account for

years and years to come, and it's money that I don't

have now, not you, me, and so in that respect it's our

addressed in our contracts that we remove all charges

from the bill for nondeniable services if they are not

paid.

I guess finally, on the issue of the contracts,

you have -- I guess for 900 services, I feel like you

have a choice on how you want to bill those services.

You can bill them on a charge card, you can bill them

directly, you can bill them through the LEC, you can

bill them through some other company. If you choose to

bill them through the LEC, it's billed according to the

way our contracts are written.

MS. HARRINGTON: Thank you, Kim.

Jon, did you want to say something on this?

MR. SHAUB: Yes, if you will allow it.

MS. HARRINGTON: I will let you, and then we are

going to move on.

MR. SHAUB: I was just going to suggest that for

the purpose of substituting a word in what Kim said,

rather than say cavalier in collections, I think a

middle ground that we are all talking about is perhaps a

more consistent discipline. Everyone would benefit, the

effectiveness of the billing, the reduction of fraud,

everything would benefit if there was a more predictable

treatment on all aging receivables within the bounds of

the contract and within the bounds of the legislation

that exists, but there is a lack of consistency, among

LECs, among billing entities, as to how that's done

today. So, doing that consistently, doing that on an

accelerated basis, would then open up options within

existing legislation and contracts, and this could be

managed more effectively.

MS. HARRINGTON: Richard?

MR. R. GORDON: Just one comment I would like to

make. Kim said that this is done at the sole authority

of the LEC, and the problem that we as an industry have

is the sole authority of the LEC is not consistent with

the law.

MS. HARRINGTON: Okay, we are all going to move

on now to the -- to two very important issues. One is

the issue of chargebacks for international audiotext

calls and who bears the costs for those. I am sure that

we are going to have a lot of conversation later when we

talk about changing the definition of pay-per-call

services, about the problem of the international

pattern. Here we're focused more on the chargeback

issue as it flows from the use of the international

dialing pattern for pay-per-call service. So, let's be

clear on what we're talking about and what we're not.

So, I'm looking at the second bullet item under

your agenda here that begins, "Who bears the costs of

chargebacks for international audiotext calls? Are IPs

who utilize international audiotext services affected in

any way by consumers' refusal to pay for such services?

What problems do the chargebacks cause for the LECs, the

carriers and the consumers?" If we could focus on that

cluster of questions.

Joel?

MR. DICHTER: Eileen, let's start with I guess

the first question, who bears the costs of the

chargebacks, and as was said a little earlier, at this

point in time, as we move forward in the spectrum, the

answer is virtually everyone in the chain, except maybe

the local exchange carrier to some extent, in that when

you place an international audiotext call, you go

through your normal picked carrier.

So, if you're an AT&T customer, you go through

AT&T lines, you're charged by AT&T under their

international tariff at their standard international

tariff rates for calls between those destinations, and

then they bill you and it appears on your phone bill.

You then either pay your charge or you can dispute the

charge by contacting the carrier, in this case an

example would have been AT&T.

AT&T then has the discretion -- they are the

billing company, it is not the information provider or

the foreign telephone company. AT&T has the discretion

whether or not to issue a credit to that consumer

resulting in a chargeback --

MS. HARRINGTON: Let me ask you a question,

Joel. Doesn't AT&T still have an obligation to pay the

international carrier, whether they decide to extend the

credit or not?

MR. DICHTER: In the past, that was the case.

In recent times, that is no longer the case.

MS. HARRINGTON: Well, can you tell me why

that's no longer the case and by what authority it's no

longer the case?

MR. DICHTER: There have been negotiations going

on between the long distance interexchange carriers, the

governments, and there is also the foreign PTTs or the

foreign telephone companies, and in their arrangements

between them, they have now entered into an agreement

whereby if AT&T is not paid by its customers, they no

longer have to pay the settlement rate to the foreign

telephone company.

MS. HARRINGTON: But does that cover the

situation where AT&T determines to extend the credit or

to forgive the charge or only where the customer doesn't

pay?

MR. DICHTER: It would be in either event,

whether the customer chooses not to pay or AT&T says we

will forgive the charge. In that case, they do not have

to pay the foreign telephone company.

MS. HARRINGTON: Marianne?

MS. SCHWANKE: And is that true for all long

distance carriers that carry service to foreign

countries?

MR. DICHTER: It is for -- for all? It

certainly would be true for 90-some odd percent of the

traffic. I can't say it's true for 100 percent of the

traffic at this point in time.

MS. HARRINGTON: Jon, is that true for -- does

that reflect your understanding?

MR. SHAUB: I am not specifically aware of those

agreements. I have heard discussions like that, but I

am not in that part of the business, so I can't comment

on the particulars.

MS. HARRINGTON: When did these agreements

become effective, Joel?

MR. DICHTER: Depending -- it's a

country-by-country type of arrangement, and they have

become effective primarily within the last six months is

when there has been movement.

MR. HILE: Is there such an agreement with

Guyana?

MR. DICHTER: Yes, there is.

MR. HILE: What about Muldova?

MR. DICHTER: Muldova, there is -- Muldova goes

-- generally from -- North American traffic goes

generally through Teleglobe, a Canadian long distance

carrier, and in that instance, I believe they do now

have such an arrangement to forgive the charges. I

think it's more on a case-by-case basis, but generally

that's the -- that would happen.

MS. HARRINGTON: Sao Tome?

MR. DICHTER: Sao Tome also has, I believe --

MS. HARRINGTON: Dominican Republic?

MR. DICHTER: Dominican Republic does have such

an arrangement, yes, that's correct.

MS. HARRINGTON: Go ahead.

MR. DICHTER: So, in those instances, then, when

they don't pay the foreign telephone company, the

foreign telephone company then doesn't pay the bureau,

and the bureau doesn't pay the provider of the

services. So, they do, indeed, share in that cost, as

well. Obviously the long -- the only one who I know --

who I think does get paid out of this arrangement is the

local phone company for their access charges.

MS. HARRINGTON: Okay, that's very, very

interesting.

Jon, I see your tent is up.

Richard, is your tent up?

MR. R. GORDON: Yes, it is.

MS. HARRINGTON: Okay.

MR. R. GORDON: On this point, I would like to

go back to the fact that what we see here is the

evolution where the commercial environment is, in fact,

becoming self-regulated. Clearly two or three years

ago, there were problems with international, and people

did have some issues where they could not get those

charges erased from their bill without undue stress and

redress.

Today, that's different, and I'm just again

commenting on Joel's comments here, but what we really

need -- and we're here for solutions, we are not here

for problems, we are looking for solutions -- what we

need is an open line of communication between all the

parties. I believe that I -- I know that there are some

foreign telephone companies present in the room here,

and I think they could, if we wanted, they could give us

direct testimony about what they do when they see any

type of abuse.

And going back to the point, stop the flow of

money, and you stop the abuse. Whenever there is any

type of a consumer complaint in the international world

now, AT&T and I believe the other carriers -- I know the

other carriers -- are giving people credits on these

things.

MS. HARRINGTON: Well, this is a -- I have to

tell you, Richard, from a consumer protection

standpoint, there is a rather new development.

MR. R. GORDON: Less than six months, yes.

MS. HARRINGTON: And there have been lots and

lots and lots of consumers who have been ripped off on

these international dialing schemes who weren't able to

get credits and whose phone service was threatened. We

have brought a lot of enforcement actions, the states

have been looking at this.

So, if it is as described now the case that the

carriers, the billing entities, have the same discretion

to bill and collect that they have for the domestic

dialing patterns, that's a new development that has

changed the situation.

Allen, do you have a question?

MR. HILE: Yes, I would like to ask AT&T and MCI

if they could supplement the record on this at all. It

would be really helpful for us if you could --

MS. HARRINGTON: With these agreements and so

forth?

MR. HILE: With the agreements and what the

status of this is. We would really appreciate that,

because that is a new development for us.

MS. HARRINGTON: Susan?

MS. GRANT: I think that -- oh, sorry, I think

it would be really helpful from as many as the long

distance carriers as we could get it, because we are

still getting calls from the fraud center from consumers

who are getting charges now that they are not able to

get the long distance companies to take off,

international charges. So, I'm wondering if that means

that these agreements are not consistent or whether --

how this should be handled when it comes to the customer

calling the company, just as an -- as in getting to the

right customer service folks.

MS. HARRINGTON: Well, and I'm wondering whether

in the interest of level playing field and so forth,

whatever disclosure is made in the billing statement to

consumers about the process for disputing charges and

the implications of not paying them ought to be included

on billing statements that have calls to international

numbers.

That is, you know, if you guys worked out these

agreements, then why shouldn't you be, you know, subject

to the same fall-out from consumer disclosures as are

those who choose the domestic dialing pattern?

Barbara?

MS. MAJESKI: In response, in order for us to

put those types of messages on the bill, we have to know

that they are for international pay-per-call. So, the

only way to know is if the IP or -- or the IXC sends

that along with the billing record.

MS. HARRINGTON: And do they do that now?

MS. MAJESKI: No.

MS. HARRINGTON: No.

Kim?

MS. WILLIAMS: Yeah, I was going to comment

along the same lines, that unless they are sent in under

certain records and unless -- I think without

enforcement of a regulatory body, there is no guarantee

that everybody is going to follow the same rules, and

certainly just because they are adjusting them, the call

has already been made, somebody's kid has already dialed

the number or some unauthorized person, and the customer

is -- a lot of them don't call, because they perceive

that they have to pay for the calls. So, I think a lot

more has to happen.

Number one, I think it really blocks on 900. If

it is going to be on international, it ought to be

treated exactly like the 900. It ought to be price

disclosures. The customer shouldn't be charged when

they first call a number until they know how much it is

going to cost them to make that call. The

advertisements need to be regulated, and they are not,

and I -- you know, the ones I've seen still do, some of

them, say things are free and with small print that says

-- in an abbreviated fashion that international dialing

rates apply. I don't know how many customers understand

that "int'l" means international, and if they know it

means international, I don't know if they know what

their rights really are.

MS. HARRINGTON: Let me just point out that a

lot of this will be discussed tomorrow when we talk

about changing the definition of pay-per-call service,

and I want to hear from Alan now. He has a question.

MR. TAYLOR: I just want to point out that there

appears to be a tremendous amount of competition in the

international market, and one way to afford the

consumers the additional protection that you've talked

about would be if, you know, why tariff international

charges anymore? Make it all unregulated, and consumers

would have all the rights that they need.

MS. HARRINGTON: Adam?

MR. COHN: About the issue of chargebacks for

international calls, I guess this is somewhat related to

a billing insert, you know, telling consumers of their

rights, but who does a consumer approach when they feel

that they are being billed for a call that they should

not be billed in the international arena? Who is the --

who are they purchasing from and how do they identify

the final person who is -- who is the merchant really of

the information, the IP?

MS. HARRINGTON: Answers to that question?

Jon, did you have your card up because you

wanted to be recognized?

MR. SHAUB: Yes.

MS. HARRINGTON: Do you have an answer to that

question? I am going to get to you.

MR. SHAUB: Yes, I believe I have an accurate

answer to the question. In any bill, the billing entity

will have an inquiry number to contact in the case of

all and any questions, and that will lead the person to

the company that rendered the bill, who is able to

answer the questions, explain policies, or give the name

-- in the case of the audiotext, the name and address

of the provider, if it's different.

MS. HARRINGTON: If it's an information provider

in Muldova, will AT&T have the name of that

international provider or simply the name of the bureau

in Canada that the call is routed through?

MR. SHAUB: I don't know the complete answer to

that either.

MS. HARRINGTON: Do you know the answer, Joel?

MR. DICHTER: I do not believe they do. I

believe they have the name of the foreign telephone

company, because that's who their relationship is

directly with.

MS. HARRINGTON: So, the answer to Adam's

question is in some companies the consumer can't learn

that information from the billing entity. Is that

accurate?

MR. DICHTER: I can only -- I think that's

correct, because it is --

MS. HARRINGTON: Okay.

MR. DICHTER: -- the billing entity's charges

that are appearing on the bill. It is not like a

900-type situation where the information provider says,

I want to charge $3 per minute, and it's his charge that

appears on the bill. With an international call, it's

the standard international tariffed rate service, and so

it's AT&T's charge or MCI's.

MS. HARRINGTON: Adam?

MR. COHN: On a follow-up to that, I just -- I

wanted to ask, to what extent -- I don't know who to ask

this question to really, but to what extent are the

international audiotext calls actually going to another

country that we have to worry about an IP being in other

country and to what extent are those calls actually in

either the United States or in a country other than the

one to which the call is apparently being directed

according to the information on the bill?

This would be important, I assume, for a

consumer if they -- if they had a bill to Muldova,

knowing that the -- that the actual IP was -- and the

phone call was being handled in the United States, it

would be important. Does anyone have any information on

that?

MR. DICHTER: I don't have a full answer for

that question. I would say, though, one point is that

as long as there is disclosure to the consumer that

there is international charges that he can check with

his carrier as to the rates involved. You know the rate

that's being charged for the call, you know that you're

being charged that amount, and you can make the decision

whether or not to make that call, which is separate from

the decision do I want to make a call to Muldova or some

other location.

MS. HARRINGTON: Joel, how does the consumer

know what rate is being charged for a call to Muldova?

MR. DICHTER: Because he will know -- he can

determine from the phone number he's dialing to that --

he can call AT&T or call MCI and say I want to know what

a call is for this code, for this phone number, and they

can tell him exactly what is the rate for making that

specific phone call.

MS. HARRINGTON: That's a stretch, Joel.

MR. HERTZENDORF: Isn't he charged for that?

MR. COHN: That misses the question I was sort

of actually asking, which is how does a consumer know

what country they are actually calling. I mean, we know

that they are being billed for a call to Muldova, and we

know at least in one case that that might not have been

the case, but how extensive is that -- does that main

party here have any information with regard to how often

a call is actually being routed to a country other than

the one on the bill, and how does this affect their

ability to seek redress from the IP?

MR. DICHTER: The answer is I think in most

instances, most all -- and I can't say in all instances

-- most instances the call does go to that

destination. I don't think it has -- whether it -- that

question, though, has any effect on the consumer's

ability to get redress for that consumer -- for that

specific call to determine whether or not they want to

get a credit for that call.

MS. HARRINGTON: Don Klug, do you have an answer

to that?

MR. KLUG: No.

MS. HARRINGTON: Okay, I am going to come back

to you.

Alan?

MR. TAYLOR: I would just like to supplement

Adam's question, and that is, is there anything wrong

with that scenario? Is there any prohibition in the LEC

billing tariff or Primus or with MCI's or AT&T's or New

England's that the calls are not actually going to where

they say they are going?

MS. HARRINGTON: Kim, could you answer that, and

then we are going to go to Richard.

MS. WILLIAMS: In our billing contracts, we

require that the records that are submitted to us be

true records, that the calls were actually made to those

numbers and to those countries. So, we don't know,

though, we have no way of knowing that the call is

really terminating there. We trust that the person

sending us those records didn't just make up those

records.

MS. HARRINGTON: Would you terminate a customer

who sent you records for calls to a country where the

calls actually went to the number but the number didn't

go to the country?

MS. WILLIAMS: Would I terminate billing?

MS. HARRINGTON: Yes.

MS. WILLIAMS: I have. It wasn't for

international, it was for a 900 issue, but same thing.

MS. HARRINGTON: All right, Richard?

MR. R. GORDON: Yes, I would like to know if I

can defer to one of my colleagues on this particular

issue.

MS. HARRINGTON: Sure, if there is a particular

issue, but you have to come to the table, state your

name, tell us who you represent, and then we would love

to hear anything that you have that is enlightening.

MR. LESSER: My name is Todd Lesser, I am from

the TSIA, and you had asked some questions I think

directly, and I wanted to answer each specific one, and

first, what is billing. I think it's more -- I know we

are going to address this issue more tomorrow, but I

think we have touched on a few of the international

issues, and I think as far as knowing where the consumer

is making the call and where it really goes, the key

issue is is the consumer being informed, is the consumer

calling a number and all of a sudden it appearing as a

call to the Dominican Republic or a foreign country and

unaware of that. As long as the consumer knows that

there is a charge and what that charge is, I think

that's the issue that we should really look at rather

than any other things.

And second, as far as knowing the charges, I

think that as an overall industry, we have a global

economy, we have free access to phones, just as if I

pick up my phone and I make a call to New York, well,

everyone can say, well, I don't know what it costs to

call New York, I don't know what it costs to call

Nebraska, but I can get that information. I can call my

AT&T operator and say, you know, I see this phone call,

I am going to make a phone call to area code 801-421,

what does that cost me?

And just as the local phone company, if you call

from Los Angeles to San Bernadino, you may not know that

charge, and there is no regulations as far as whether

it's an information provider call or a regular call, and

really shouldn't be decided. It's just that is that

information available and is there too great of a burden

to put on every type of call.

You know like, for example, in Japan, when you

make a phone and hear some deep tones, you know it's

going to be a toll call. We don't do that in the United

States, and there is obviously going to be some

confusion, but the consumer just inherently by the

technology that's around is going to have to spend the

time and become more informed before they pick up their

phone to make a call, because as companies and the

Internet is growing, you are going to start ordering --

you may not buy your milk from the local distributor,

you may buy your milk from New York and it may be flown

in the next day, and you are going to have to know that

there is a potential when you pick up your phone that

there are charges that can occur.

MS. HARRINGTON: Thank you, Todd.

MR. LESSER: Okay.

MS. HARRINGTON: Mark, do you have a question?

MR. HERTZENDORF: Yeah, I was wondering whether

the foreign carriers identify for long distance

companies which phone numbers are related to audiotext

or information services, and if they don't currently do

it, is there a reason to think that they can't do it in

the future?

MS. HARRINGTON: Anyone have an answer to that

question? We have got a number of tents up, but I'd

like to try to get an answer before we go through --

MR. R. GORDON: I think there is an answer, if I

may defer?

MS. HARRINGTON: Sure.

MR. FISCULA: My name is Lawrence Fiscula. I

represent the Guyana Telephone and Telegraph Company in

South America. We do provide that information to any

carrier that requests it from anywhere in the world. We

currently provide it to AT&T and to MCI.

MS. HARRINGTON: So, you --

MS. SCHWANKE: I'm sorry. So, you know which

telephone numbers go to audiotext services.

MR. FISCULA: Of course.

MR. HERTZENDORF: Do you provide that

information to a carrier on a -- well, how --

MR. HILE: Systematically?

MR. HERTZENDORF: Yeah, on a call-by-call basis

or once a month you give them a list of specific numbers

or what?

MR. FISCULA: We have specific numbers in our

audio plan which are allocated for audiotext usage.

MS. HARRINGTON: Do you know whether other

carriers in other countries similarly have certain

numbers that are allocated for audiotext?

MR. FISCULA: I don't think I can -- I can't

comment on that. The Dominican Republic, yes.

MS. HARRINGTON: Dominican Republic, yes.

Anybody know about Muldova? Why don't we have

anywhere here from Muldova?

MR. KLUG: They are answering the phones.

MS. HARRINGTON: Could you supplement the record

on that through -- are you a member of the TSIA?

MR. FISCULA: Yes.

MS. HARRINGTON: Could the TSIA supplement the

record to the best of its ability on the matters of

whether foreign carriers have numbers that are

designated for audiotext, the method by which they

notify carriers and billing entities in the United

States -- the circumstances under which they notify them

of that fact, that is, whether a call is to an audiotext

service, how they provide that, you know, so on and so

forth.

MR. FISCULA: Let me clarify, if I may. We do

not call up AT&T and say, on either a per-call basis or

even a weekly basis, these numbers are for audiotext.

We have designated numbers in our numbering plan. AT&T

has requested from us and does from time to time, just

using them as one example, what numbers and are there

any changes in your numbering plan. So, that -- that is

the extent of it. We do not notify them --

MR. HILE: Is that part of the new arrangement

between you and the American long distance companies for

the settlement rates and so on?

MR. FISCULA: They have been curious about this

for some time. This has nothing to do with any of

that.

MR. HILE: Can you supplement the record on the

issue of the settlement procedures between the foreign

phone company and the -- and the American long distance

carriers?

MR. FISCULA: In what respect?

MR. HILE: Well, we have heard that --

MR. FISCULA: There are currently agreements in

place with two major U.S. carriers concerning

chargebacks, I'm assuming that's what you're --

MR. HILE: Yes, that's the issue.

MR. FISCULA: -- Where if -- and AT&T, we will

just use them as an example again -- subscriber --

MS. HARRINGTON: Would you use your microphone

is everyone can hear you? Thank you.

MR. FISCULA: Better? Is that better?

If an AT&T customer is given a credit, it is

totally at the discretion of the U.S. carrier. I have

nothing to do with that. AT&T in that example will not

settle with Guyana for the -- whether it's a five-minute

call or a three-minute call in that particular instance,

I receive zero settlement. I in turn make no settlement

with my service bureau or information provider for that

particular call.

MR. HILE: And that's the end of it, or does it

go further? Is there more -- is there some additional

process?

MR. FISCULA: The -- the -- in this business, we

have found internationally, the best way to solve a

problem is simple nonpayment for the service, whether

it's where people use the word "free" in advertising or

if it's a type of service that doesn't work. If they

aren't paid, they won't do it again.

MR. HERTZENDORF: Has Guyana Telephone been in

communication with the group of European regulators to

implement similar procedures, and is -- is anyone

present a member -- the abbreviation is ITU,

International Telephone -- I think it's International

Telephone --

MR. FISCULA: Telecommunications Union, of which

we are a member. We are also a member of the

associations NSTIA and the ITA, and we do work through

our associations more often than directly.

MS. HARRINGTON: All right, we are going to move

to the last issue here concerning the industry view that

if there were a change made in the notice in the billing

statement, that that might have an impact on

chargebacks. We would like to discuss that issue for

our remaining time this morning.

Richard, do you have your card up?

MR. R. GORDON: Yes, I do.

MS. HARRINGTON: Okay.

MR. R. GORDON: We very much, as the TSIA,

support and endorse and would like to actually plead for

a change in the wording, and again, I believe that this

is consistent with the intent of Congress.

It's important to note that really what we're

dealing with is a commercial exchange, whether it's

billed through the phone company or it's billed through

a third-party billing company. The present state of

affairs is such that we as an industry do not have

sufficient information about the consumer with which we

can make an informed decision and make sure that they

know what they are doing.

Consequently, when there is a statement on a

billing record or on a bill that's received by the

consumer that basically says, you don't have to pay this

and if you don't pay it, nothing is going to happen --

and I know that that's extracting something out of it --

what happens is the information provider, the provider

of the services, does have, under the law, a commercial

right to go after the person who used those services and

has the right to pursue collection.

Unfortunately, the billing notice, as it is most

frequently presented to the public, gives the public the

false impression that when the phone company says, I'm

taking that off your bill, that the phone company has

final authority. That is not the case. The phone

company is only the agent for the provider of the

services here, and as we have heard this morning, the

phone companies, the LECs, believe that they purchase

the accounts receivable, and they then have the right to

collect that money.

I think as an industry we would say that they

borrow the accounts receivable. They don't purchase

them, because if there is a denial of the record, if

there is a denial of the transaction, then the LECs, who

will not assume that debt and probably shouldn't,

because they were not really a party to the actual

transaction, they simply are a party to the billing side

here, they have to be able to give back to the industry

sufficient data that the industry can then go and on

commercial terms with full disclosure to the customer

advise the customer that they have consumed these

services, they have a requirement to pay for them, and

we need to let the public know consistently that if you

use the telephone as a vehicle to commit electronic

commerce, that doesn't give you the right to steal, and

that's the problem.

The public notice is such that consumers are

becoming educated that they can put their hand in the

cookie jar and keep taking the cookies and never have to

pay for them.

MS. HARRINGTON: Susan?

MS. GRANT: Let me --

MS. HARRINGTON: Before you speak, let me ask a

question. Does everyone -- we had circulated a copy of

the ISA proposed alternative language here for the rule,

and I hope that all the participants have that, because

we are going to talk about that in a minute. We have

more copies if you don't have them. The ISA, for

example, needs a copy.

MR. ANGEL: We have got comments on page 8 --

MR. KLUG: Marianne, are there extras?

MS. SCHWANKE: Yes.

MS. GRANT: I don't know if more documentation

can be provided than has been provided in the comments

so far about the different categories of consumers who

dispute bills and how many of them are really taking

advantage and how many of them have really been taken

advantage of. I do know that -- and I would welcome

that information if more data could be provided.

I do know that in the calls that the National

Fraud Information Center gets, people are alarmed about

the possibility of their phone service being shut off,

even though the bill says that it cannot be, and they

need to be re-assured, in fact, by our counselors that

they do have the right to dispute the charges without

fear that their phone service is shut off.

I sympathize with the IP's desire to get paid

for legitimate charges that have been wrapped up by

consumers who really understood what they were getting

and how much it would cost and are refusing to pay. I

don't know what percentage of the chargebacks and the

disputed bills that represents, but I think that if the

billing notice was to make clearer to consumers the time

within -- within which they must dispute the charges,

which I don't have any problem with, and the fact that

while their phone service could be turned off, they

might still be held responsible for those charges, I

think it would be important to also tell them that they

have the continued right to defend themselves against

those charges.

If the company wishes to take that collection

action against them, that they have the right, as they

do in any other kind of situation where they are

disputing the validity of the charges, to continue to

contest them.

I'm really concerned about any notice on the

bill that would further alarm consumers into believing

that they don't have the continued right to dispute

these charges, because from the calls we get, people

need to be re-assured that, in fact, they can continue

to argue about it.

MS. HARRINGTON: Okay, so, looking at this ISA

proposal in paragraph 2 at the end of the second

sentence, you would add some sort of phrase that says,

"and you have the right to continue to dispute them"?

MS. GRANT: Right.

MS. HARRINGTON: That would -- okay, Dave?

MR. GILLIS: In reviewing the proposal, and I

guess at this point in the interest of complete

disclosure, I should make the comment that the views I

express are my own and don't represent the formal

position of the National Association of Attorneys

General, but in reviewing the disclosure provision that

was enclosed, it would be my view that people should

know what their rights and obligations are. So, I --

and to the extent that this would help with chargebacks,

I think it would be a good approach. I think there are

some potential problems.

One, if you give people too much information, it

will dilute the effectiveness of the communication, and

it -- so, it has to be important that the notice is

concise.

Secondly, I share the concern that Susan

expressed about the use of the notice by -- either as it

stands alone or by collection agents to imply that

disconnection will occur as a result of nonpayment for

these charges. And so I would offer those points and

suggest that the formulation of the notice ought to be

one that's carefully studied consistent with what people

take away from the communication.

MS. HARRINGTON: Allen?

MR. HILE: I'm referring specifically to the

ISA, and I have one rather narrow question, and that is

the first -- the first paragraph, the first thing that's

in bold and italics, which are noncommunication

services, and I wonder if anybody has a view on what

meaning consumers might take from that particular

phrase. The proposal is, "This bill contains charges

for calls from your phone to 900 numbers that provide

information and/or entertainment which are

noncommunication services."

MS. HARRINGTON: Albe?

MR. ANGEL: I believe the term refers to the

term of art that the FCC has used in categorizing

different charges, and --

MS. HARRINGTON: Use your microphone, please.

MR. ANGEL: -- and noncommunication services are

those like 900 that generally are unregulated, while

appearing on telephone company bills, will not result in

a disconnection of basic service for nonpayment.

MS. HARRINGTON: Why was that -- why should this

information be given to consumers? What difference does

that make? I mean, why would anybody care?

MR. ANGEL: We struggled with the choice of the

right words trying to strike the right balance in terms

of what consumers would understand and at the same time

invoking the right principles from a regulatory

standpoint.

Now, all of you may recall that, you know, the

modified final judgment, Judge Green used one set of

terms and the FCC used yet another set of terms. We're

content to change that language to something that

consumers understand consistent with the regulatory

environment.

MS. HARRINGTON: Kim would --

MR. ANGEL: I believe Ed LaVergne, who is our

counsel, just wants to make a point. Would that be all

right?

MS. HARRINGTON: Okay.

MR. LAVERGNE: Ed LaVergne, counsel to the ISA,

a very brief point. The wording was specifically chosen

because it is precisely what the Federal Communications

Commission currently requires in billing statements, and

that's -- and the precise section is 47 CFR 64.1510

(A)(2)(i)(a).

MS. HARRINGTON: I wonder if anyone has ever

copy-tested to fine out if consumers understand any of

this. That's an inappropriate editorial aside.

All right, we are going to hear from Kim and

then Richard.

MS. WILLIAMS: I just wanted to comment on the

statement, too, that our statement is very similar to

this, and the noncommunications piece is in ours because

the FCC directed it. I think our concern at the time

that we had to put this statement out there, also, was

why don't we just tell consumers not to pay it then,

don't even send us the check, we will just mail you your

charges back as soon as you're ready, but really, 900

chargebacks have gone down, but is that -- since the

TDDRA. I don't know if that's a function of any of

this.

I think it's a function of the fact that most of

the services that consumers complained about left 900

and moved on to other things. The statement helps

consumers understand their rights. Whether it's worded

the best or not is another thing. I think we all took a

shot at wording it ourselves and Southwestern Bell's is

probably not identical to any other LEC's, but it has

the pieces in it that the FCC required.

MS. HARRINGTON: Richard?

MR. R. GORDON: Yes, again, I would like to try

to bring us back to the fact that we're here today

trying to work together to come up with changes or

modifications to the regulation that reflect the intent

of Congress, and the intent of Congress, I think, was

very clearly established in a communique dated February

18th, 1997 to the Chairman of the Federal Trade

Commission, authored by Congressman Gordon, in which he

specifically offered the following language to be

printed on a separate page of a consumer's phone bill:

"This bill contains call -- charges for calls

from your phone to 900 numbers that provide information

and/or entertainment services. If you wish to dispute

any specific 900 charges that appear on this bill, you

must call the number at the bottom of your itemized call

page within 60 days; otherwise, the charges will be

presumed to be valid. Neither your local nor long

distance service will be disconnected if you do not pay

the disputed charges. Even if the disputed charges are

removed from your bill, the 900 service provider has the

right to pursue the collection of these disputed

charges. Your failure to pay undisputed charges timely

may be reported under the Consumer Credit Reporting Act

to a third-party credit reporting agency, which may

adversely affect your credit. You can call your local

telephone company to have 900 calls blocked from your

line."

We're here to interpret the intent of Congress.

MS. HARRINGTON: Well, I have to dispute that.

The Commission interpreted the intent of Congress when

it promulgated the rule, and we are here to review the

rule.

MR. R. GORDON: Sorry.

MS. HARRINGTON: Just -- and that's an important

point, I think.

Let me ask a question. The Commission in the

first -- when it promulgated this rule indicated its

preference to avoid overly prescriptive regulation here

by in most instances opting not to require that specific

language be used in disclosures, so that in the

advertising portions, for the most part, the rule

requires clear and conspicuous disclosures of certain

pieces of information rather than requiring that

disclosures in advertisements be scripted in a specific

way.

Likewise, even where the rule requires the

disclosure of information about odds of winning in

sweepstakes, we stayed away from, you know, specific

language. This would be -- to adopt this approach -- a

complete departure from the Commission's general policy

of leaving it to industry to decide how to provide

certain information. As long as it's there, we are not

going to, in other words, get into the business of

writing disclosures in the rules.

What the ISA is proposing here is a complete

about-face, essentially. It's quite restrictive and

regulatory, and I'm wondering if anyone has given

thought to the implications of that.

Richard?

MR. R. GORDON: We have, and in support of what

Peter has said, when you have someone such as his

company, which has one national program going out in 600

newspapers, and you have such vast inconsistency in the

chargeback rates and in the -- and in the collection,

the only thing that you can conclude from that is that

there's inconsistency in the communication at the LEC

level.

That appears to be the major problem that we

have, and if -- if it starts on the billing statement,

if the billing statement is consistent, then hopefully

the customer service representatives at the LECs will

consistently say the same things and consistently apply

the same standards.

And further, when these do become third-party

collection or secondary collection efforts, hopefully,

if the attorney generals are all properly advised as to

what the federal standard is, then their local offices

will apply the same standards when dealing with

consumers that are complaining about collection

efforts.

MS. HARRINGTON: Adam, do you have a question?

MR. COHN: I had a question about --

specifically about this billing statement that the ISA

provided, if you want to go on to other --

MS. HARRINGTON: Okay, I am going to come back

to that.

Linda?

MS. GOLDSTEIN: I was just going to try to

address that comment and perhaps give the Commission

some comfort level that in adopting this language it

would not really be acting inconsistent with the

reasoned and flexible approach it took on the

advertising disclosures. I think you are talking about

two different animals.

The reason the industry advocated so strongly

for some flexibility in terms of the advertising

disclosures is because of the multitude of forms,

variations, formats, styles, presentations that the

advertising might take and the hundreds of thousands of

different advertisers that might be subject to those

regulations, and we felt, as is consistent with general

FTC policy, that always the advertising and the adequacy

of the disclosure should be viewed within the context of

the totality of the ad based on the net impression,

based on all the graphic materials, where the disclosure

appears in relation to other information on the piece,

what the other graphics copy and text are.

Here, we're dealing with a document which by its

nature is a disclosure document. So, you really don't

have the need or the driving force or the creative

flexibility really doesn't exist in the context of this

document to the same extent as it does in connection

with advertising.

MS. HARRINGTON: All right, I want to check and

see whether there is consensus around the table on the

question of whether it would be preferable to have a

boilerplate disclosure in the billing statement rather

than -- and to require that by regulation.

Susan?

MS. GRANT: I would support it as long as it

strongly voiced the consumers' rights as it does the

company's rights. I think that the reason why we have

the preamble requirements and other protections of the

rule stemmed from the instant nature of the charges and

the fact that it's often something that's billed on the

consumer's telephone bill, a very basic consumer

service. So, I would really support a concise, strong

notice that gave consumers as much information about

their own rights as their obligations to the companies.

MS. HARRINGTON: Does anyone disagree with what

Susan just said? Put your tents down for a minute,

please, because I really can't -- does anyone disagree

with what Susan Grant just said?

You disagree with her?

MR. R. GORDON: No, I don't disagree.

MS. HARRINGTON: Okay, well, then you can't talk

right now.

All right, now, everyone who had their tents up

may put them back up. We have only a few minutes left.

Adam, a question?

MR. COHN: I had a question specifically about

ISA's proposal, which is very similar to the -- to the

one that was just read earlier. I think that was -- was

that also Bart Gordon's --

MR. R. GORDON: That was right out of his

letter, yes.

MR. COHN: There is a statement in the second

paragraph that says, "Also, if you do not pay legitimate

charges, your ability to pay noncommunication services

and to make 900 calls may be blocked."

How does -- how are legitimate charges defined?

What does that mean?

MR. R. GORDON: Legitimate charges are charges

that actually occurred from that telephone. So, if

there are situations, as there have been in the past and

there may be in the future, where somebody does -- a

phrase I hadn't heard before until today -- phantom

billing, if somebody really does phantom billing, then

the consumer absolutely can't be held responsible for

those. That's the intent here.

MR. COHN: What about other complaints that a

consumer may have, where they would claim that it was

not legitimate, even though it was placed from their

phone, false advertising, for instance?

MR. R. GORDON: Again, at that point in time,

that becomes an issue between the service provider and

the consumer, and that can be resolved using standard

commercial terms.

MS. HARRINGTON: Okay, we are going to have

Kim.

MS. WILLIAMS: Yes, I guess my only statement

about the message on the bill is that it shouldn't be

mandated other than certain key points and all of the

key points, such as that it's -- you know, the

legitimate charges statement you just asked about,

that's in the FCC's requirement already. As long as we

all have those things in our message to the customer,

I'm not sure why a specific statement has to be used.

MS. HARRINGTON: Okay, Albe and then Jill.

MR. ANGEL: Just for clarification, I want to

point out that what we have done here is we have taken

the FTC's existing billing notice in the regs, we have

proposed some changes. The changes that we are

proposing are in bold italic, and our proposal --

MS. HARRINGTON: So, this would still be a

sample?

MR. ANGEL: Yes, and it's a sample.

MS. HARRINGTON: Fine, that's an important

clarification.

MR. ANGEL: Yes, and I think there is a great

degree of uniformity can be achieved by just putting on

additional sample that people can feel they have a safe

harbor by using.

MS. HARRINGTON: So, we are not talking about

changing the rule but about the sample language.

Important clarification.

MR. ANGEL: Correct.

MS. HARRINGTON: Jill?

MS. SANDFORD: In taking a look at this language

here, I agree with Susan to the extent that we do want

something that's consistent and balanced, but two issues

come to mind. The first, this fails to distinguish

between authorized and unauthorized calls, and I think

it's important to have in the language something that

references a call being authorized by the consumer

before the consumer is billed.

Another concern I have is this italic language,

"No later than 60 days after we send you the first bill

on which the disputed charges appeared." We are

starting to see a number of consumer complaints where

consumers are enrolled in memberships on a recurring

basis.

Now, if you had a situation where the consumer

was enrolled in the Psychic Hotline and the consumer

missed the first month's charge, would they then waive

their right two or three months later to object to those

charges because they didn't object initially to being a

member of the club?

MS. HARRINGTON: Okay, Marianne has a question.

MS. SCHWANKE: Actually, I have a question and a

follow-up clarification. I just want to clarify that

ISA in its comment, I believe, proposed changes to the

rule and in addition provided this as a sample billing

notice that would comply with the changes it proposed.

Is that correct?

MR. ANGEL: I have to check.

MS. SCHWANKE: I see heads shaking behind you.

MS. HARRINGTON: Ed LaVergne, your counsel, says

yes. I'll note that for the record.

MR. ANGEL: Yes.

MS. SCHWANKE: Okay, and then I wanted to follow

up something that Richard said about legitimate

charges. You indicated legitimate charges would include

all calls made from a phone bill, but it would not

include what we have referred to as phantom calls, but

the whole issue about phantom calls is that it appears

on a bill as though it's a call that was made from the

consumer's house and the consumer is disputing that

fact. So, how would that play into this issue of what

is a legitimate charge?

MS. HARRINGTON: Don? You have your tent up.

MR. KLUG: Yes, you were asking earlier about

looking for consensus on the requirement for uniform

language as opposed to each billing entity to provide

their own. I strongly support uniform language. I

think it strengthens the intent of the notice as well as

just the -- just helps the industry.

MS. HARRINGTON: Does a safe harbor example not

provide adequate uniformity?

MR. KLUG: No.

MS. HARRINGTON: Well, why not?

MR. R. GORDON: I have a -- because, Eileen, if

I may, the current regulations say 60 days, and there is

interpretations of what that means. I think if we leave

this to the LECs to interpret the sample, then we get

back to the matter of inconsistency.

MS. HARRINGTON: We are going to hear from Mark

with a quick question, we are going to hear from Albe,

and then we are done.

MR. HERTZENDORF: With regard to the

participants who are recommending uniform language, can

they create some particular billing statement that was

used by some particular LEC which they thought

discouraged consumers from paying? I mean, one that

stood out as being particularly bad from the IP's point

of view?

MS. HARRINGTON: Albe?

MR. ANGEL: In response to your question, Mark,

I know that anecdotal examples, such as the one that

Peter Brennan plans on following through with, will

provide some of the granular information that we're

looking for. In response to the earlier question as to

whether or not we're proposing a rule change in addition

to that change sample, at page 7 of your comments, in

bold once again, we are articulating what the change in

the rules should be, and it does go to the issue of when

a customer may initiate a billing review.

MS. HARRINGTON: Okay.

MR. ANGEL: And it's just that last segment of

the first paragraph.

MS. HARRINGTON: Okay, Marianne has a question

out that hasn't been responded to. Does anyone have

anything that is responsive to Marianne's question?

Richard, your sign -- your -- do you have

something?

MR. R. GORDON: Well, I had a comment, but --

MS. HARRINGTON: Okay, but your sign is sort of

perpetually up, and that's -- and everyone has an equal

stake, but we can't have perpetually up signs here.

Thank you, Mark. See, it applies to the goose

and the gander.

Marianne, what's your question again?

MS. SCHWANKE: My question is how do -- there is

a statement on the bill that indicates that all

legitimate charges have to be paid. How does the

phantom bill fit into that statement? Is that a --

would that be considered a legitimate charge?

MS. HARRINGTON: Jon?

MR. SHAUB: I think we need to have a clear

understanding of what is meant by "phantom bill,"

because I think, back to Jill's point, we need to

distinguish authorized from unauthorized in the

definition of phantom bill. The customer may have said

I didn't make that call, but, in fact, the call may have

come from that line without the customer's knowledge,

whereas I think a phantom call is being discussed as a

call never took place.

MS. HARRINGTON: We are going to have more

discussion this afternoon on phantom billing, as well.

Thank you, Jon.

Okay, Albe, and then -- this is the last

comment.

MR. ANGEL: It's just to augment what you just

said. The billing code reasons that are given by a LEC

for a chargeback is what we're also seeking for some

uniformity. A phantom bill would not be a legitimate

charge in that there would be an investigation launched

to determine that there was fraud.

MS. HARRINGTON: Thank you, Albe.

Thank you, everyone, for being patient with our

process, and this has been a very rich and wonderful

discussion this morning. Thank all of you.

We will resume promptly at 1:30, and let me tell

you, we have got a new food vendor up at the fabulous

Top of the Trade. We don't get any money here from it.

There is no kick-back, but if you need a quick bite, go

up to the 7th floor.

(Whereupon, at 12:30 p.m., a lunch recess

was taken.)

AFTERNOON SESSION

(1:30 p.m.)

MS. HARRINGTON: Thank you, everyone. I hope

you had just a wonderful, leisurely lunch.

We are going -- we are going to continue talking

about this billing and collection issue, but now we want

to talk about issues that have been raised from the

consumer perspective, and we touched on one of these

this morning, and that is the incidence of unauthorized

calls, what can be done to reduce the incidence of

those. We also want to talk about the phantom billing

issue and other issues. I would refer you again to your

agenda, we're on page 2 at the 1:30 to 3:15 segment.

So, I'd like to begin, and if I could just sort

of arbitrarily see if Dave Gillis would like to say

something to begin.

MR. GILLIS: Sure I would.

MS. HARRINGTON: Since no one's tent is up.

MR. GILLIS: As pointed out in the comments

submitted by the subcommittee of the National Attorney

Generals Consumer Protection Committee, our offices

continue to get complaints from people about calls that

they did not authorize, and the most typical situation

is where a parent is complaining about calls that at

least as asserted by the provider were made from a

particular number and what to do about that incidence.

MS. HARRINGTON: What does that mean, Dave?

What is it that happens, that kids are placing calls?

MR. GILLIS: Yeah, that's it, at least in one

scenario that's it. There are other situations where --

MS. HARRINGTON: And they haven't yet gotten 900

blocking or they have opted not to get 900 blocking?

MR. GILLIS: That's right. There are other

situations where people say that they were away from

home on vacation, and they come back, and their bill

reflects charges to pay-per-call services, and in those

-- and those are not infrequent complaints when we

compare notes among the state attorneys general.

It's very troubling, because these type of

complaints have persisted over time, and so in terms of

coming up with a mechanism to resolve and address those,

we have to look to the industry for that solution,

because after all, the consumer doesn't get a printout

at the end of every month from their particular phone as

to its calling detail, and rather, they rely on the

industry for the production of this that comes within

the bill.

So, one of the problems in dealing with this

issue that I think could be improved upon -- and this is

covered later on in the agenda, too, but I'd like to

point to it now -- and that is a more thorough and

complete investigation by information providers that

responds to inquiries about authorization for calls.

Frequently when we send out complaints to

information providers, the response is a simple two

sentence, this is their phone number, and our records

reflect the phone was made. There is not even -- there

is no supporting data, and when you ask for that, at

least, in many instances we don't get it. So, that's

the first point, is in terms of investigating

complaints, providing supporting, underlying

documentation that documents the fact that the call was

made.

The second point would, again, be implementing

procedures at the front end of the transaction to make

sure that you're providing a service to someone who is

authorized and who wants the service, and I think that

was best illustrated earlier this morning when one of

the commenters mentioned that they used chargebacks as a

measure as to whether or not they are doing their job,

that with a low chargeback, they understand that to

reflect that people are getting the value they perceive

in the service.

So, those are two -- two areas that I would like

to see the discussion focus on and how to improve the

industry's response, and I think by doing that, the

problem of unauthorized charges would be diminished.

MS. HARRINGTON: Allen?

MR. TAYLOR: Yes, thank you.

I think I better caveat what I say by saying

they are not necessarily the opinions of the Florida

Public Service Commission, but basically with what we're

about to talk about on the agenda, I want to make clear

that my concerns are only about those charges billed on

the local exchange company billing systems, and why is

that? That's because that's -- a local exchange company

billing system is probably the most open to fraud and

abuse of any billing system anywhere, and that's -- I

think we can pretty much document that anybody almost

anywhere at any time can generate a charge through this

billing system.

I think our comments, for instance, providing an

example where a subscriber actually had 900 number

blocking, but it was billed for a 900 number call, which

the transport provider admitted never transited its

network. So, I think that's your definition of a

phantom call. How did that bill get originated? Is it

a figment of somebody's imagination? I don't know. I'm

concerned because what is on the bills does not

accurately represent what has occurred, if anything

occurred in some cases.

I'm concerned because some of the ads that are

used by information providers certainly incense other

folks and maybe others not so young to essentially rip

off the telephone service of the elderly in a condo

environment where it's been known that unauthorized

people clip on and generate calls for one reason or

another, and I think we have to have some responsibility

be placed on the information providers to ensure that

they have authorization for the calls that they

receive.

MS. HARRINGTON: How would they do that, Alan?

MR. TAYLOR: Well, I'm glad you asked that

question. I think that there are several ways that they

could do that. One is to basically charge 900. I don't

really -- if they use the 900 service access code, I

would argue they didn't have to get any other

authorization, but if they are going to use another

service access code, I think they bear a responsibility

to get authorization, and the way you could get

authorization would be to use not some made-up card

number or not some instantly developed PIN number or

card number, but the -- and again, I am talking just

about the local company bill.

Most people can obtain a local exchange company

calling card that has a unique PIN number, and if this

PIN number was provided, that could serve as being the

authorization to receive a bill for anyone using that

PIN number. Basically this gives the parents the

ability, without changing their phone number, to change

their PIN number if their kids used it in an

unauthorized way, and it could serve to block any bills

for someone who simply knows the phone number, and

anyone can know the phone number, because it's in every

phone book.

So, I think we need sort of a V-chip for

telephone service that parents can use, and I think the

FTC would -- is probably in a position to assist in this

-- in this and that it needs to be done. After all, if

you can block indecent programming on your TV, why not

be able to block indecent telephone calls?

With respect to international, I want to say

that, again, this may not be the venue to discuss it,

but I don't -- obviously the industry has moved to this

type service access code for a reason, and maybe some of

those reasons are justified, but maybe some of them

aren't, and I would like to see -- I think we can do

something about that through the tariffing process. I

just basically don't want the FTC to do anything that

would inhibit what I would hope the FCC might do as far

as new tariffing in order to make it nonregulated

charges on bills which then can be better denied.

MS. HARRINGTON: Adam has a question and then we

will go to Peter, unless someone else has an answer to

Adam's question.

MR. COHN: About the issue of phantom bills, I

guess there is some question about what that actually

means, whether it means that a call that was just

generated completely out of the blue, 100 percent false,

or whether it means something maybe a little bit

broader, such as a bill reflecting a call that -- an

actual charge, but the bill is reflecting something

different than what actually happened. That might be,

say, an international call to a country other than the

country that it was actually terminated it, or it may be

something like a subscriber subscribing to a phone card

or someone subscribing to a phone card from a particular

residence and then charges made with that phone card

reflected as a bill to that phone number.

And what I wanted to hear, if anyone had any

comments about the suggestion that we have some

arrangement where consumers use a calling card for these

sorts of calls that are not a 900 number, whether that

would actually open the door to more fraud, where, say,

a visitor in a person's home could subscribe themselves

to a person's telephone number with a calling card and

then use that calling card from then on to charge to

that line and then generate what might appear to the

consumer as phantom bills.

MS. HARRINGTON: Okay, we are going to have some

-- Peter, do you mind if we have some answers to that

question?

MR. BRENNAN: No, please do.

MS. HARRINGTON: All right, Alan and then Albe,

then Kim and Don.

MR. TAYLOR: Let me just clarify, that would

certainly defeat the purpose if that was the case. What

you have outlined and described is what happens today,

and that's what's wrong with the system, is that anybody

can make up a card number and assign it to a telephone.

I'm saying the only authorized charges would

have to have the one and only the one specific PIN

number associated with the phone by the local exchange

company.

MS. HARRINGTON: Albe?

MR. ANGEL: In response to --

MS. HARRINGTON: Use the microphone, please.

MR. ANGEL: -- in response to a cluster of

questions.

In terms of phantom billing, as I understand it,

it really arises from accessing billing anomalies, and

they can arise in two or three different ways. One

that's received a lot of attention in the comments is

where there is clip-on fraud, where, in effect, a third

party goes into the equipment room and gains access to

the lines associated with a residence or a business and

places calls not from the instrument in the residence or

business but on some portion of the network interface

that's on the customer side, so that the call is

actually placed, the handling equipment correctly

identifies the ANI, but the call, in fact, was not made

by the subscriber; it was made by a thief.

The other major variant is where someone is

submitting billing records, and these billing records

are completely fraudulent. They have no basis

whatsoever in any call that was made.

And then the third variant is that there was, in

fact, a call made, and it was dialed using some

sequence, but when the billing record is presented, it's

presented in a form other than the way the call was

originally dialed, so that, for example, a call might

have been dialed 800 but presented as 900 for billing.

So, the three different --

MS. HARRINGTON: There is a fourth variation,

too, I think that Adam raised, and that is where the

billing -- the call is placed and the bill is presented

in a way that is consistent with the call that was

placed, but the call never reached the destination that

is assigned to that number.

MR. ANGEL: Okay, so, in other words, duration

of the call or circumstances associated with the price

per minute -- there is some billing information that's

at variance with what should have happened.

MR. COHN: Or what actually did happen, like

going to a country other than the one that the bill

states, or also, I did -- this might be similar to one

of the ones you mentioned, but a calling card call from

-- from another location that's reflected as a call

from that -- from that home instead of as -- I don't

know how normal calling cards -- in my bill, when I use

my calling card, there is a special section that says

"Calling Card," but from what I understand, there are

consumers who receive bills that are with calling cards

of -- many sorts of calling cards, and it's billed as a

bill on -- as if they have made a call from their home

without using a card.

MR. ANGEL: I'm not familiar with that last

category, but certainly charges are sometimes presented

on telephone bills, on separate bill inserts, that

reflect operator-assisted calls or specially handled

calls outside of the residence, and they are billed as a

bill-to-third-number situation, and that's been a garden

variety type of fraud that has been the subject of

operator assistance proceedings.

But on the issue of the calling card, clearly if

someone has your calling card and your PIN number, they

can initiate fraudulent calls without your consent.

MS. HARRINGTON: Marianne has a question.

MS. SCHWANKE: To follow up with Albe on the

second way in which phantom billing occurs, that is,

that someone submits false billing records, are you

hypothesizing that this might happen this way or do you

know that this has happened or does happen?

MR. ANGEL: I don't have specific information I

can share with you right now. I do know, having been

involved as a telecommunications attorney some years ago

and having represented some billing providers, that

there were frequently allegations that billing messages

were presented twice or presented incorrectly, and I

don't have specifics on that, but basically what you

have there is if there is a continuing relationship with

a billing provider and a local exchange company, there

should be some enforcement mechanism between those two

parties to ensure that that doesn't happen, and if it

happened repeatedly, I'm almost certain the local

exchange carrier would use the option of terminating the

contract on the basis of fraud.

MS. SCHWANKE: How would a LEC know that the

billing tapes or billing information was fraudulent?

MR. ANGEL: Consumer complaints.

MS. WILLIAMS: I think I can address that, too,

when it's --

MS. HARRINGTON: Kim?

MS. WILLIAMS: Yeah, I have actually seen

several of the situations, the examples that you have

given, for instance, a different number than that which

was actually dialed. We had certain programs that we --

certain types of programs we don't want to bill for,

period, and it's because of a company image policy, and

an attempt, you know, at policing, because if we get

complaints about certain types of services being billed,

we will go back to a company that we have a contract

with and say this doesn't meet our image policy, it's

not something we will bill for.

What we have had happen is had companies submit

900 numbers that were never dialed, when a customer

calls and complains and says, Well, I didn't call this

number or I didn't -- you know, we can do a couple of

things. Number one, we have called those 900 numbers,

found them to be pretty -- you know, services we will

bill for. So, we go pull a tape of what calls the

customer actually made, and there aren't calls to those

900 numbers at all. They are calls to other numbers

that don't meet our billing policies. After several

experiences with one company, we did terminate that

company's billing for that reason.

MS. HARRINGTON: Do you ever report that to law

enforcement?

MS. WILLIAMS: No, we did not.

MS. HARRINGTON: Would you?

MS. WILLIAMS: I guess I would have to check

with legal about that. I don't know.

MS. HARRINGTON: I mean, it seems to me that

that's fairly significant fraud.

MS. WILLIAMS: Well, I know the first was --

MS. HARRINGTON: I would think. I would think

that the AGs would think that, too.

MS. WILLIAMS: I know the first time we

terminated billing for that company for a certain type

of service, they filed a lawsuit against us and went to

Judge Green on the whole bit and then kind of dropped

the whole thing. So, they came back, said we will

comply, we did it again, found out the same type of

thing happened again, went to stop it again, and we were

subjected to complaints that you are treating us

differently than everybody else and, you know, it's

discrimination.

Finally, we just terminated billing with that

company after a third shot at it. Every time that that

company would send us billing, it would be --

MS. HARRINGTON: Were these, for example, calls

to 800 numbers that were presented as calls to 900

numbers?

MS. WILLIAMS: Actually, many of them were just

calls to interstate numbers.

MS. HARRINGTON: Inter?

MS. WILLIAMS: Yes, although they weren't all

direct-dial calls. Sometimes they would call and get a

direct call-back and then turn around and send it in as

a 900 call, something like that. So, we have seen

variations in that respect.

Other 900 numbers that I have seen recently, the

monthly fee business, you call a psychic line one month,

and every month you get a 900 number call on your bill

for $9.95 for a one-minute call, but those calls are

never actually made that month, so we have stopped that

kind of billing. And many companies just looked at that

as a way to bill a monthly fee, not necessarily as some

billing violation, but it certainly was a violation.

MS. SCHWANKE: If a consumer calls you and

alleges that a particular call on their bill was never

made and nobody was ever home, do you have a way of

checking the records showing the calls that were

actually dialed from the home to see if the call was

ever dialed from that number?

MS. WILLIAMS: We do. We don't necessarily use

it in every case, because it is not an easy or a cheap

thing to do, but we have to go back to our network and

pull the recording of the recalls that were made from

that customer. So, we state a specific date and time

that we want to check, maybe a certain few hours on a

certain day. The network -- our network people actually

pull a copy of the real tape and print it off and say

these were all of the calls that were made from that

phone at that time.

MS. SCHWANKE: How far back do you maintain that

data, do those records go?

MS. WILLIAMS: I honestly don't know how far

back we keep it. I know they only want us to go 45 days

or so, because I assume those tapes are shelved or it

may be destroyed, I don't know. I honestly don't know

how long we keep it. Our guidelines say we can only go

back 45 days, but we have been able to get information

further back than that.

MR. HILE: Kim, what would be the actual

mechanism for someone to create a billing tape that

showed a monthly charge for a psychic line when the call

didn't take place? How would you do that? Do you

know?

MS. WILLIAMS: How they create the call?

MR. HILE: No, no, how do they create a billing

tape that shows a call that was never made? Do you --

can it be done with a computer?

MS. WILLIAMS: Well, yeah, I mean --

MR. HILE: How does that happen?

MS. WILLIAMS: Well, the way calls are billed is

an industry format record, what's called an EMI record.

MR. HILE: This is an electronic record, right?

MS. WILLIAMS: Correct, and I would say that

these companies just create EMI records with phone

numbers, to numbers, dates and times, to submit for

billing. I mean, there is a process to bill certain

monthly fees on a certain type of record, but it is not

billed as a call, it is billed as monthly fees.

Our company recently got out of the business of

billing monthly fees on our bills, because we found

everybody was going to monthly fees to bill. I would

question whether presubscription agreements should be

made for monthly fees. I'm not sure if the rule does or

doesn't apply. I think it would, but we said we won't

bill monthly fees anymore, so then we saw people giving

us 900 records instead to make it look like a call when

it was really a monthly fee.

MS. HARRINGTON: Mark?

MR. HERTZENDORF: Just to follow up, this

company or some of these examples of companies where you

have cancelled contracts, is this a major, like, billing

aggregator which submitted bills for hundreds of

information providers or was this a contract you had

with an individual information provider? How big a

scope are we talking about here?

MS. WILLIAMS: Well, I mean, we have seen

different things with different companies. We don't --

I will say we haven't just cancelled anybody, you know,

first strike you're out. We certainly try to work with

whoever has a contract with us to fix whatever they are

doing, you know, certainly have billing houses that have

hundreds of companies they bill for, and because they

have got one bad player, we don't cancel their

contract.

MR. HERTZENDORF: I guess I am trying to get at

how many different companies you have contracts for to

do billing. Do you have, like, a hundred contracts --

MS. WILLIAMS: We have about 80 contracts, I

think, right now, 80 for billing services, and many of

those are billing houses who bill for many other

people.

MR. HERTZENDORF: Do some of the billing houses

just bill for audiotext services?

MS. WILLIAMS: I would say yeah, that's a fair

assessment. Most of them -- I think a lot of them bill

just for audiotext or the monthly fee type services, but

other things, like voicemail and --

MR. HERTZENDORF: Regular long distance, that

doesn't go through a clearinghouse, does it?

MS. WILLIAMS: Some, it can. It depends on who

-- you know, if they are billing for an operator

service provider, you know, we do some of them for

billing houses.

MS. HARRINGTON: Okay, Peter and then Susan --

I'm sorry, Don, did you -- on that question, did you

have something?

MR. KLUG: Yes, I did.

I think it would be useful for the purpose of

this discussion to distinguish between unauthorized

calls where everyone, the caller and the carrier and the

biller agrees the call was actually made, versus phantom

--

MS. HARRINGTON: Made from the subscriber's

phone?

MR. KLUG: Telephone.

MS. HARRINGTON: Not from a clip-on.

MR. KLUG: Or a clip-on. The phone call was

made but unauthorized, versus a bill is rendered for

which a call never was made. I have been in my position

for four years, I have been responsible for management

of tens of millions of 900 calls. I have never heard of

one instance -- I'm not saying they don't exist -- of a

call that was rendered to a billing entity for which the

call was never made. If that situation exists, it's

very easy for either the LEC or the interexchange

carrier to audit their AMA tapes, the tapes by which

calls are made, to see if, indeed, it was made.

MS. WILLIAMS: Well, the AMA tape is the process

I was referring to.

MR. KLUG: There is a process in place.

MS. WILLIAMS: Right.

MR. KLUG: Because I think there are remedies

for both these problems, and I think we ought to kind of

distinguish between unauthorized calls, whether it's

children or clip-on fraud, versus calls that aren't

made, the "phantom calls," which is a new term to me.

MS. HARRINGTON: Kim, did you have a rejoinder?

MS. WILLIAMS: Yeah, the problem with that is we

can tell, but usually we are at the point where we have

gotten so many complaints already, because that billing

comes all in at once, and you get customers calling, and

normally it's the customers who have 900 block and they

get a charge on their bill, and it flags -- it goes to

their attention first. They are the ones who are coming

to us first saying, Wait a minute, I have a 900 block,

how did I get a 900?

We go pull that tape and say, Hey, you never

made a 900 call. So, you're right, we can tell that,

but it has already hit a lot of people before it

actually gets to me from, you know, all five states

where this has occurred.

MR. HERTZENDORF: If you find out that there is

phantom billing going on, someone making up the charges,

do you remove those charges even if the consumer has not

complained?

MS. WILLIAMS: We -- no, I can't say that we go

out and look for every consumer that was billed. We

might go to that company and expect that they would make

adjustments for all of them. We certainly make

adjustments as we get calls from customers, but I can't

say that we have gone back to try to poll every bill to

notify every customer. I mean, we hope that customers

look at their bills before they pay them, although I

know that that doesn't always occur.

MS. HARRINGTON: Allen?

MR. HILE: I just want to clarify one thing, and

that is what is the relationship between this thing that

you refer to as an AMA tape and a billing tape?

MS. WILLIAMS: An AMA type is the network

recording of all the calls that were made from that

customer's location.

MR. HILE: Who makes that tape?

MS. WILLIAMS: The LEC's network. I don't know

all the right terms, I don't think, but our network

does, versus the billing tapes coming to me from a

billing customer of mine.

MR. HILE: And the AMA tape shows the origin,

the destination and the duration?

MS. WILLIAMS: Yes, yes.

MR. HILE: Anything else?

MS. WILLIAMS: It -- I don't -- whenever I have

gotten a printout, I really don't understand most of

it. I just know the right things to look for, to be

quite honest.

MS. HARRINGTON: Kim, could you find out the

answer to that question and supplement the record?

MS. WILLIAMS: Of what else is on the AMA tape?

MS. HARRINGTON: What else is on the AMA tape.

MS. WILLIAMS: Sure.

MS. HARRINGTON: Peter or -- Susan, I'm sorry,

do you have something on this point or --

MS. GRANT: Yes.

MS. HARRINGTON: Okay.

MS. GRANT: There are so many ways that

unauthorized charges or what the consumer would consider

an unauthorized charge can appear on the consumer's

bill, and we have heard about a lot of them, and we hear

about them every day. The problem for consumers is that

they don't necessarily know how it occurred. They might

have called an 800 number and now they are being billed

for a 900 number, but they may not connect the two.

They -- it may be a phantom billing.

There may have been people in their household

who made calls or maybe not, and they may have called a

number thinking that it was free and then started

getting those monthly voicemail charges, because maybe

their number was captured. But it's very difficult for

them to know. They are getting the bill a few weeks

after the calls were supposedly made, and when they

contact the LECs initially and then try to work their

way up the line, it is very difficult for them to get

information about how did this occur.

The presumption often seems to be that you made

the call unless you can prove otherwise and not the

other way around. So, the burden is really put on the

consumer, who is the least able, of all the parties

here, to determine how it happened and to prove that

they didn't make the call.

And I think the Muldova case is a perfect

example of a situation where consumers didn't have a

clue until they got their phone bills about that. I

know we will be talking about this later, but what I'm

leading up to is that as we think about things like

sterner messages for consumers and creating a data base

of repeat offenders, we have to remember that there are

all different ways that these charges can appear on

consumers' bills, that they may really not have been

responsible for, and if this might result, ultimately,

in their being blocked from getting various kinds of

telephone-based services that they want and need, then

it's a real concern besides just the issue of fighting

over the bill.

MS. HARRINGTON: Peter?

MR. BRENNAN: Yeah, and actually in response to

that, those who also provide various kinds of services

that they will want and need also have a stake in seeing

that the business is legitimate, and so our efforts are

to that end.

I just wanted to clarify for the record, I

wanted to object to the characterization made by the

gentleman from Florida, perhaps unintentionally, that

these calls are indecent. Just for the record, I wanted

to clarify that.

MR. TAYLOR: Well, I'll be glad to respond that

not all 900 calls are indecent, maybe not even all 800

calls, but I'm certainly aware that there are some.

May I also take this opportunity to just say

that I -- I think some discussion about -- I appreciate

the gentleman from MCI clarifying about the various

responsibilities about whether calls originate or not,

but I would like to say that just because a call

originates from a particular number, I'm not able to

make the leap that the subscriber to that phone is

automatically indebted to the company that provided the

information or the service.

As a regularity, I know for tariff charges

historically we have said, Okay, for regulated services,

regardless of who made the call, if it comes from a

particular number, that the subscriber is liable;

however, we're talking about unregulated charges here.

Perhaps I'm misinformed, maybe somebody can

refer me to some law that says that the subscriber is

responsible for any call of an unregulated nature from

their phone. To me, it's sort of like having someone

order a lawn mower from Sears. Sears is under the

obligation to obtain billing information. Just because

they call from somebody's phone doesn't mean the phone

provider is obligated to pay for it.

MS. HARRINGTON: Well, I think in -- at the

federal level, at least, there is a presumption in the

law that a call placed -- that the subscriber is liable

for charges that are incurred because of calls placed

from the subscriber's phone.

MR. TAYLOR: Well, where in the law?

MS. HARRINGTON: Well, where is Heather?

Heather McDowell used to work here, now at Venable, and

she is a rulemaking alum.

You used to know the answer to that question,

Heather. Do you still know it?

MS. MCDOWELL: I believe it's through FCC order,

but I would want to check.

MS. HARRINGTON: We believe it's through FCC

order, but we have to check to make sure. Someone else

may know the answer. Heather hasn't worked here for a

number of years, so she is no longer the person

responsible for having the answer to that question,

although Heather, as far as we're concerned, you are

always responsible.

But there is an FCC order, and I think there

also, as I recall, are some either state or District

Court cases brought that stand for the proposition that

calls that are placed from the subscriber's phone are

the subscriber's responsibility.

MR. TAYLOR: Well, I would hope that that same

law implies that -- because that would be illegal in

every other respect --

MS. HARRINGTON: It doesn't mean that the

subscriber doesn't have the right to challenge, and

certainly under the 900 number rule regime, there is a

right to dispute, but it's more that there's a

presumption here that's rebuttable.

MR. STEIMEL: Alan, I would be happy to send you

those cases. They arise under the toll fraud -- a

series of toll fraud cases, but I would be happy to send

those to you.

MR. TAYLOR: If you give me a cite, I can find

them.

MR. STEIMEL: I will have to go back to the

office, but I will get the cites to you.

MS. HARRINGTON: Excellent.

Jill?

MS. SANDFORD: By the time the consumers get to

us, whether it's clip-on fraud or a fraudulent billing

record having been sent, they are tremendously angry,

and part of the anger comes from having to go through

this maze to discover, if they can, who put the charges

on the bill. The consumer first will call the local

telephone company, who often times will say, we're just

a billing and collection agent, you have to call this

other entity.

Then the consumer will get the billing

aggregater, and the billing aggregater will say the

exact same thing, and here's another number you can

call. Often times that other number is disconnected, no

one is answering, or they just put the consumer on

hold.

What we have also found in some of our

enforcement actions is that that final step, the

information provider, has already discounted the

accounts to a factor. So, they are even out of the

picture. At that point, what is a consumer to do and

what are the remedies? And in New York, we have NYNEX,

and they are certainly not as liberal at charging back

accounts as has been represented --

MS. HARRINGTON: Well, now you have Bell

Atlantic.

MS. SANDFORD: Soon, and I hope they are more

liberal than NYNEX, who seems to pass everything along,

but at that stage, what is a consumer to do to dispute

when the IP has all but disappeared?

MS. HARRINGTON: Jon?

MR. SHAUB: Regarding a question asked earlier

by Allen, additional information on what's on the

network AMA tapes, in addition to the calling number and

the called number and the duration of the call, there's

also the time that the call attempt was made and the

time that the call attempt was answered if, in fact, it

was answered. If the call was never answered,

represented by a signal from the far end, then no

billable event is created and no billing record goes

forward. So, it's a pretty tight process, and that can

be used as an investigative tool within the retention

period, which is now 18 months, I believe.

MS. HARRINGTON: Mark, does that answer your

question?

MR. HERTZENDORF: No, not exactly, but it's sort

of very much related.

MS. HARRINGTON: Do you want to put your

question out on the table, then?

MR. HERTZENDORF: Yeah, I just wanted some

clarification on whether it's practical to authenticate

billing tapes from the AMA tapes, would be one question,

and the second question would be how feasible it is to

use the AMA tape as part of a standard investigation

that might take place in response to a dispute.

MS. WILLIAMS: I think I would probably have to

get a little more information on the AMA. I know, at

least the way it was also presented to me, is that it

was very difficult to go pull the AMA tapes. Again, we

just get this printout to wade through, and you are

looking for certain dates and times.

MR. HERTZENDORF: Presumably it is matched up --

could be matched up by a computer, although I imagine

that could be expensive, too.

MS. WILLIAMS: Yeah, I mean, I don't know that

anybody has looked at that side of the business as being

-- as trying to create some kind of technology to take

that and map it back or match it back. Certainly most

of what's recorded there isn't even billed. You have

tons of local calls, and I think the AMA tape records

everything that's done from that phone, and once a call

is made, we don't necessarily know where it's going or

where it ends up, you know, ultimately. If you call an

operator or you call an 800 number to an operator, then

it's gone from us, and it is no longer in our hands to

know where it's terminated.

MS. HARRINGTON: Kim, what does AMA stand for?

MS. WILLIAMS: I honestly don't know.

MS. HARRINGTON: I see Don and Jon, who are

phone guys --

MR. SHAUB: Automated message accounting.

MS. HARRINGTON: Automated message accounting,

okay. Don and Jon, it looked like to me you had

something that was responsive to Mark's question.

MR. KLUG: Yes, the way the billing messages are

put together, Jon alluded it's a pretty tight question.

If we were billing, for example, 2,900,000 calls a month

with SBC, we would send them electronically the detailed

information of the caller's telephone number, the 900

number, the duration of the call and the price, and then

they would confirm back and say, Yes, we received this

dollar amount and these number of calls. So, we know it

leaves a --

MR. HERTZENDORF: I missed that last sentence.

I don't understand.

MR. KLUG: Okay, let's take a 900 call that's

made from your telephone, and let's assume it's from SBC

territory. A 900 number is not portable, so after you

dial the first six digits, SBC can determine which CIC

code, carrier identification code, belongs to that 900

prefix and transfers the call over to them.

The IXE, the long distance carrier, let's say

MCI as an example, would take that 900 number, and we

would look up in our data base what ten-digit POTS

number, plain old telephone service, that terminates

to. So, we would then connect the telephone number that

you dialed to the terminating location, which is the

information provider.

After the preamble, we would -- assuming the --

you didn't hang up, we would time the call. At the end

of the month, we would take our billing tape that had

your telephone number, the duration of the call, the

price of the call, and electronically send it to SBC to

have it put on your telephone bill. SBC would confirm

that they received the information --

MS. WILLIAMS: Well, just that we received his

tape, just his billing tape.

MR. HERTZENDORF: Okay, I thought you confirmed

--

MR. KLUG: Yeah, Kim said earlier, I think it

was Kim, said they were actually buying the receivables

at that point. So, it's a financial transaction just

like banking. So, there is a handshake there.

If it turns out that you then complain saying I

never made this call, then we can go back, MCI, the IXE

carrier, through SBC, and look at our tape and say, yep,

we have got the ANI correct, we have got the 900 number

correct, and we verify the call was made.

MR. HERTZENDORF: So, you have sort of records

that are analogous to the AMA tape that the LEC keeps?

MS. HARRINGTON: Mark, use your microphone.

MR. HERTZENDORF: So, in other words, you have

records that you feel are sort of analogous to the AMA

tapes that the LEC keeps?

MR. KLUG: I may be wrong here, jump in, Kim,

but from a long distance perspective, the timing is done

by the long distance provider, not by the LEC company.

MS. WILLIAMS: I think I know the start time and

stop time, when the guy went off hook to make the call,

and I think I know the hang-up time from the AMA tape,

but I think that information is in the central office

that carried it. I think our business office has to go

back to the originating central office where that

customer's service is to say give me a copy of that AMA

tape for this date and time.

So, that's why I'm -- when I look at what has to

be done to even get that, I don't think -- there is

certainly no ties to my billing system, and I have to go

to every central office out there, wherever that

customer is served, and get that information. I think

that's a whole lot different from my billing system,

which is in a central location.

MS. HARRINGTON: This whole, I think, exchange

and colloquy underscores, if any of you were confused,

the fact that you are not at the FCC today, you are at

the FTC, and so we have need for some remedial education

on this, and it's very useful.

Gordie -- Albe, I'm sorry.

MR. ANGEL: The only thing I would add to the

previous colloquy, just to clarify things for staff, is

that in the context of a 900 call, the dominant

carriers, AT&T and MCI, are actually rating the call in

most instances in that they are timing the duration,

they are making the connections, and they are sending

the billing tape directly to the local exchange carrier,

without any manipulation of the billing tape by the

information provider or service bureau.

That is distinct from the situation where a

billing entity other than AT&T and MCI are involved,

where the duration of the call is typically taken at the

service bureau/IP's location. That billing tape is then

sent to the billing aggregater or billing entity and

then on to the local exchange carrier.

MS. HARRINGTON: Jon?

MR. ANGEL: I just wanted to see if we could --

MS. HARRINGTON: I'm sorry.

MR. ANGEL: -- address a couple of the issues, I

just want to make quick points.

MS. HARRINGTON: Sure.

MR. ANGEL: On the questions that go to

unauthorized calls, we need to define what an

unauthorized call is. If what we're referring to is

calls by minors, then it should be identified as such.

If it's a call by someone of majority in the household

but it wasn't authorized, you weren't allowed to use the

phone, you incurred the charge, then it's of a different

character. I just want to give the example of how some

things work in my household as a -- just a tool for

examining the issue.

I have three children and a housekeeper. My

12-year-old daughter calls her friends that she met in

camp, incurring interstate charges, and no matter what I

say to the local exchange carrier, those charges stick.

She wasn't authorized to do that, but as a result of the

law, those charges stick.

My son David calls 900 numbers. I give him

permission on a case-by-case basis to make those calls.

Every once in a while, I'll uncover calls that I didn't

authorize but perhaps his mother authorized. If I were

to call the local exchange carrier and say those calls

weren't authorized, they are wiped off the bill

instantaneously.

If the housekeeper has made the call and they

are a 900 call, they are not going to be sustainable,

and they are wiped off the bill. So, I think there's a

double standard, and maybe the standard really revolves

around whether they are regulated charges or unregulated

charges, but they are distinctly different than the

category of phantom calls. They are calls that are made

where perhaps there aren't necessary parental controls

or controls over people of majority in the household,

but to isolate a different issue but very pertinent to

this discussion, I want to relay a circumstance that

involved my company.

We were presented with over $5,000 or $6,000 in

charges. What had happened was calls were made from a

number to various information services providing sports

results and handicapping information. In month one,

those calls totaled to $300 or $400. They were unpaid

by the next billing cycle. In month two, the calls

continued, and they amounted to $700 --

MS. HARRINGTON: They were unpaid because they

were contested?

MR. ANGEL: No, they were just unpaid, and the

local exchange carrier was getting around to questioning

what was going on, and by the end of the second month,

the first month's charges were not paid, and now you had

the second month's charges added on top of that, so they

were about $1,100. And what it turned out upon

investigation -- actually, the interexchange carrier

intervened, because it was their 800 number on the

billing page in respect to these 900 numbers. The

person that was the bill payer, head of the household

said, we are certain we know what these are about, this

is our visiting nephew who has an addiction to sports

and will make good for the payment.

The service continued to that location, so that

in the third month, there were $2,000 in charges run

up. I think you get the idea. By the time the

chargeback arrived at our doorstep five or six months

later, we had had our first taste of what was going on

here, and we went back to the interexchange carrier and

asked why we were presented with $5,000 worth of charges

for calls that originated six and seven months ago.

They said, you know, the matter was in treatment, and

it's not going to be paid by the consumer.

So, we asked as to the details, and it was

unclear whether or not the person that made the calls

was even a minor, and it was clear that their billing

files, in terms of treatment, showed that the consumer

agreed to pay for the charges, at least at month two

level.

When we asked for that documentation, not only

were we denied it, but we weren't even told the billing

name and address. So, that helps to illustrate the

problem.

MS. HARRINGTON: If I could make a point about

your first point, and that is that -- which was that

there seems to be a double standard, the point that I

would make is that in the -- in the TDDRA, there is a

different standard, in a sense, for pay-per-call

services that are directed to minors and implicitly, I

think, for minors' use of pay-per-call services. It

doesn't necessarily mean that the application here is

just right, but there is under the law a different

standard.

I don't know who you are from the TSIA down

there, someone new has joined us.

MR. PASSON: My game is Gary Passon, and I am

the western chairman of the TSIA, and I am sitting in

for Richard for a little bit to give him a bit of a

break. I guess I would like to make two quick comments,

one as it relates to phantom calls. I think what this

has been very helpful to do is to find that there are a

lot of different reasons that sometimes call records

don't match what the consumer thinks the call records

should look at.

Some of them are obviously affected by fraud,

due to physical location, clip-on, some could be due to

fraud based on the information provider providing

inaccurate or incorrect information to the local

exchange carrier, and a number of different cases, but I

think one thing that would be helpful to keep in mind

here is that the largest single reason that records are

marked as being recoursed back or charged back is

denying all knowledge, and if we presume for a second --

and I think it's a very reasonable presumption -- that

AT&T and MCI are unlikely to create phantom calls,

essentially create records, you know, for their own good

purposes, and since they control the network timing and

billing records themselves in conjunction with a LEC,

that for -- if the -- if we take the chargeback data of

between 20 and 40 percent, and 7 percent of all records

are marked as denying all knowledge, what we are really

seeing is 14 to 35 percent of the phone calls that are

being made are, in fact, the -- the subscriber of the

lines doesn't seem to recognize the call, and I think

that that's probably a good-sized step.

I think that's a bit of a leap for us to believe

that, you think, that that significant number of the 900

calls are really not being generated with the knowledge

of the subscriber in that particular home.

Consequently, I think it's probably also unreasonable to

think that they shouldn't take some of the

responsibility for those calls, and I think what might

be at hand here is where do we draw those lines, what's

reasonable lines to make and what resolution and dispute

process solution should we have to resolve those cases.

MS. HARRINGTON: Gary, one question that we're

going to be focusing on almost immediately is the

question about what billing entities are doing to comply

with the rules requirement that they undertake a

reasonable investigation of charges that are disputed,

and there may be something in the discussion on that

question that actually goes to the question that you've

just raised, and I would like to urge everyone to start

thinking about that, because we are about to transition

to that part of the discussion.

Marianne, you have a question.

MS. SCHWANKE: I would just like to go back to

unauthorized calls for a moment and address one of the

questions we have put on the agenda.

Does anybody think that the preambles have been

effective in reducing the incidence of unauthorized

calls, by minors especially, and are there other ways to

ensure or other measures that could be taken to reduce

the incidence of unauthorized calls?

MS. HARRINGTON: Kim?

MS. WILLIAMS: I think as far as preambles go, I

don't know that that really stops a minor or very many

minors from making the calls. I think it probably

depends on the service being offered, and, you know, if

they want to get to it bad enough, they are going to

make the call no matter what the recording says.

I think 900 blocking has been effective in

reducing the calls from minors, and I think many people

have taken advantage of that. Whether they might think

they want to call a 900 number sometime or not, probably

their concern of their kids reaching things they don't

want them to was a greater concern, so they subscribed

to it anyway.

MS. HARRINGTON: Jon?

MR. SHAUB: Just a bit information relating to

Albe's comments a little while ago about what seems to

be an inconsistency in agreement. The complexity exists

that there is, in fact, an inconsistency. There are

nine states where the PSC has a stricter rule, and

Florida is one of those. So, in fact, AT&T or the LEC

or any billing entity, if they were aware of those laws,

they would treat those differently in Florida.

MS. HARRINGTON: Thank you, Jon.

Don?

MR. KLUG: In response to Marianne's questions,

I think, again, this is anecdotal, but I think preambles

have helped unauthorized calls at the margins. I agree

with Kim. If there is an adolescent who wants to make a

900 call and his parents aren't around or her parents

aren't around, it's certainly not going to prevent them,

but I think it helps, and I do agree that blocking is

the -- absolutely a much more effective way.

MS. HARRINGTON: Linda?

MS. GOLDSTEIN: I'm just going to make one

comment and also respond to the minors issue, that --

and I think this will probably be a segue to the next

section, but I think what has really come through very

clearly in these discussions is that there really is a

bright line, I think, that can be drawn between phantom

billing, as we have now defined it, and unauthorized

calls, and what that also goes to, to some extent, I

think, is the culpability of the party that's tied to

those two types of occurrences.

Phantom billing, as we have now -- is pure

fraud, and whether -- I don't know that we can talk

about whether we want to have additional protections to

target that, but there certainly is the mechanism now

under current law to proceed against phantom billing. I

mean, irrespective of TDDRA, charging people for goods

or services that were never delivered is plain and

simple fraud.

MS. HARRINGTON: There is a remedy in the law or

it says if we know about it, and I would raise a quick

question for the carriers and others to think about, and

that is whether there is more that you could do to let

us know about this when you know of it and whether, in

fact, the rule ought to require some reporting, two

separate questions, or the FCC's rule.

Go on, Linda.

MS. GOLDSTEIN: And what really jumps out at me

in terms of the discussion of the unauthorized charges

is that that's something that's occurring in the

person's household. It's an unfortunate occurrence, and

I'm not suggesting it's something that shouldn't be

addressed, but there is nothing specific that the

information provider is doing to encourage that. There

is something that is happening within the household,

either in terms of the direction that's been given or

the freedom.

You know, I was struck by the comment that the

two most common instances that the attorneys general are

seeing of unauthorized calls is, one, relating to

children which is, you know, a problem that is not

unique to 900 but we're seeing the same issue in the

online context, but secondly being people who may go on

vacation and leave someone to watch their house. I

mean, that certainly jumps out at me as a prime example

of something that should not really be the information

provider's responsibility, nor do I think the IP should

be faulted because someone leaves their home in the

hands of someone who likes to kind of run up all kinds

of charges.

The second point I just wanted to make on the

minors issue, I don't really have any data to indicate

to what extent the preamble has helped, but I do know

that on a number of programs, particularly in the

sweepstakes area where there are also state prohibitions

on often those programs to children, one of the things

that has been affected is, while it can't be done in the

preamble, because the preamble is passive, is shortly --

almost immediately into the call is to ask the caller to

indicate their specific date of birth, and that will

cause people who may really not be of age to perhaps

trip up on providing that information, and at least the

call can be kept to a lower charge than might otherwise

happen, so the charge is reduced and the call can be

terminated sooner.

MS. HARRINGTON: Peter?

MR. BRENNAN: Thank you.

On the subject of children and preambles, the

preamble is problematic, and as one of the companies who

was offering preamble since we began business in 1989,

before TDDRA even thought about it, the preamble in the

TDDRA has caused us -- has caused us difficulty in terms

of a clear message to younger consumers.

The specific statute requires that -- that the

phrase, the parental admonition, be included in every

preamble and says that you must tell consumers if, you

know, if you are under 18 years old, you must have

parental permission.

Well, those of us who offer services for adults

-- not indecent service, please, for adults -- like

resumes, where we don't want people to use the services

who are under 18, would prefer to be able to say,

please, if you are under 18, hang up the phone now.

And, in fact, now what we are left with is a situation

where we have to say both, because the law requires one

thing, and our policy requires another, and it's a --

it's a confusing message. And so we are -- we are

hopeful that perhaps one upshot of this meeting will be

for us to go -- all go arm to arm and ask the Congress

to make the change in the law that would clear this --

this area up.

MS. HARRINGTON: All right, we are two minutes

overdue for our break, but we are going to finish with

the people who are up. Adam has a question, Alan and

Kim, and then we will take a quick break.

MR. COHN: I had two questions about some things

that were just stated. One was about the taping, you

mentioned the taping of someone saying their age or

their date of birth.

How feasible would that be to have in a larger

number of pay-per-call services? It seems that this

might be a good way of settling the argument between a

consumer who says that the call was unauthorized and an

information provider saying it was authorized. How

feasible would it be to have a recording? I know some

services already do record voices. Maybe that would

discourage, as you said, further unauthorized calls. A

child might be less willing to put their voice on tape

and think that their parents might hear them later.

MS. HARRINGTON: Did you mean on tape, Linda, or

--

MS. GOLDSTEIN: No, I was not -- I want to

clarify for the record that I was not -- I was not

referring to taping there. I was referring merely to

the request for that information, and in the

applications that I'm referring to, it is done by -- by

inputting on the touch tone, but what it does do is at

least screen out some calls very early in the call where

the person has not input the data that would correspond

to the correct --

MR. COHN: I apologize, I misunderstood, but I

guess my question is how feasible would it be --

MS. GOLDSTEIN: And it's a valid question, but I

don't feel qualified to answer that question.

MS. HARRINGTON: But I'll bet Gary is.

MR. PASSON: I'm Gary Passon, again.

A number of companies do use recorded

transactions of the first, you know, 30 seconds or one

minute of a call. Obviously there is an economics

issue. If you only have a 50 cent call or a $2 call,

it's probably not very, you know, economically feasible

to maintain a tape of the transaction for, you know, for

that kind of transaction, but if it were deemed that

that would help resolve these issues and, you know, and

take a lot of the -- and remove a lot of the "denies all

knowledge" and move them into the case of I accept

knowledge and I accept responsibility, then I think it's

something that, you know, I'm sure the industry would be

very interested in looking at.

MS. HARRINGTON: All right, Kim, Alan, and then

the last word to Susan, and we are going to take a quick

break.

MS. WILLIAMS: A quick word on the taping of

calls. I know -- I believe it's used today quite a bit

by companies, but not 900 providers, more the voicemail,

the 800, the international, and I think that it's used

more often than not, and users feel they are being

strong armed into paying for things when truly there was

no valid presubscription arrangement just because you

caught my kid on tape saying his name, but yet I think

consumers are being led to believe that because they

have got a child's voice or somebody's voice on tape in

their home that that means they have to pay for their

call, and that is my concern, that people are using that

in a wrong way that doesn't make it a valid

presubscription arrangement. In fact, it proves that

the subscriber on the phone didn't authorize the call if

it's not the subscriber's voice on the phone.

MS. HARRINGTON: Alan?

MS. WILLIAMS: I was just going to make a couple

other comments real quick.

MS. HARRINGTON: Sure, go ahead.

MS. WILLIAMS: As far as I wanted to address

back the treatment and collections process that you

talked about before and the timing issues and things

like that. Certainly once we send a bill out, that

customer has got at least 30 days to pay that bill.

When payment isn't received, depending on our regulatory

requirements in certain states and the customer's credit

rating with us, we start an action once there is a

balance due, meaning a notice on his next bill first

that says, you know, your charges aren't paid. We don't

-- at least in Southwestern Bell, I can't speak for

anyone else -- we don't at that point say deniable or

nondeniable charges, we just say that there is a balance

due that you owe on the bill, and that whole process can

run out for quite a long time before something is paid.

We started a process with nondeniable charges

for customers who hadn't called us that said if we are

going to send this guy a letter if he is not calling us,

and we have got so much 900 that that's the only thing

that he's deniable for or, you know -- not deniable, but

I mean that he owes us that throws him into treatment,

and we send letters to customers saying are you calling

us or not, are you not paying your 900, call us and let

us know, what is it you are not paying here? If you are

disputing charges, you need to tell us. So, that still

takes you pretty far out into that 60 days you're

talking about, depending on the cycle, at least 60

days.

MS. HARRINGTON: It sounds like everybody is in

phone therapy. What is treatment?

MS. WILLIAMS: Oh, treatment, I just figured

everybody knew that term. Treatment is when you are

trying to get a bill paid. So, when you are collecting,

treatment in collections, you are treating an account by

trying to get payment on an account. So, there are lots

of processes that we go through to try to get a bill

paid that the 60 days that obviously was something that

we don't appear to be following, you know, is -- you are

way into that and past that in some cases, depending on

how long that customer has had service and how good his

rating is.

And a point I made on a break to somebody is I

believe what the rule talks about is when there is a

billing error. Well, some customers, there is no error,

they just refuse to pay, and that's where we get back to

that situation of what do we do with that charge at that

point.

MS. HARRINGTON: Treatment.

MS. WILLIAMS: Treatment.

MS. HARRINGTON: Alan?

MR. TAYLOR: Just briefly, I wanted to clarify

for anyone who may have misunderstood, I think, in our

comments, there are certainly examples where no home

sitter was left in charge of the house while the folks

were away. We have examples of calls where -- to the

owners no one was authorized to be in the home at the

time and, in fact, should not have been in the home at

the time.

Also, I want to point out that in my experience,

I haven't had really occasion to question a bill that

AT&T or MCI have rendered. It's typically been other

providers. With respect to -- I know of no one,

industry or otherwise, who is actually willing or has

put together whether the call really was dialed as it's

shown on the bill and followed through the process. I

have done that, there is an example in the comments. I

don't think consumers have the ability to call up the

local telephone company and ask them to do that for

them, at least I am certainly not aware of anybody

having that done for them.

MS. HARRINGTON: All right, now, our schedule

says we are going to have a short break at 2:30 and then

a real break at 3:15. The bad news is that the coffee

is not ready yet for the short break. So, what I'm

wondering is whether we should just plow on through

here, we could stand up for a minute and stretch and sit

right back down and continue so that we could have a

really great coffee break at 3:15, my personal

preference, or --

MR. TAYLOR: You have got my vote, Madam

Chairman.

MS. HARRINGTON: But you won't get called on.

Let's stand up for a second and then sit right back

down.

(Pause in the proceedings.)

MS. HARRINGTON: All right, let's refocus.

We're talking about chargeback issues and billing issues

from the consumer perspective. There was a point made

early on by Susan Grant about the difficulty that some

consumers claim to have when they ask for a

re-investigation of charges. They are unable to obtain

documentation.

I would note that when the Federal Trade

Commission staff recommended that the rule include

billing dispute resolution provisions similar to those

in the credit card statutes, I think we probably had in

mind that this should work pretty much like the credit

card billing dispute procedure to the extent possible,

understanding that there aren't necessarily records from

transactions that are as easily available in the

telephone context as they are in the retail sales

context.

But I'd like to focus us now on the last

question on page 2, are billing entities adequately

complying with the requirement to conduct reasonable

investigation of an alleged billing error, as is

required in the rule? If they are, do we need

additional procedures? If they are not or if they are,

how is it that the re-investigation procedures are being

used and what steps are included in those?

We would like to have some discussion here,

again, about investigation, not treatment, and as my

colleague Allen observes, the role is recovery. So, if

we could talk about investigation activities rather than

collection activities, I think that's an important

distinction. And are there? We would be curious to

know whether there are actual investigation procedures

that are being used by billing entities.

MS. WILLIAMS: Is that me?

MS. HARRINGTON: Actually, Don, I told you you

would have the first word this session, because you were

waiting from last or prebreak, so why don't you begin

and then we will go to Walt and then Alan. We will hear

from these providers first.

MR. KLUG: Within the past few years, there has

been somewhat of an innovation in terms of investigation

of calls that consumers claim they didn't make or were

unauthorized, and it's been described in various ways as

voice recording, voice capture, voice print, and the way

it works is the information provider will record a few

snippets of a conversation. If it's a psychic

application, sometimes they will ask the caller for

their birth sign or birthday. If it's a voice personals

application, they may ask for their first name.

MS. HARRINGTON: Do they tell consumers that

they are making a recording?

MR. KLUG: It is usually done in the context of

the application. I mean, it's information needed to

complete the call. In other words, if it's a psychic

reading, I would have to ask your birth sign to do a

proper reading.

MS. HARRINGTON: Do consumers know that it's

being recorded?

MR. KLUG: I don't know that or not. I don't

know that.

MS. HARRINGTON: Okay.

MR. KLUG: If they do or not, but what happens

then is when the consumer would call the billing entity

and say, well, Gee, that wasn't me or I didn't make the

call, then they can bridge on the information provider's

system and key in the ten-digit ANI and, you know, back

will come a recording of a Scorpio or Don or whatever,

and they say, Well, do you recognize that voice? And in

many cases, in most cases, Oh, yeah, I remember making

that call, that was my son or whatever. So, it's a

useful way to help sustain charges or to unsustain

charges, as the case may be.

MS. HARRINGTON: Walt?

MR. STEIMEL: Thank you, yeah, I'd like to

follow up on that.

We take voice prints at almost every single

billing event. The voice prints are either done through

a specific notification that one's voice print's been

taken or by using the FCC-required beep tone. And then

during the investigation of call records, that is played

back, a subscriber's call to the line, that's played

back.

If a subscriber denies all knowledge of the

voice, then that's the end of the investigation. If the

subscriber identifies that another party is responsible

for the voice, then investigation may continue into who

that person was and redirecting billing to the proper

party, but voice printing can be a very valuable tool in

quickly and easily settling investigational complaints,

especially when it's during the call.

The other thing is most carriers, and Pilgrim

certainly does, keeps all of the call records off of its

switch. So, in addition to the voice print checking,

voice print verification, you can also check call

records to see when calls originated, where they

originated from. This is especially important when

you're dealing with calling cards, because calling cards

are supposed to be, by statute, an identifier that's

unique to the individual that bills back to the calling

card location regardless of where you actually make the

call from.

And in verifying calling card traffic, you can

look back in the call records, see where the call

originated from and when the calling card was originally

issued and verify that it was issued to the number

that's being charged back to, see where it's being used

at points in the future, and sometimes that can help

track down fraud and verify that there has been an event

of fraud that has taken place, that the call was

unauthorized and some other party might be liable for

these charges.

Before I finish, right after lunch I'm a little

bit slow sometimes, and we were talking about phantom

billing. I have two statements. One, a question for

AT&T, in the context of what I understood we were

defining phantom billing as, in the first segment after

lunch, AT&T normally charges for teleconferencing and

some of the telemessaging purposes on the 700 exchange,

even though you cannot dial a 700 number from anything

except on AT&T dial tone derived from presubscription or

10XXX dialing.

That does not seem to me to be a phantom

billing, when you put in an internal routing network

code to the service rather than a POTS-based dialed

number, that does not seem to be phantom billing.

That's an identifier to the service that you've

purchased rather than number dialing.

And secondly, most LECs do not permit, to the

extent that you get into any kind of information service

platform, by dialing an 800 number, most LECs and most

billing engines -- most billing factors do not permit

you to populate the dial-to field with an 800 number

when you have anything other than -- what's it called,

the record -- EMI --

MS. WILLIAMS: A 16 record?

MR. DICHTER: 4250?

MR. STEIMEL: 2450, when you are using any kind

of information service or pay-per call record --

actually, I don't think you can ever populate the

dial-to field with an 800 number, but --

MS. HARRINGTON: Walt, you're a lawyer?

MR. KLUG: Jargon alert.

MR. STEIMEL: It has to do with you cannot put

an 800 number in the dial to when you're generating a

bill to the client. You just can't do it. AT&T for

teleconferencing has to put a 700 number in. Sometimes

Pilgrim puts a 700 number in. I don't think any of

those events create phantom billing. I think phantom

billing is properly when someone is just generating call

records that were never dialed, which does happen on the

network sometimes, sometimes on mistake, more often by

-- on purpose.

MS. HARRINGTON: All right, now, to translate

that, Kim?

MS. WILLIAMS: Well, I think when we're talking

about the 800 billing and what can and can't be put on

an EMI record, which is one of these records that --

MS. HARRINGTON: EMI stands for?

MS. WILLIAMS: Exchange message interface, and

that's the industry standard record, there is some

different kinds.

MR. HERTZENDORF: Exchange -- it's an industry

billing record?

MS. WILLIAMS: It's a standardized record for

the whole industry for billing. We use certain EMI

records for certain types of billing. Southwestern Bell

never did permit an 800 number in a two-number field,

because there usually was no charge to call an 800

number. Once we got into 800 pay-per-call, we opened up

our 16 record and said if you are going to bill 800 pay-

per-call, we want it on this record, so it is identified

with the correct to-number in it for the end user.

MR. HERTZENDORF: What's a to number?

MS. WILLIAMS: To number, T O.

MR. DICHTER: Number called.

MS. WILLIAMS: Some LECs chose not to bill 800

at all, and that's why they don't allow 800 in the to

field. That doesn't mean that they allow you to put

some other number in there because an 800 was dialed.

They don't allow billing of 800 calls. We only allowed

it on that record, and if that's the call that was made,

that's what the call had to look like.

When a number is really going to a number in

Boston, it should be the Boston number showed up on the

bill, not some other number or a 900 number. When a 900

number is dialed, that's the number we expect to show up

on the bill. The conference service that AT&T provides,

we have talked to them about that before, that's not

really a pay-per-call or information service, not a chat

line or any of those things, it's teleconferencing, and

I think that's kind of a different animal and not part

of this discussion.

MS. HARRINGTON: Adam, a question?

MR. COHN: This is very tricky. When you said

what EMI stands for, I heard some other mumbling that

said something else, electronic?

MS. WILLIAMS: Is it electronic? Exchange

message, I think. It's an electronic way of exchanging

those messages, but I think it's exchange -- is that

right?

MR. KLUG: Let's vote.

MR. HERTZENDORF: Let's define it here.

MS. HARRINGTON: Okay, Susan.

MS. GRANT: I wanted to point out that we get a

number of complaints from people about the voice taping,

that when they are questioning the charges and a tape is

played for them, they say that it's not them or anybody

in their household, and it may be that in some cases the

information provider is just pulling a tape out of the

stack and putting it in a machine to play for them with

the intention of making them feel as they report to us

they feel like they have no way out, like they are

really boxed into paying for these charges that they

shouldn't have incurred.

MS. HARRINGTON: Gary?

MR. PASSON: I think back on the -- well, I

guess back a little portion here, which is what things

can be done to do reasonable investigation, and I think,

you know, voice taping is something that we brought up

and I think we talked about, and I would like to address

Susan's comment in just a second on that, but really at

the core of that is what Kim talked about, is really the

original information that's in the central office. You

know, that's really something that's, you know, not --

it's, you know, it's not modifiable by anybody. I mean,

it truly is a fingerprint of what happened in that

transaction.

Many, many transactions, as we are talking about

here 900, there is really -- that is an extremely

accurate representation of what happened. It's going to

be a little bit shorter than the IXEs, because it was

processed in before the IXE touched it, but it is a

very, very accurate thing. As we get to these other

areas of alternative billing and alternative dialing

plans and that kind of stuff, that information gets less

and less useful, but as it relates to 900, I think it is

very valuable.

What doesn't exist at this point in my mind is a

process by which the IP or the billing aggregater can

request that information to validate whether or not the

transactions that they are trying to do research on, in

fact, matches an actual physical transaction on the

phone itself. I think with the combination of voice

print and a record from the local exchange carrier that

this transaction was accomplished on that physical

telephone at such and such a date and time, you really

narrow down the cases where -- where it's disputable,

because now what you're really requiring is someone to

get physical access either to the inside of the house or

to, as Albe mentioned earlier, to the physical equipment

on the outside of the house to do clip-on fraud. You

have really narrowed the cases down, assuming the voice

print is someone in that family.

MS. HARRINGTON: Albe?

MR. ANGEL: I wanted to make clear that from an

information provider standpoint, we don't require that

an investigation be made. If it's a bold statement that

I can offer up, if the local exchange carrier or the

interexchange carrier were merely to refund the charges

and pass that information on to us, we might be better

served than if they had an investigation that delayed

information to us on nonpayment.

MS. HARRINGTON: Don?

MR. KLUG: I was just going to reply to Susan's

comment about voice capture, and I don't think the

information providers just kind of willy-nilly just try

and pick something out to try to badger the customer to

pay, and I think in my experience it's a tool that's

legitimately used. If there are circumstances where

customers feel that's happening, we would sure like to

know about them so we can pursue that with our

customers.

MS. HARRINGTON: Alan?

MR. TAYLOR: Yes, just going to the basic

question about the information provider doing a

reasonable investigation, we encounter much the same

problem that the consumer or subscriber does in that,

you know, when we receive a complaint, you know, we can

go ask the LEC about it, and they can refer us to the

long distance carrier, who can then refer us to the

information provider, and if all we have is a phone

number that never answers, we have no way of pursuing

that.

It might be, you know, it would certainly be

helpful if somehow some list of information providers

could be made available so states can communicate with

them. Otherwise, perhaps the FTC is willing to take

some -- take some of these files and act on them. Is

that something I should be considering doing as far as

how to see whether a reasonable investigation is being

made?

MS. HARRINGTON: You are certainly welcome to

send us information.

MR. TAYLOR: Um-hum, okay.

MS. HARRINGTON: Jon, and then Peter. I'm

sorry, Adam, do you have a question or can you hold for

a minute?

MR. COHN: I'll hold.

MS. HARRINGTON: Okay.

MR. SHAUB: Just a clarification as it pertains

to AT&T and inquiry investigations. The overwhelming

majority of phone investigations can be carried out and

completed during one initial contact, which usually

lasts five to ten minutes. The information, the network

event tape, the rating information, the program content

that's being questioned is all available online for the

past three billing cycles.

So, a discussion can take place and in most

cases a resolution can be reached. If a person denies

all knowledge, we can look back two previous billing

cycles and see if that same person, that same

originating phone, contacts those same numbers on a

repetitive basis. It's somewhat illogical to think that

unauthorized use would have occurred to the same number

again in previous months, for instance.

The most probable situation where an

investigation couldn't be resolved with available data

would be if it covers periods that are older than three

billing cycles, in which case the data wouldn't be

available immediately.

MS. HARRINGTON: Peter?

MR. BRENNAN: Thank you.

In response to that and, Alan, to your inquiry,

the -- it -- like it or not, there are people -- there

are consumers who abuse the process. We know that, and

we have known that. There are many more consumers, I

think, though, who -- who call and generally, it has

been our experience, and our chargebacks are

historically fairly low, who -- who do understand and

who all it takes is to explain to them, yes, this is a

call to the personals of the Tampa Tribune, and they

say, Oh, yeah, that was what it was. I understand now,

okay?

It's -- there are -- in terms of the

identification of the information provider, which is the

issue that you raised, the rule stipulates that in the

preamble message that the -- and in advertising the

information provider be identified. That is sometimes

problematic, because we would identify ourselves as the

TPI Group or TPI, a service of TPI, because we are the

customer of record for that.

It would probably be better for us to be able to

say The Tampa Tribune, because somebody in Tampa will

recognize that they called the service of the Tampa

Tribune and might not recognize that they called the

service of TPI. So, there is probably some housekeeping

that could be done in that regard.

It's been our experience, and our carrier is --

the vast majority of our service is AT&T, who handles

its own inquiry, that many problems can be worked out in

the process that Jon alluded to, but there is a

timeliness issue here, as he adequately raises. So, one

of the issues we didn't get to this morning that I would

like to -- we would like to bang on is that I think we

should require -- we should require timely reporting.

We should -- the rule should specify timely reporting,

prompt reporting back to us of consumer issues, because

it's the only way we can deal in good faith with it.

MS. HARRINGTON: To the IPs. Let me ask a

question. Why can't that be dealt with in contracts?

Why is that a consumer -- why is that a consumer

protection issue rather than a business protection

issue?

MR. BRENNAN: I'll toss it to Jon.

MR. SHAUB: It is, in fact, dealt with in

contracts. Our contracts with our customers, the IPs or

the bureaus, we do pass that information back about

adjustment or sustaining in the next billing cycle.

Special circumstances or large volumes, we could

accelerate that and pass it back sooner by special

arrangement.

The difficulty I think comes in in the

contractual relationships between the billing entities

and the LECs. The LECs have to work, as AT&T does in

the same role, have to work a balancing act between what

constitutes good faith efforts in collections and how

many attempts to collect the money should be made over

how long a period of time before you think you are not

getting a true statement of intent. So, you know,

that's a judgment call that sometimes is done well and

sometimes is not done well.

MS. HARRINGTON: Let's hear from another LEC,

Barbara.

MS. MAJESKI: I'm hearing conflicting --

MS. HARRINGTON: Could you use your microphone?

MS. MAJESKI: I've been hearing conflicting

statements here. One on the part of the LECs is to get

the charges back quickly and the other is to have the

LEC do a proper investigation before doing chargebacks.

I can tell you from my company, when we get a complaint

from a customer, we send the customer -- it depends on

what the customer is asking, if the customer is saying I

didn't make the calls or whether they are charging --

they are asking about the charges involved with the

call.

If they are saying I didn't make the call, our

company goes through a specific checklist of things that

we do. We first check ANI. We do a central office

check. We also do -- we send a repairman to the home to

check the facilities. We also check the policies

leading into the -- into the customer's home. We

reserve the AMA tapes for problem complaints, such as

the phantom calls. As Kim said, those are not kept as

long as other -- other data, and it -- I believe it is

an expensive process.

MS. HARRINGTON: Okay, hold on one second.

Mark, we have -- we haven't heard much from

either Joel or Dave this afternoon, and they have both

had their cards up, and then we are going to come back

to Commission folks with questions, if that's all

right.

So, Dave, you first and then Joel.

MR. GILLIS: One of the points that I wanted to

make relates to the investigation that the information

provider ought to be doing when they receive a complaint

from someone saying that the charges were unauthorized,

and that complaint probably is initiated by a call to

the number that appears on the bill, and the problem

that's reflected is that very, very frequently, people

can't get through, and they -- as was mentioned earlier,

they have difficulty identifying who the providers are.

We don't see the same sort of problem when they

are trying -- you know, with respect to accessing

information numbers. You don't have call blocking

there. It seems to me that this is a problem that the

industry could really solve, either at the carrier level

or the LEC level, by requiring the information provider

to maintain a certain level of call completion, if you

will, or call -- and so that the 800 number that they

are offering is accessible, and my understanding is that

that's possible for this industry to do, so that if you

need more capacity with this 800 number, you can add it,

and then people can get through and we can identify, and

it seems to me that would help minimize chargebacks.

MS. HARRINGTON: All right, let's do a check on

that. IPs and IP types, if the -- if there were greater

clarity with regard to the 60-day requirement for

placing charge -- for raising disputes, would -- in

exchange for that, would IPs be willing to agree to a

certain standard of call completion or level of call

completion on your billing inquiry numbers?

Peter?

MR. BRENNAN: Absolutely. In fact, it's been my

impression that that's required now.

MS. HARRINGTON: Okay.

MR. BRENNAN: Doesn't the law -- I'm not sure if

it's a law or the rule -- require that there be a

toll-free way of -- and it's required? Whether or not

-- whether or not that's being lived up to, just as the

LECs aren't living up to the 60-day part of the rule --

MR. GILLIS: Maybe --

MR. BRENNAN: -- that's another issue.

MR. GILLIS: Maybe call completion is the wrong

term. Some people complete the call and then they are

put on hold for 40 minutes. So, a response time.

MS. HARRINGTON: Some sort of standard for

response.

MR. BRENNAN: In good faith, right, right. I

mean, in our case, we have a 24-hour operation. For all

but four hours a day, there are live operators there,

because they are also taking personal ads, doing the

other things that they do, and we manage -- we manage it

to the point where if it's more than 11 seconds that

somebody rings on the phone, okay, which is two and a

half rings, you know, we hire more people. So, you

know --

MS. HARRINGTON: Okay, there is one answer. We

want quick answers here.

Gary?

MR. PASSON: Well, we man a 24 hour a day

facility, but I would have -- we have to differentiate

just a little bit here. An awful lot of inquiry that's

done is done by the third-party aggregators or by AT&T

or MCI or Sprint or behalf of them, so that only a small

percentage of the actual calls end up in the hands of

the major service bureaus or even in a -- even in a rare

case end up in the hands of the IPs. We represent

thousands of --

MS. HARRINGTON: But what we are hearing is

consumers who try to call IPs aren't able to get

through.

MR. PASSON: Right, and I think -- and I guess

the reason is if they are calling for a billing dispute,

then I think we have a little separate issue than if

they are calling for information about, you know,

sustaining information about what was really going on on

the specific call. So, I think we have to try to

differentiate here between the two cases, but to get to

your specific question, the answer is I think

absolutely, I think all the major companies would enjoy

that.

MS. HARRINGTON: All right, Albe?

MR. ANGEL: Our company's policy is absolutely

to deal with consumer inquiries promptly, which is

typically defined as one business day. The billing is

-- billing inquiries are typically performed by either

the LEC or the interexchange carrier, in instances they

will bump that call to us, and even in instances where

refunds have already been made, we will bend over

backwards to make a second refund if a consumer feels

that somehow they have not gotten the proper answer, not

gotten the cash.

MS. HARRINGTON: Dave?

MR. GILLIS: Well, I -- it's -- this is all good

to hear. The problem is we continue to get complaints

from people that I'm trying to get through with

questions about their bills to specific information

providers who have been put along the way from the local

phone company to the interexchange carrier to either the

bill aggregator or the -- and they can't get through.

They are put on hold, and they --

MS. SCHWANKE: Can I ask a question, David? Do

you think it's the -- are they claiming they can't get

through to the information provider or is it the billing

entity or the organization that has agreed to deal with

billing questions? I mean, might it be the billing

entity or the billing aggregator and not the information

provider they are having difficulty getting in touch

with?

MR. GILLIS: It may -- it would be the entity

that is able to resolve their questions about their

bill, including the authority to drop the charges if

that's appropriate.

MS. HARRINGTON: Okay, questions from Adam,

Mark, and then we are going to Joel.

MR. DICHTER: I can talk to this, too.

MS. HARRINGTON: Okay, Joel, talk about this,

and then we will go to Adam and Mark.

MR. DICHTER: I think we are probably talking

about the bill aggregators, because when you get a

separate billing page, there is a separate 800 number

for the company that's rendering the bill, and you call

that, that would be the first point of contact or the

local phone company for that consumer to try and redress

their dispute.

I know from the IP perspective that they try as

best they can to have all these companies have as many

people on hand to answer those questions as quickly as

possible, and I think there have been improvements. I'm

not saying it's perfect, but I think there have been a

lot of improvements, because everyone realizes no one in

the industry gains if a consumer is dissatisfied, can't

get an answer to his questions, starts writing to

attorney generals. That's not in anyone's interests.

So, I think there -- there is in that regard an

effort to try and be more responsive to that and to put

more investment into having operators who can answer the

questions and setting up terminals and having the data

online if they can do it. Part of that process to help

with that has been the voice capture mechanisms,

something used by operator-assisted companies, et

cetera, because it's -- and I have been a party to this

in some places where we have been asked to get involved

when an attorney general steps in and a consumer

disputes a claim, and I have been on calls with the

local phone company and the consumer when they go into

this data base and hear the voice capture, yes, I

ordered the voicemail service or whatever it is, yes,

and that really helps a lot. It doesn't answer all the

questions. There are still going to be people who say I

don't recognize the voice, but it really has helped in a

good, significant number of cases where it's been

beneficial.

Also, on your question I think early on starting

this session this afternoon, we have tried to be also

helpful in getting additional information. The initial

letter response to the person who's complaining to the

attorney general may say we generally do this. If the

question asks for additional information, I go to my

clients, and they answer us when they can, they have

been responsive; and in going to the interstate --

interexchange carrier and asking them for information on

their call records to back up what their own records are

and to try and show that yes, this call was indeed made,

that there was no phantom call.

And, you know, there may -- there probably are

phantom billings, and I don't think it's a huge

problem. I can say from ITA's perspective, and I am

here to talk on an ITA perspective, on an international

front, it is all handled by the long distance carrier.

So, you can't even have a phantom call from that

perspective, except for the clip-on fraud.

MS. HARRINGTON: Adam?

MR. COHN: I have a question. This relates back

to some points made earlier regarding calls which are

identified on a bill in a different way from what the

customer actually dialed. It -- my question is, does

this make it more difficult for a consumer to realize

why they have a bill? I mean, isn't that really the

front line on stopping this whole problem of consumers

complaining about they didn't make calls?

And related to that is, I am curious as to why

that's happening. Why are there people who are billing

800 number calls as pay-per-call still, and it's my

understanding that that's what 900 number is for. I

know there are a lot of issues relating to international

audiotext, and that might have advantages over 900 for

certain reasons, but why would someone want to bill to

an 800 as a pay-per-call as opposed to just straight to

a 900 call and how is this happening? And I'll stop

there.

MS. WILLIAMS: I think everybody went to 900

when the -- I mean to 800 when the 900 rules first came

out, because it was -- there weren't the same

protections and because people jumped into that

presubscription loop hole and said, Oh, good, we give

them everything here, and we don't have a problem.

MR. COHN: But my question is why is that billed

as a pay-per-call? I mean, shouldn't -- if someone is

not availing themselves of the 900 billing system, why

would they want an 800 call to be billed as a 900? Why

not just have someone call a 900 number? And if they

use a presubscription agreement under 800, shouldn't

there be some other billing mechanisms? Why would they

be going through the LEC at all? I don't understand

that.

MS. WILLIAMS: To bill an 800? I would say to

get it collected. I would -- I'm not sure if I

understand what your question is. I think that, you

know, the same companies who were billing 900 moved to

800 and tried to bill 800, whether, you know, originally

we didn't even know what was being billed. We got calls

to Florida, calls to -- all over the place, and none of

them looked like 800, because people were for matting

the calls in a way that our billing system would accept

it. We didn't accept 800 calls, and nobody came to us

and asked us -- to ask if we would bill them. They just

sent them in another way.

I mean, I think the rule left it open for 800

pay-per-call, if you want to call it that. I don't

think as many people use it today. I think they have

moved to international now or monthly fees, but it

certainly was a problem for quite a while.

MS. HARRINGTON: Yes, it was. We did some

enforcement in that area.

Marianne?

MS. SCHWANKE: My question goes back to the

question of what's a reasonable investigation, and I

wondered what you think about whether the rule should

standardize the investigation procedure by either

setting forth specific requirements for conducting an

investigation of an alleged billing error or maybe

perhaps by setting a safe harbor or some kind of minimum

standards.

MS. WILLIAMS: If I --

MS. HARRINGTON: Let's go to Albe, who has had

his card up.

MR. ANGEL: This is actually responsive to

Marianne's question, the point that I wanted to make.

First, I wanted to clarify what appears to be a typo on

the agenda. Under the segment that is 1:30 to 3:15, the

third bullet point that appears toward the bottom of the

page, it says, "Are IPs --"

MS. HARRINGTON: No, we meant billing entities.

MR. ANGEL: Right, this would be LECs, not IPs.

MS. HARRINGTON: Or billing entities, not

necessarily LECs.

MR. ANGEL: Right, that are required to have a

"reasonable investigation."

MS. HARRINGTON: Right.

MR. ANGEL: The ISA convened an ad hoc group

which called itself the billing task force, and this was

comprised of billing entities that were LECs,

third-party billers, IPs and service bureaus, and it was

a multi-month process where we compared notes, winnowed

it down, and one of the primary findings of that task

force, which is contained in Exhibit B to ISA's

comments, was that consistent and timely LEC write-off

processes are important so that service bureaus and IPs

can quickly identify and block users. The investigation

that we have in mind is not a lengthy investigation. It

is an investigation similar to the one that Jon Shaub

identified. On the same call that the consumer comes to

the, you know, the billing entity to complain, there is

some resolution, and it's resolved.

MS. SCHWANKE: But what do you think about

standardizing the procedures for determining whether or

not the charges should be sustained?

MR. ANGEL: Okay, we would love to do that. A

consistent theme throughout the ISA comments is that

greater uniformity in the area of billing works to

everyone's advantage, so that there is less squabbling

about what should be done.

Now, the difficulty that we have is that if you

understand the telecommunications industry and how

people are stratified and where it is that they get

their marching orders from, it is not simply the case

that an information provider can complain to a carrier

and hold out on this point for purposes of getting their

billing and collections contracted precisely the way

they want it.

There are other issues in the LECs, and

typically an interexchange carrier will have to refer

back to his support people, his or her support people,

to determine whether or not they can implement the

specific procedure that's being asked for. Invariably

those roads lead back to either contracts with the local

exchange carriers or some process that's either ongoing

or hasn't yet been initiated at the ordering and billing

forum.

And then creating a priority position within the

ordering and billing forum is a near impossibility for

the years that I've had, you know, I've been following

this issue. So, to summarize, we don't really have any

bargaining power when it comes to using the

interexchange carrier to discipline the LECs on issues

of timeliness in terms of billing investigation.

And we would really like to use this regulatory

proceeding and administrative proceeding to focus on the

issue and say, you know, it's high time that we do

something by administrative rule to rectify the problem

and that the solution is quick and timely reporting and

quick and timely resolution of the consumer's complaint,

and that typically means on the same call.

MS. HARRINGTON: Mark?

MR. HERTZENDORF: Well, I think my question

maybe was just answered, so I'll ask the next question

that I came up with while I was listening to that one.

If there is such a problem going through the

LECs in terms of you're not happy with them forwarding

the information about the customers who aren't paying

up, and I guess this is a problem even if AT&T or some

third party is doing the billing and inquiry, because

you just don't know about these people until months

later, I guess the problem is not so great that you want

to send them a separate bill and have a third party

actually put a separate bill in the mail, and you could

handle the whole process from beginning to end?

MS. HARRINGTON: An answer to Mark's question?

Peter?

MR. BRENNAN: Yes, the cost of doing that for

low and medium-priced services would be prohibitive, and

the result would be anti-consumer. All I think we can

expect, and I address this as much to my colleague and

vendor and to the Commission, all we would expect in a

situation --- and we would just as soon handle our own

complaints and do our own investigation, because we find

in most cases it's a good faith issue and able to be

clarified -- is the information in a timely way to do

that, and that means the information about the call, the

information about the customers and any other

information that is a part of that process.

MR. HERTZENDORF: What's the reason why the --

is there some legal impediment for the LECs to say who

hasn't paid their bill within 30 days, even if you

haven't -- even if it's still under treatment?

MS. WILLIAMS: Well, when we bill, I wanted to

address the billing inquiry issue. When we bill

charges, we are collecting on a total balance due. So,

if a customer is making a partial payment or something

like that, we don't know what he's withholding payment

on unless he contacts us to tell us that.

When it comes to the billing inquiry issue, when

customers call us, we don't do inquiry for most of the

companies we bill for. We do it for very little. So,

most of the time the customer calls us about these

charges, and as you heard from some of the complaints,

we do refer them back to the company who has the billing

contract with us.

And many of the complaints we get back from

customers are that they have gone to them, they have

asked for an adjustment, either it was promised and

never given or it would take 60 to 90 days to give it,

or they didn't get an adjustment, and they felt like

they should. So, we get customers back all the time.

Sometimes it's after months of waiting for an adjustment

that never came.

Then we issue to the adjustment, and now we are

back to that 60-day thing that we are way past again,

but that customer asked for one long ago, and I think

some of the hold-up in some of that is not necessarily

the LEC hold-up. It is the person or I mean the company

who has the billing contract with us.

We, if a customer does come to me and I take it

off the bill, there is no waiting period. I take it off

the bill in that call, I am on the call for a few

minutes, try to sustain it, go through dates and times

of call, was there anybody in the household, look at the

prior month's bill, has this customer made these kinds

of calls before.

If he has, I offer him 900 blocking, make an

adjustment, post the account the next day, and it goes

back to the billing company. If the carrier or company

who has the billing contract gets their adjustments from

me on a daily basis, which they can do, they will know

the next day. If they only get it once a month, they

won't know until a month later, or if they just missed a

billing report, then it will be two months later.

So, some of that hold-up in reporting isn't

really from the LEC. When I go back to that treatment

issue, when I'm trying to collect from customers, it may

take three months -- that's about the standard time for

us, about 90 days after a charge is billed, minimum,

before an account write off because of that whole

collection and treatment process that we're regulated

under.

Once that customer writes off, those nondeniable

charges are sent back to the billing company, and now

they are at least 90 days old, if not older, because

that customer didn't pay his phone bill, period, and his

charges were written off and sent back. So, timely

notification, we are working under the constraints of

the regulatory system, and sometimes I think the billing

clearinghouse is the one causing the hold-up, not the

LEC.

MS. HARRINGTON: Don?

MR. KLUG: I think we need to kind of -- if we

are looking at billing disputes to kind of keep a couple

of things in perspective. Dave and Susan were talking

about consumer complaints, about not being able to get

through and find out who the IP is. In our MCI

perspective, it is less than 30 percent, so of all the

calls to the network, less than one of those is

inquiries about the call. So, that is fairly low for

the industry.

MS. HARRINGTON: Well, but I think the question

is what happens with that -- you know, what's the

experience of the consumers who constitute that 1

percent?

MR. KLUG: Okay, I just wanted to have that as

the data point.

MS. HARRINGTON: I understand.

MR. KLUG: Have it out there, and the other

point is Representative Gordon this morning talked about

a double-edged sword. There is a requirement for the

IPs to provide information about the programs, but there

is no requirement for the billing entities to provide

the information provider of the notice that someone has

requested an adjustment.

MS. HARRINGTON: Mark, you can't do a side bar.

You need to get called on and use your microphone.

MR. HERTZENDORF: I guess I'm confused about

something you said. There was a 1 percent inquiry rate,

but earlier we talked about a 20 percent chargeback

rate. So, I'm confused.

MR. KLUG: Well, the chargebacks are a percent

of revenue and the 1 per is a percent of calls. So,

it's two different things.

MR. HERTZENDORF: Oh, oh.

MS. HARRINGTON: Marianne, do you have a

question? Okay, let's go to Alan and then Jon and then

Gary. Oh, Gary's sign is down.

MR. TAYLOR: Thank you, Madam Chairman, I will

be brief, because I know your coffee time has passed.

MS. HARRINGTON: Actually, it is coming up in

six minutes, and we're hoping that it's done.

Excellent.

MR. TAYLOR: Actually, I just wanted to sort of

build on a question Adam asked, and that was why would

anyone use the service access code other than 900. In

our comments, we provided an example of a phone bill --

oh, I don't know that it's -- the little old lady laying

in the nursing home who was billed $1,000 -- well, $600

or $700 for conference calling when she was physically

unable to even be on the phone that long and only has a

phone to receive calls from her son who lives somewhere

else.

How would -- when we're talking about authorized

calls, how would that person go about blocking access to

the 700 number if the information provider is going to

continue to use the 700? Now, I know the information

provider will say, Well, just call us, and we will put

that number. Okay, that takes care of one, but how many

hundred calls would that person have to make to reach

all information providers to say I don't want anyone to

be able to dial a 700 $49.50 a minute call from my

phone?

Can the industry answer that? I'm just bringing

the focus back to what we're supposed to be talking

about at this period, unauthorized calls as opposed to

industry issues with the LECs.

MS. HARRINGTON: Ah, do Barbara or Walt, do you

have an answer, or Jon, to that question?

Do you have an answer, Gary?

MR. PASSON: It's a little circular here, but

one of the things we talked about earlier was what

information would be made available to information

providers, and so I think maybe one answer to this

question would be that if information services was a

piece of information that was made available, say, on a

LIDB data base that can be checked at any time by a

service provider, independent of its dialing platform,

then, you know, then they could make a business decision

that obviously this specific telephone has said I don't

want to take information services, so therefore, they

would not allow that transaction to occur.

That's one way it could happen, and I think that

drives us back to, you know, what's -- you know, right

now we have the 900 blocking data base. Maybe that

shouldn't be made available on LIDB but maybe some other

piece of information that says I don't want --

information services outside of the 900 world should be

made available on LIDB.

MR. STEIMEL: A complaint that involves Pilgrim,

I actually pulled down the electronic call records on

that complaint, and it's a fairly typical fraud

pattern. Apparently somebody who works for the nursing

home obtained access to that line and got a calling

card. The calls were never made at the nursing home.

We know who perpetuated the fraud, because we have their

home phone number and voice print. So, full credit was

immediately issued on the account and then we were able

to track it back to the person who was fraudulently

stealing service and charging it to the poor lady in the

nursing home.

In a situation like that, normally what a

carrier can do is they can block a number to prevent a

calling card from ever being issued to that number. In

this particular situation, that nursing home also, we

did a LIDB screen, and they had no LIDB blocks for

calling card or third-number -- third-number -- I mean

collect or third-number billing. So, people could have

accepted collect calls to her phone and issued -- and

sent third-number call bills to her line and there was

no way to check that.

There also appears to be no information digits

on that to identify if the calls were coming out of the

nursing home facility and the calls were not cleared

back through a -- were not cleared out through a PBX.

So, someone --

MR. TAYLOR: Was it an unauthorized call then or

not? You said if it comes from that number, I have a

right to collect it under the law.

MR. STEIMEL: This was a calling card call.

MS. WILLIAMS: Was it a card issued by Pilgrim?

MR. STEIMEL: It was a Pilgrim-issued calling

card.

MS. HARRINGTON: Adam has a question here.

MR. COHN: I have a question about the calling

card. So, this person received a bill that said that

calls were made from that phone in the nursing home but

in reality there were no calls placed from that phone in

the nursing home?

MR. STEIMEL: No, no --

MR. COHN: That's my understanding of a phantom

call.

MR. STEIMEL: This one says teleconference.

This may be a situation where -- I would have to go

check again -- this may be a situation where the LEC

does not permit the detail that we would need to

indicate that it's a calling card call, although we went

back and checked that it was a calling card call.

Electronically, we cannot transmit the information to

them to cause the bill to print that way, and -- they

called the 800 number on the bottom of the phone -- on

the bottom of the phone bill, and we were able to tell

them it was a calling card call. That's what it looks

like to me from looking at the bill and then looking at

the detail that we printed off of the switch related to

that particular call.

Typically these would show -- would show that it

was a calling card call. It could be that this

particular LEC does not permit the pay-per-call

disclaimer, the TDDRA disclaimer that we have to have on

the bill except through certain electronic formats, and

so the only choice the carrier has is to submit it

through electronic format to drive the disclaimer on the

bill, which a lot of carriers think is the most

important aspect, and then there is an 800 number I can

dial for the carrier to find out exactly what happened.

MR. COHN: Actually, I'm a little confused. You

said earlier that it was a calling card, but you're not

sure?

MR. STEIMEL: It is a calling card call, yeah.

MR. COHN: But those calls were -- were any

calls placed from that phone?

MR. STEIMEL: It does not appear to me that the

calls were placed from that number, that the original

call when they got the calling card, that was placed

from -- the calling card was subscribed to from the

number that was billed, but then the calls that were

actually -- in which a billing event took place were

made from a different location and then billed to the

calling card.

MR. COHN: Okay, billed on the calling card, but

on the bill it appeared to be a call from that phone

number.

MR. STEIMEL: Actually, it just says number

called.

MS. WILLIAMS: Appears as a direct dial call.

MR. STEIMEL: It says teleconference 700.

MR. COHN: My follow up to that --

MS. HARRINGTON: Says what?

MR. STEIMEL: Teleconference and a number.

MS. HARRINGTON: Okay.

MR. COHN: My follow up to that is if you have

such a hard time determining just from the information

that you have how the call was generated and where the

calls came from, how could a consumer who received a

bill with all those calls on it who had a locked house

for the week that they were -- received all these bills,

who did everything they could to keep their phone from

being used, and then they received a bill that indicated

that their phone had been used, and they send a letter

in that says I didn't make these calls, and they get a

response back that says that our records indicate that

these were calls made from your phone, why isn't that a

phantom bill? I just don't --

MR. STEIMEL: When a customer calls the carrier

and complains about the call, the carrier should

immediately look up the call records and see what

happened and tell the customer what happened.

MS. HARRINGTON: Kim, do you agree with that?

MS. WILLIAMS: No, that call record, I'm seeing

it's shown as a direct dial call with a 700 number and

it was a teleconference. If that's not what was really

dialed and it was a calling card call, it should show up

as a calling card call. I think this is an example of a

call record that is made up, not what really occurred.

MS. HARRINGTON: We have a difference in the

factual circumstances on the record here.

MR. STEIMEL: We are historically not in

agreement.

MS. HARRINGTON: And the record notes that there

is a long-standing quibble.

All right, here is what we are going to do

here. We are going to hear from Dave, and I see now

that Warren Miller has come from ISA to replace Albe.

Warren, we will hear from you, and then Linda, did you

have something -- we will hear from you, and then the

coffee is done and we will take a break.

Dave?

MR. GILLIS: Eileen, the point I want to make is

that this illustrates the other problem that we

identified with billing for calls to 800 numbers, and

that was that the local exchange companies that received

the billing tapes system did not permit them to bill for

800 numbers. So, the solution to that was to describe

the call in another way, so that people eventually got

bills for calling card services and other things, and

it's -- it gives rise to the concern upon -- concern of

-- for people in my position, and I think it raises

serious question in the minds of consumers as to how

this industry works and why they can't trust their phone

bill, and it's that sort of situation that has to be

resolved, I think, if you're going to go forward on an

established basis for legitimate services.

MS. HARRINGTON: Linda?

MS. GOLDSTEIN: Believe it or not, I was to some

extent going to agree with what Dave just said.

MS. HARRINGTON: Excellent.

MS. GOLDSTEIN: Just really more by point of

clarification, to say that I don't -- I don't know and I

don't want to presume to know the specifics of what

happened in that instance, but I would want the record

to be clear that I don't think we can necessarily agree

that that's a situation of phantom billing, that there

-- that there is an issue caused by the limitations

placed by the LECs on how certain calls can be

designated on the billing record, and some of these

issues are related to that but should not be equated to

phantom billing. It's not as though the call did not

occur.

The other point I just wanted to make back on

what can be done here and the collection activities is

that I think the singular theme that's come out of this

discussion is really what the industry is asking for is

timeliness, more so than specifying the specific

procedures or what form those procedures have to take is

the timeliness, and that the timeliness -- there are a

number of other issues I think that trickle down from a

failure to get that information in a timely manner.

Obviously there is the unpredictability of the

chargeback and the havoc that that wreaks on the

information provider. It also severely impacts an

information provider's ability to measure the

effectiveness of a particular advertising program,

because they may be going on certain data based on

responses that came in, only to find out six to nine

months later that that data was totally inaccurate, and

they have acted upon that for a series of months. So,

there is sort of an exponential economic impact to the

consumer -- to the information provider.

And also, I believe that the delay probably to

some extent also stymies the process and contributes to

a consumer's inability to remember. When you're

contacting a consumer nine months after the call may

have been made, it's far less likely that they are going

to remember that than 30 to 60 days after the call was

placed.

MS. HARRINGTON: Warren?

MR. MILLER: Thank you, my name is Warren

Miller, I'm the chair of the Interactive Telephone

Council, the ISA, and the director of a service bureau

here in Washington. I wanted to respond to your

question about the responsiveness of information

providers as well as Mark's concern about the disparity

between the 1 percent inquiry and the 18 percent

chargeback. I have some very specific items to respond

to.

When TDDRA was enacted, we took our

responsibilities as a service bureau very seriously. We

required every information provider to install a unique

800 number for their service. We populated the AT&T

data base with that 800 number on a recurring basis,

made sure that information was up and correct. We

recorded and required a 14-day hold period with no

erasure provisions for us to be able to examine any

complaint made against any service provider to their

800. We kept that information, that would not be erased

until housekeeping in 14 days.

Every day for four years, from the time TDDRA

was enacted until AT&T took back billing, at a staff

meeting I had someone report to me every Thursday what

kind of complaints had reached the information

providers, and the answer is zippo. There -- so, the

only conclusion I can draw is a lot of these complaints

are not making it to the information provider.

MS. HARRINGTON: And what's the nature of the

information that's provided by your --

MR. MILLER: That's a good question. During

that period of time, we still -- we have had the same

product mix all along. We don't do entertainments

programs. We do the other three categories, we do

sports, we do voice personals, we do

business-to-business and consumer. During that period

of time, we probably billed tens of millions of dollars

and had tens of thousands of dollars in refunds. During

that period of time, the chargeback rate went from 5

percent to 10 percent, but during that same time, we had

no complaints.

MS. HARRINGTON: That's very interesting. We

are going now to take our break. We are heading into

the break about six minutes late, so we are going to

come back at 3:50, and we have heard now on this billing

and chargeback issue from both industry and consumer

perspectives. We are going to spend the rest of the

workshop time today discussing possible solutions. So,

we would like everyone to think about -- hard about

common ground and solutions both. Then we will have

public participation at 4:45.

Just one moment. Is there anyone here who wants

to participate during the public participation part of

the day? Ron, you don't have to be in the public

participation part of the day. Show of hands, anyone

else?

MR. LESSER: There is someone who's not here.

MS. HARRINGTON: Someone who is not here, a

phantom participant. Well, we are going to have Ron

Isaac, who is a staff member at the FTC, join us up

here, you don't have to participate during that part, so

we will begin with you actually in the next session, and

then we will have another participant who is unavailable

or we may not know, but let's resume promptly at 10 of

4:00 to work on solutions.

(A brief recess was taken.)

MS. HARRINGTON: We have had a couple of

questions about our requests for information to

supplement the record. One panicked person asked

whether that's due by tomorrow, and the answer is no,

just, you know, this is an ongoing rulemaking. The

record remains open, and -- oh, okay, and we do have the

mystery person identified. So, anyway, if -- in fact,

we have -- if you have additional information that you

would like to put in the record, please do that.

The period for comments in response to the ANPR

closed, but the record on this rulemaking remains open,

and so you may continue to submit information to the

rulemaking record, and it will go on the public record.

We would welcome additional information.

And we are now at the part of the day where we

want to talk about solutions, but I think, Adam, do you

have a question that you wanted to begin with before we

do that, and then Ron Isaac, who is our colleague from

the Division of Credit Practices, wanted to make a

couple of observations, as well.

You didn't want to ask a question?

MR. COHN: No.

MS. HARRINGTON: Okay, Ron. Ron is an attorney

in the Division of Credit Practices, and he was part of

the staff team that did the work to promulgate this

rule, and particularly on billing and collection.

MR. ISAAC: Thank you, Eileen.

As Eileen said, I'm in the Division of Credit

Practices, and it was our division that wrote the

billing and collection section of the rule, and we're

responsible for its support.

I wanted to clarify certain issues with respect

to the billing and collections section, because I have

heard today certain statements that I think may be a

little confusing as to exactly what the rule requires,

particularly with respect to billing entity. I believe

I heard it said earlier that billing entities,

particularly the LECs, may not be complying with the

spirit of the rule by not -- refusing to -- not refusing

to honor disputes that have not been filed within 60

days.

The rule does not require a billing entity to

refuse to honor a dispute if it's not filed within 60

days. The rule sets out a certain period of time in

which a billing entity must treat a dispute if it's

filed within that 60-day time period, but if it's

submitted subsequent to that time, there is nothing in

the rule that requires a billing entity to refuse to

honor that dispute.

The rule gives the billing entity the right to

decide whether or not they want to continue to treat

that dispute as a legitimate dispute or whether or not

they want to decide at that point not to honor it

anymore. There is nothing in the rule or in the Act, I

would say, that requires a billing entity to turn that

billing dispute down if it's not filed within 60 days.

Secondly, the rule doesn't require a billing

entity to conduct an investigation if a dispute is

submitted by a consumer, reasonable or otherwise. The

rule gives the billing entity the right to pass that

charge back to the IP if it so desires, and the reason

it was written this way is because, as was pointed out

earlier, Congress mandated that the Commission in

drafting this rule consider the extent to which the

regulation -- first of all, we shouldn't draft it based

on our familiarity with the billing procedures under the

Fair Credit Billing Act, and only the extent to which we

should diverge from those requirements, Congress stated

that we should do so in order to protect customers and

in order to be cost-effective to billing entities. So,

in drafting the rule, we kept that mandate in mind.

Now, under the Fair Credit Billing Act, as well,

if a credit card issuer decides not to charge or decides

to charge back a charge to the -- to the merchant, they

can do so at any time, whether it's submitted within the

60-day period or after. There is nothing in the Fair

Credit Billing Act that requires them to not charge that

back, and it's the same with respect to the -- so, we

followed the procedures in the Fair Credit Billing Act

in drafting the rule and the mandate given to us by

Congress.

And what it comes down to is that we felt that

ultimately, there were certain issues that were best

left to be resolved by the parties, particularly the

billing entities and the IPs based on the contract. And

it was always understood that these issues ultimately

were going to have to be resolved by those parties.

Now, we understand that because of the nature of

the technology, that to a large degree IPs are at the

mercy of the carriers with respect to exactly how much

they can impose in the way of a contract, but really

whether or not the Federal Trade Commission should be

charged with altering the positions of the parties in

that situation, I'm not sure that Congress mandated us

to do that. Just keep that in mind.

MS. HARRINGTON: Those are enlightening

comments, Ron, thank you. Or, to phrase it as I did

earlier, how is that a consumer protection issue.

Now we are going to talk about solutions. We

have heard about the problems and the issues from the

perspective of billing entities and IPs and LECs and

from consumers. How can we move to resolve some of

these concerns?

Richard?

MR. R. GORDON: Well, if I could, I would just

like to make a brief comment on the statements that were

just made.

I am actually much more active in the credit

card industry than I am in the pay-per-call industry for

my profession, and it's a surprise to me that there is a

60-day limitation or a 60-day guideline on credit card

chargebacks, because we have always in the industry

understood it to be 180 days.

MS. HARRINGTON: No, that's under the Fair

Credit Billing Act. Under provisions of the Truth in

Lending Act, consumers must raise their disputes within

60 days to preserve their legal right to be free from

additional collection activities and so on and so forth,

and the same standard applies in the TDDRA rule, as

well.

MR. R. GORDON: Then what I'm talking about

really is a practical approach in the industry where

once a merchant has not received a chargeback within 180

days, the chances of him ever receiving a chargeback is

close to zero.

MS. HARRINGTON: Well, that makes Ron's point I

think quite nicely, because those regulations have been

worked out among the private parties who are a part of

that payment system not as a result of government

regulation.

MR. R. GORDON: But the point I wanted to make

there when we as an industry went back to the authors of

the bill and Congress and said we have got this problem,

chargebacks are coming back two years, a year and a half

later, we were told that can't happen, because there is

a 60-day limitation. We asked for a 180-day limitation,

and what we were told by the members of Congress was in

the Federal Register, they interpreted -- and they may

have done it wrong -- but they interpreted that these

things had to be done in 60 days, and I think that that

gets to the issue of solutions here, which is really

what we're all looking for.

I know today's been extremely educational for me

as far as some of the perspectives brought to the table

and some of the comments made by everyone who's

contributing here, and one word that I think I reacted

to the same as some others did was "treatment." When

treatment was defined, there was a statement made which

I think is right on point as far as what we need as an

industry to be more responsive and more respectful of

the consumer, and it was defined as when we put someone

in treatment, we take into effect or into account how

long we have had this customer and what is the chance of

getting paid.

One of the very first things that we talked

about earlier this morning was there are certain

nonprivate information that is maintained by the LECs,

such as the date in service. There are other things,

types of service, things of this sort that the phone

companies and the billing entities have at their

disposal. We want to give more information to the

public, but we always want to make sure that the public

that we're dealing with is not trying to figure out ways

to get through the backdoor constantly. And what we

need is additional information so that our treatment can

be effectuated on a fair and equitable basis.

Again, I want to make sure that everyone

understands, we're not talking about black lists.

Somebody used that phrase this morning, it sent a chill

up my spine, because that's not what we're looking for.

What we're looking for is in a highly automated

environment. If you need to handle the exceptions on a

manual basis rather than try to take every call in as an

exception, and if we know, as an example, again, the

date in service, whether or not this person has

requested a 900 block, that gives us additional

intelligence, and the software and the development that

can be created -- the software development that can be

created with that information will give us predictable

models.

This has worked extremely well in other

industries, and I think that it's something that if we

can get some additional assistance from the LECs, that

we would be able to significantly reduce the costs of

service to everyone, including the cost of chargebacks.

One of the things as chairman of the TSIA I

would like to encourage, the dialogue here today has

been extraordinary for at least those of us on this side

of the table. We have learned a lot, and I hope that we

have been able to give back in the form of

communications and information to some of the other

participants in the meeting. I understand that during

the rulemaking process we can't have any more formal

meetings or they are restricted. We would like to

encourage both the consumer advocates and the attorney

generals and the LECs to establish better lines of

communications with us.

What you said earlier I think is exactly the

case here. In the credit card industry, the private

sector has pretty well been able to work these things

out, and I think one of the reasons that's been

successful is because there are only four or five large

credit card companies, Visa, Mastercard, Discover,

American Express.

Unfortunately, in the teleco world, there are

many, many multiples of that number of entities

involved, and it's a little bit harder to get everybody

together to communicate.

MS. HARRINGTON: Let me ask a question, Richard,

on that point. One of the ideas that we had floated in

our agenda is whether there is some way that the

industry folks can get together to set up some dispute

resolution forum, alternative dispute resolution

mechanism. Now, that could be in our agenda, we asked

that question with respect to disputes between consumers

who claimed not to have made a call and IPs who claim

that it was made, but could not a mechanism like that,

since there are so many different players in this

industry, that is, there are consumers, there are

information providers, there are service bureaus, there

are LECs, there are IXEs, there are billing entities and

billing clearinghouses, couldn't there be some sort of

dispute forum, dispute resolution forum to -- so that

these disputes between information providers and LECs

could be the subject of some sort of arbitration or

mediation?

MR. R. GORDON: I think that's something we can

work toward. One of the problems is, of course, that

takes funding, and I don't know how many entities would

be involved, so what level of complexity there might

be. Certainly I know the TSIA will be very proactive in

contacting the people at the table and saying, If you've

got a real issue with someone, please call us, let us

help to try to resolve these issues so that they don't

have to rise to the level of the FTC or the FCC. It's

better for us to maintain a quiet, dull roar than a

shout on this matter, and there is so many things that

we can resolve internally.

I mean, I think, again, some of the terminology

that we struggle with is more communication than

anything else. The one thing that I know we stand

steadfastly for, though, is we do need conformity, we do

need uniformity. There was some discussion earlier this

morning about the different types of chargeback codes

and the different types of billing records, and while

there are some standards, I understand there is as many

variations in the standard as there are standards.

So, it's very hard to standardize an

unstandardized practice, and what -- again, we go back

to a statement on the billing record. We believe that

there really has to be more than a model, because if

there is a model, people will vary from it, and then

things like happened with Peter, where there is such

vast divergence in different geographical parts of the

country.

The people in Tampa don't have any different

degree of literacy than the people in Topeka, and yet

when you have got this kind of vast statistical,

broad-based difference, it can really only be attributed

to the noncommon point, the noncommon point being the

way that the LEC treats that particular item.

Okay.

MS. HARRINGTON: Jill?

MS. SANDFORD: I have found today to be

tremendously informing but certainly learned quite a bit

about the industry as well as all the different players

and the levels. We have also heard quite a bit of

finger-pointing today, which I do find interesting. The

bottom line is the problems that we have identified

today do exist. Moving forward, looking at the

solutions, I think there are front-end issues and then

there are back-end issues.

At the front end, we have identified the

authorization issue. I think a greater use of

presubscription agreements, I think the industry needs

to develop a mechanism to ensure that the consumer truly

does authorize the call, that the subscriber of record

is the one who authorizes the call, and then it's okay

to have the presumption that the consumer or the

subscriber of record will pay for that call.

On the back end, I think the colloquy between

Walt and Kim clearly illustrated the problem. I think

if someone makes the 900 number call, it should be

billed as a 900 number call. If someone makes an 800

number call, it should not be billed as an international

call. Whatever the consumer's method of calling or the

pay-per-call service, that should be what appears on the

bill. If the industry has trouble dissecting what is on

the bill and the origin of the call, I don't see how we

can expect the consumers to wade through all of that

information.

Something that's been brought up today and has

been repeated is the timeliness issue of reporting the

disputes and getting back to the IPs. I'm going to

float this out here, would it help the IPs and the

industry to have what I'll call the true party in

interest on the bill instead of having the consumer have

to go through the LEC and then a billing aggregator,

have the IP's name and 800 number on the bill? That

way, the consumer can deal directly with the IP, and

also I think it's to the advantage of the information

providers to have a consumer, when they call them, to be

open to discuss the problem as opposed to having gone

through three layers, and by the time they even get to

the IP, they are so annoyed at the whole process that

it's even harder to work through the dispute.

I certainly agree that we need to have

uniformity in the dispute resolution practices. One of

the things that we see in our complaints is an

inconsistency on how complaints are dealt with. It

almost appears like a squeaky wheel. The consumer who

yells the loudest often times gets the chargeback or

gets the charge refunded. I really think there needs to

be a consistency of factors that the industry abides by

in determining whether a charge should be sustained or

whether the call should be recoursed.

Something I've learned today which I think needs

to be applied at the LEC level is the existence of the

billing record, and I think it was called the AMA, which

allows the LEC to actually determine whether a call was

made, and I think if the time is taken when a consumer

calls up to differentiate between a call that was

actually made and one that was a phantom call at the

git-go, when the consumer first complains, both the LEC

will be able to identify a pattern, as well as report to

law enforcement what's going on.

I mean, the pattern of our complaints is it's

either feast or famine. We may have one or two

complaints that we're able to resolve through a

mediation or we have a flood of complaints against a

particular billing entity or IP, and they tend to be

across the board phantom calls. So, we can really

distinguish when it may be a misunderstanding between

the consumer and the IP or the billing entity or when

there is a significant problem.

MS. HARRINGTON: Thank you, Jill.

Let me ask you, Albe's next on the list, let me

ask you first to respond to Jill's question about

whether the IPs would be in favor of having the actual

creditor's name or actual provider's name appear on the

statement and then whatever else you wanted to say.

MR. ANGEL: Okay, the answer is that it does

appear on the bill. In the 900 billing regimen, in

order to initiate an information service, there is an

information service application, and the carrier

requires that, and there has to be a specific service

description, and that service description responds to a

specific provider, but that doesn't necessarily

translate to that provider is responding on the billing

inquiry.

Literally, what happens is that when the page is

rendered to the consumer, at the bottom of that page is

the 800 number or local number that the consumer can

call in order to deal with that particular charge.

MS. HARRINGTON: But can -- the billing entity

-- the provider is not identified on the bill.

MS. WILLIAMS: It can be.

MS. SCHWANKE: Isn't it the type of service

that's identified?

MR. ANGEL: Let me go through this. The

identification of the provider is dealt with in the

rules, because both in the advertisement and the

preamble to a certain extent there is an identification

of the service and the provider.

MS. HARRINGTON: But not on the bill. There is

no requirement in the rule that --

MR. ANGEL: Understood, understood. On the

bill, there is a limitation in terms of what can

actually be printed on the bill as a result of how many

characters are allotted, how many little spaces you have

on the bill as a function of the EMI format, the basic

format that's being used to transmit telephonic billing

messages.

MS. SCHWANKE: And the telephone number that

appears on the bill is the organization that has agreed

to deal with the billing inquiries, not necessarily the

information provider.

MR. ANGEL: Right. Is that clear? Now, I guess

the proposal --

MS. HARRINGTON: Well, that's clear, and it's

clearly different than what Jill is proposing. So,

we're interested in knowing what you think about what

Jill is proposing, which would identify the provider on

the bill.

MR. ANGEL: If I understand Jill's proposal

correctly, it's that the ultimate information provider's

800 number appear on the bill so that if a consumer has

an inquiry, that that can be directed directly to the

information provider, correct?

There is a factual -- a pragmatic difficulty

with that in that many information providers are not

positioned to handle billing inquiries that might be

coming in on a regular basis during the day. They pay

billing entities for that service to be provided. They

are available to respond to anything that the billing

entity cannot answer or cannot resolve, but --

MS. HARRINGTON: All right, well, let me ask you

this question, Albe, though.

MR. ANGEL: Go ahead.

MS. HARRINGTON: If they don't position

themselves to provide that information to consumers and

they have paid a billing entity to do that for them,

then why shouldn't a consumer protection regulation

dictate the terms of the agreement between the

information provider and the billing entity with regard

to timeliness?

I mean, this sounds to me like a series of

private business decisions that are being made by

information providers, and, you know, I'm sort of

missing why it is that the Telephone Disclosure and

Dispute Resolution Act, which was intended to protect

the consumers, without unduly burdening industry, should

get involved in terms of handling information and

disputes between private parties on the business side.

MR. ANGEL: In order to give you a really

intelligent answer on that, we really need to step back

and look at the industry and how it operates from a

bird's eye view. For every inquiry that we're

addressing here, the one out of a hundred calls that are

being made, there is a further percentage of calls that

are satisfactorily handled on the first call. So,

realistically, if a hundred calls were made and one

results in an inquiry and half of those calls are

satisfactorily resolved in the first call, we're dealing

with a fraction.

Now, that fraction has amounted to chargebacks

in the amount of $200 million for the industry. The

industry is responding that there is a structural

problem here, and we, just as you stated earlier, you

said why isn't there an alternative billing dispute

mechanism? Well, why isn't there a forum?

Well, in fact, the ISA did just that. With the

U.S. Office of Consumer Affairs, in October of 1995,

they held a meeting, and they had a further meeting, and

then the result of the third meeting was a formal task

force, and the task force was to come forward with ad

hoc recommendations, and those are the ones that are

appended to our comments, and literally, we had

participation from the National Association of Attorney

Generals and interested LECs, and it was really broad

participation. And the recommendation was timeliness,

get the information back to the IP or service bureau

immediately rather than having it clog up the system and

result in such chargebacks. That's really, you know, a

quick answer to your question.

But if you want to focus on the very narrow

issue of whether or not an 800 number should appear for

an IP, the industry wasn't grown that way, wasn't

structured to accomplish that, and there are many, many

IPs that provide wonderful services and continue to

provide value that won't be able to provide those

services if this new requirement is imposed without

prior notice.

MS. SANDFORD: May I --

MS. HARRINGTON: Ah, I am going to ask Kim, and

then Jill, I'll come back to you.

MS. WILLIAMS: I wanted to address putting an

IP's name on the bill. I know we have at least one

state that requires that we do show the underlying

carrier's name on the bill. We call it subentity

billing --

MS. HARRINGTON: Carrier or IP?

MS. WILLIAMS: I think it's the underlying

carrier they ask we show. I'm not sure how the rule

actually reads, but --

MS. HARRINGTON: For the record, what state is

that?

MS. WILLIAMS: Kansas. So, I have a billing

entity who has a contract with me, and on their bill,

charges are broken out by subentity, and it will say

billed on behalf of and list the name of that subentity

and list the calls underneath. We can actually will I

show an 800 number for each subentity, but I don't think

many carriers or customers have opted to show the

number. In fact, I think a lot of IPs can't even be

reached. When we refer customers to billing entities,

they offer that you can write to them, the IP, but not

that you can reach the IP by phone, and we do have a lot

of complaints about that.

MR. ANGEL: May I respond?

MS. HARRINGTON: We are going to go to Jill, and

Albe, you can respond after that.

MS. WILLIAMS: One other thing that Jill said,

on the AMA tape issue, I just want to make sure nobody

thinks that is an easy thing to get to. Again, it's in

the central office, and there are many, hundreds and

hundreds and thousands and thousands, and for me to go

get that record is not an easy thing. It is not a thing

done on the line with the customer. It takes a couple

of weeks to get a response back from a central office

where I might have a couple of people walking around,

who are working there and taking care of the actual

extra office.

So, it is not something that I think is an easy

answer to whether a call was really made or not. I

think, number one, making it against the law for anybody

to send a call record that was never made would help.

Whether it is or not, I don't know. I know it's against

my billing contracts, but I am left to try to enforce

that based on customer complaints.

MS. SANDFORD: To just get back to your point,

if the IP does not have the capabilities to service an

800 number or consumer inquiries, then I think that the

800 number for the billing entity should also have the

authority to be the last stop for consumer credits, as

well as to recourse and refund the charges, that whoever

is on the phone bill should be the stop for the

consumers who also has the authority to handle the

dispute, and ultimately, if it's found that it is an

unauthorized or phantom charge, take that charge off the

bill.

What we are seeing, though, is you have a

billing entity's number on the phone bill, the consumer

calls them up, and they say, Oh, well, we're just a

billing entity. You have to call this other number.

And I think whoever is on the bill, if the IP has chosen

to avail themselves of the billing entity as well as

having the billing entity's 800 number on the consumer's

telephone bill, they should also have the authority to

handle the dispute.

MS. HARRINGTON: Mark?

MR. ANGEL: May I respond?

MR. HERTZENDORF: A quick question for Kim. Are

chargebacks any lower in Kansas?

MS. WILLIAMS: Not that I know of, no. I mean,

I don't know that that really makes any difference.

MS. HARRINGTON: Okay.

Albe?

MR. ANGEL: As far as I know, I may stand to be

corrected here, billing entities do have full authority

to make any satisfactory resolution that they see fit

under authority given both by the IP and the service

bureau that might service that IP, so that a function of

the billing and collections agreement that the carriers,

AT&T and MCI in this case, institute with their 900

service customers is that the billing entity, whether it

be their own inquiry and bill resolution department or

that of a LEC, be empowered to make a full resolution.

Secondarily, to the extent that there are

third-party billing entities, to the best of my

knowledge, they all similarly mirror that same language

in their contracts with their IPs, and it's the rare

case where a consumer does not get satisfaction and is

referred to an information provider who is evading

calls. I mean, we're really talking about millions and

millions and millions of calls that are being made,

handled satisfactorily, and a very small sample of

anecdotal information is coming up here where people are

getting the runaround, and, you know, unless we address

those on a case-by-case basis, it's hard to address

them.

MS. HARRINGTON: All right, and I think we

understand that what the information providers are

saying is that their issue is simply that of the delay

in the -- between the time of the billing and the -- and

the ultimate resolution by the billing entity. We

understand that.

Okay, Marianne had her card up first.

MS. SCHWANKE: For those consumer disputes that

aren't resolved satisfactorily, could you or could

somebody address the feasibility of developing some kind

of industrywide alternative dispute resolution

mechanism? There are other industries that have

developed such a mechanism for resolving disputes.

MS. HARRINGTON: First Walt, then Ron.

MR. STEIMEL: Okay, it seems like part of the

problem here is that in many instances the LEC is the

arbiter with the consumer on whether or not the charge

was legitimate, and the industry doesn't trust the LEC,

and the LEC thinks it's unfair, and I think both of

those are legitimate complaints.

One thing we would like to suggest is maybe an

industry-funded dispute resolution mechanism that could

be overseen by the FCC Informal Complaints Division.

Most disputes are already sent to them. Consumers and

LECs already view that department as the place to go for

help and a department that is already familiar with many

of the issues involved. The funding for the added

burden could be resolved through increased fees, which

could be paid by the billing entity. When I say billing

entity, I don't mean, like, you guys; I mean, like, us

guys, just to make that clear.

MS. HARRINGTON: For the record, "you guys" are

the LECs and "us guys" are the --

MR. STEIMEL: Are the interexchange carriers and

the major providers, as such. The arbitration, or in

addition, the complaint mechanism could go through an

arbitration basis in extreme situations, which could be

accomplished on a voluntary per-use basis. The billing

entity would either use the existing process, which is

to resolve a dispute directly with the consumer within

the formal complaints department as a passive observer

or the billing entity at its sole option could pay a fee

to submit the issue to arbitration.

We believe this process might demonstrate

independence from LECs, IXEs and IPs, confidential

treatment of parties' business methods and the

individual dispute information. The disputes would be

arbitrated or mediated only when the party issuing the

bill agrees to it, and the informal complaints

department could ensure that the entire process

comported with existing laws, rules and regulations, and

there would be -- the LECs would be taken out of the

loop on trying to determine things in which they did not

have firsthand information when they were billing to

third parties. In addition, the parties that were the

billing entities would not feel like the LECs were

forgiving charges without a legitimate basis.

MS. HARRINGTON: Okay, thank you, Walt.

We are going to go to Ron and then to Susan.

MR. GOLDBRENNER: Good afternoon, my name is Ron

Goldbrenner of the Professional Marketing Association.

Eileen, I'm a little bit confused, if I may ask you a

couple of questions. You said that the Fair Credit --

MS. HARRINGTON: Ron, I actually called on you

to answer Marianne's question.

MR. GOLDBRENNER: I have a question on the

60-day rule.

MS. HARRINGTON: We will get back to you.

Susan?

MS. GRANT: I wanted to start by saying that I

am not unsympathetic to the billing and collection

problems that members of the industry have, but I think

that a lot of the problems that we've been discussing

today are things that need to be resolved between those

business entities and really are not appropriate for the

FTC to attempt to resolve through the rule. This is a

consumer protection rule, and I think that we may lose

focus of that as we talk about these problems.

I think that some of the problems that we have

learned about from the industry have to do with the

structure of a business that they have structured, and

that if that's not -- if that structure is not working

well, then maybe it's incumbent upon the industry to

take another look at alternatives.

It was mentioned just in passing but really not

explored that direct billing, for instance, was more

expensive than having your billing done through a LEC,

but I don't know how that compares with the amount of

money that is being lost due to chargebacks and whether

it would have repaid some of the chargeback problems and

ultimately turn out to be a more economic solution to

the problem.

I'll second what has already been said about

more use of presubscription agreements, which I'd really

like to see in writing in order to have some

documentation of their existence, and I think there are

some other alternatives, as well. Perhaps the industry

could set up a service similar to the mail and telephone

preference services that Direct Marketing Association

maintains for consumers to opt out of getting -- of

having the ability to have certain of these calls made

from their phones.

MS. HARRINGTON: Beyond 900, because they

already have the 900 block.

MS. GRANT: Right, beyond 900. It's not going

to eliminate the problems and certainly we know that the

most fraudulent companies out there will probably not be

members of -- of such an industry organization, but it

may reduce problems, help to reduce problems at any

rate.

I like the idea of an alternative dispute

mechanism for consumers, although, you know, I would

have concerns about how easily accessible and objective

it would be and whether it would be binding or whether

consumers would still have recourse, but ultimately,

when it comes right down to it, what really

distinguishes most of the pay-per-call industry and

gives rise to most of our concerns is the fact that it

is billed primarily through consumers' phone bills, and

I think that there is more than just convenience for the

companies involved.

I think that consumers' telephone service is a

really basic right that we can't do anything in order to

help the industry with its collection problem that would

endanger consumers' rights to basic telephone service

and to kinds of telephone services that may be developed

in the future that consumers want to avail themselves of

and need.

MS. HARRINGTON: Thank you, Susan.

One area that I really would like to hear some

discussion on as we move through the rest of the

participants who want to participate here is the notion

of the problem caller data base, which is one solution

that has been proposed by some in their comments. So,

I'm going to continue to call on people, but --

actually, Don had to leave, so if you wait long enough,

you're gone.

All right, Ron?

MR. GOLDBRENNER: May I -- may I speak about the

60-day rule or --

MS. HARRINGTON: Sure, sure, but I also would

like, if you have got a comment on the problem caller

data base, too, we would like to hear that.

MR. GOLDBRENNER: Should I start with the 60-day

rule?

MS. HARRINGTON: Whatever you want to.

MR. GOLDBRENNER: I understood you to say before

that Fair Credit required the consumer to file their

notice within 60 days.

MS. HARRINGTON: For a consumer to assert his or

her rights under the Fair Credit Billing Act, the notice

has to be served up in 60 days.

MR. GOLDBRENNER: And that the FTC's rule is

intended to follow that.

MS. HARRINGTON: Well, the statute that directed

us to promulgate the rule directed that it follow the

Fair Credit Billing Act billing dispute provisions

unless there was some good reason not to.

MR. GOLDBRENNER: And as I read the rule as it's

stated, it seems to require a consumer to file their

notice within 60 days.

MS. HARRINGTON: It doesn't preclude -- I think

the point that Ron is making is that there is nothing in

the rule that precludes the billing entity from

considering a dispute that arises after the 60-day

period. That's the --

MR. GOLDBRENNER: Well, that's where I would

take issue. I think there is nothing in the rule which

precludes the carrier from acting upon the notice after

60 days, but if the notice doesn't come in within 60

days, then it is not a valid notice within the

regulation, and as a matter of law, the carrier must

reject it. There are two aspects --

MS. HARRINGTON: It doesn't say that, Ron.

MR. GOLDBRENNER: Well, if I may finish, there

are two aspects to the chargeback situation. The

regulation sets forth a threshold that the consumer must

meet, the consumer must file within 60 days. Whatever

rights the carrier has, the rule requires the consumer

to act within 60 days.

The carrier does not have the right to restore

the consumer's late notice by acting upon it after the

60 days. The carrier has the right not to act upon it

within the 60 days, but the carrier cannot re-awaken a

notice that is illegal and not appropriate, and I think

that's the point that the industry is trying to make,

and the industry is trying to make the point that there

are two problems here, both of which should be solved,

both of which would help the industry, and neither of

which would hurt consumers, because I think we will all

accept the fact that at some point, a claim is stale.

If you say that the consumers can make claims

that can go on forever, then you are arguing against the

whole concept of a statute of limitations, and this

60-day limit is in the nature of a statute of

limitations, and it requires the carrier to accept only

notices which have been properly filed.

There are a series of other requirements in the

regulation with respect to what the notice must say. It

must set forth the billing entity, identify the

customer's name, telephone number. If any of those

provisions were omitted from the notice, the notice is

similarly inadequate, and the carrier cannot act upon it

and charge back. And so what the industry is saying is,

you must at least follow these threshold rules, and that

will ameliorate the situation greatly. If you choose to

act at a later time on properly filed 60-day notices,

that's fine, but at least abide the regulation.

MS. HARRINGTON: Well, I think at least on

behalf of the staff of the Commission that we do not

agree with you with regard to what you just stated about

the rule and what is required versus what is

discretionary.

MR. GOLDBRENNER: Can you tell me what the

difference is between the requirement for the telephone

number and the name and the requirement for it to be

filed within 60 days? How do those two differ as

requirements?

MS. HARRINGTON: I'm telling you that the

requirement that a dispute be raised within 60 days goes

to the consumers' rights to be free from billing or

discontinuance, and if you look at the Fair Credit

Billing Act and Regulation Z, which is what this is

modeled from, the 60-day requirement goes to the

consumer's ability to be free from further collection

activity or other adverse action.

MR. GOLDBRENNER: You mean the consumer can't be

-- can't be cut off within that 60 days?

MS. HARRINGTON: If the consumer raises the

dispute within that 60-day period, then the consumer's

-- then no adverse action may be taken against the

consumer as long as the dispute is under

re-investigation. If the re-investigation establishes

that it's a valid charge and the billing entity directs

the -- informs the consumer of that, then the consumer

is obligated to pay the charge, in the same way that a

consumer raises a dispute under the Fair Credit Billing

Act and Regulation Z.

So, the 60 days doesn't -- there is not a

statute of limitations on the LEC's discretion here.

The statute of limitations, if you will, goes to certain

rights that the consumer has to be protected from

collection activity and other adverse action so long as

the consumer raises the dispute within the 60-day

period.

MR. GOLDBRENNER: So long as the consumer raises

the dispute within 60 days, he is protected from having

his phone service cut off. Is that correct?

MS. HARRINGTON: Well, no, the consumer is

protected from having his or her phone service

disconnected for nonpayment of 900 number charges in a

much broader way, and that is an FCC and state law

requirement and so on and so forth.

MR. GOLDBRENNER: But I still don't understand,

then, what the 60-day limit is for. Is it protecting

the consumer or is it protecting the industry?

MS. HARRINGTON: The 60-day limit provides

certain basic protections to the consumer.

MR. GOLDBRENNER: So, the -- in order -- so, the

consumer must file within 60 days in order for the

consumer to get certain protection?

MS. HARRINGTON: That's correct.

MR. GOLDBRENNER: And what protection is he

getting if he files within 60 days?

MS. HARRINGTON: If the consumer raises the

dispute within 60 days, the consumer is entitled to a

re-investigation of the charge or a forgiveness of the

charge if there is no re-investigation undertaken, and

the consumer further is entitled to remain free from

further adverse action --

MR. GOLDBRENNER: And if the --

MS. HARRINGTON: -- During the time that the

charge is subject to re-investigation.

MR. GOLDBRENNER: And what penalty does the

consumer suffer if he doesn't file within 60 days?

MS. HARRINGTON: The consumer is not entitled to

be free from adverse action if the claim is raised

outside of the 60-day period. So, the consumer is not

entitled to be free from further billing and

collection.

MR. GOLDBRENNER: Well, I -- as you said before,

I'm afraid we must disagree. I think that sounds very

much like a limit to me that is not as well --

MS. HARRINGTON: Well, if you look to the

statement of basis and purpose from the rulemaking

record, it is quite clear, Ron, and also from the

legislative history of the statute, that what

Congressman Swift, who was instrumental in putting this

language in the bill, intended, and if you look through

the committee hearing transcripts on the legislation,

what was clear is that the Congress intended that the

Commission adopt the same kinds of billing dispute

resolution provisions that are clearly laid out in the

Fair Credit Billing Act and Regulation Z.

MR. GOLDBRENNER: Well, if that were the case,

it seems to me that the words don't say that, because

the section --

MS. HARRINGTON: Well, it says it right in the

statute. It says it right in the statute.

MR. GOLDBRENNER: The Section B regulation

states, "A customer may initiate a billing review with

respect to a telephone-billed purchase by providing the

billing entity with notice of the billing error no later

than 60 days," so that it would seem to me from the

plain reading of this that if he provides notice later

than 60 days, he may not initiate a billing review. I

don't see how you could read the words any other way.

MS. HARRINGTON: The point is that part of the

rule doesn't govern the conduct of LECs. LECs in -- the

only point that we're making here is that LECs can do

whatever LECs want to do.

MR. GOLDBRENNER: I'm not arguing that, but what

I'm saying is that LEC -- LECs may not initiate a

billing review if they get a notice that is not valid.

If a notice comes in --

MS. HARRINGTON: Well, we are going to move on.

MR. GOLDBRENNER: -- after 60 days, it's not

valid.

MS. HARRINGTON: Ron, that's not what the rule

says.

Let's see here, I wanted to ask about this data

base issue.

Gary, do you have something on that?

MR. PASSON: Yes, I can talk to that for a

second.

I think probably one of the best analogies here

to this data base issue would be that which is being

done in the long distance area, where people that have

contested long distance and not paid valid long distance

bills have been put into a data base that I believe are

being shared by the participating major EXEs. That data

base must be driven by name, not by telephone number,

because clearly the possibility exists for that person

to create a brand new person by creating a brand new

telephone number, by going to the LEC and simply

requesting another telephone number.

So, to the extent that there was a data base

that was driven by the names of the consumers that had

aggregated their responsibilities to pay their bills

after a reasonable investigation, I think the industry

would be very interested in having that.

MS. HARRINGTON: Okay, I want to do a quick

check and see if there is any agreement around the table

as to the desirability of the creation of that kind of

data base and the accessibility on it. I want yes/nos

only here.

Barbara, is that something that Southern New

England Telephone could agree to?

MS. MAJESKI: I think so.

MS. HARRINGTON: Yes from SNET. Dave, Jill?

MS. SANDFORD: I don't think we will take a

position on this.

MS. HARRINGTON: No position from NAAG.

Susan?

MS. GRANT: No.

MS. HARRINGTON: No, you wouldn't agree?

Alan?

MR. TAYLOR: Well, you are -- you are asking me

yes/no, but I think they are talking about establishing

the data base themselves, not the LECs, if I understand

correctly --

MS. HARRINGTON: But I am looking for -- we are

looking for possible solutions here and checking to see

whether there is agreement among the participants.

MR. TAYLOR: Well, I want to support the data

base, but I would hope that the industry would also make

available on that data base the opportunity for

subscribers to say I don't want access to information

services.

MS. HARRINGTON: So, opt out, consumers would

have the ability to opt out.

MR. TAYLOR: Right.

MS. HARRINGTON: Susan, would that change your

view?

MS. GRANT: Yeah.

MS. HARRINGTON: All right, if consumers have an

ability to opt out, so far everyone who has taken a

position would find that to be an acceptable solution.

Joel, do you have a position on that?

MR. DICHTER: The answer is yes.

MS. HARRINGTON: Yes, fine.

Peter?

MR. PASSON: Absolutely.

MS. HARRINGTON: Does anyone wish to say no?

MS. WILLIAMS: I don't know that I want to say

no, I just want to qualify that I think we would have to

find out from a state regulatory perspective, can we

have a bad debtor data base. If we can and if it can be

accessed by anybody -- you know, I think there have to

be certain rules of who could get to it and who

couldn't. I don't know that I'm qualified to say yes.

It sounds good, but I can't say yes unequivocally.

MS. HARRINGTON: Jon?

MR. SHAUB: Qualified yes.

MS. HARRINGTON: Qualified yes.

Albe?

MR. ANGEL: Yes.

MS. HARRINGTON: Ron?

MR. GOLDBRENNER: Yes, but with the

qualification that I think you could design your data

base so that it was not indicting of a person in that

the data that was contained in there would record events

that happened. There were so many claims filed or the

facts of certain accounts, transactions, and people

could draw their own conclusions from that in credit and

in many other things.

Companies act differently with respect to

problems they have with debtors. They have different

credit limits. If somebody defaults once, twice, five

times, ten times, they all have different levels of what

they deem to be a problem. So, a data base should not

make any judgments; it should merely set forth the

facts. If it sets forth the facts, then there shouldn't

be any problem.

MS. HARRINGTON: Okay, a nonjudgmental data base

with an opt-out for consumers, okay.

Gary?

MR. PASSON: I just want to make one quick

comment from earlier about IP names and addresses.

MS. HARRINGTON: Yes.

MR. PASSON: And I want to draw a parallel to

the credit card system. We are a very large credit card

player and a very large telephone player. We place our

own 800 number on each of the credit card transactions

that we perform, and in an average day, for 75 percent

of all inquiry, is 37 days. So, we actually have an

extremely timely ability to get information from

consumers who have a question about was this transaction

valid, was it really made by somebody authorizing, you

know, using that specific person's credit card.

I suspect we would find a parallel in that

teleco business if that information was made available

to players who had access to all of the information,

unlike the LEC, who is really working with a very narrow

piece of information. What they are really working with

is the number it was called from, the number it was

called to and a date and time and an amount, but they

really have limited information about more about the

call or possibly, in our particular case, we happen to

have the voice prints and those kinds of things. So, I

would -- I think we would also have the industry

extremely interested in having that be something that

was made available.

MS. HARRINGTON: Marianne?

MS. SCHWANKE: If there was such an industrywide

data base developed, what criteria would be used to

determine whether or not to put a consumer into the data

base and who would make that decision?

MS. HARRINGTON: Albe?

MR. ANGEL: I think the exact mechanics for what

the data base reports on a factual basis is yet to be

determined. I think that would be a function of what

the industry can do together, but from the standpoint of

what the consumer's privacy concerns are, the ISAs have

been active in privacy proceedings that the FTC has been

spearheading, and we have learned from that experience,

so we would be prepared to address notification and

access use, security, expiration, procedures for

correcting inaccuracies.

MS. HARRINGTON: It could be -- I would just

observe in a nonauthoritative sort of way that that

could be a very interesting model for a self-regulatory

solution to a problem before it even exists.

MR. ANGEL: I would just add to that, to the

extent that you have a problem now in telephone, just

wait until the Internet gets kicking. Time is of the

essence.

MS. HARRINGTON: There is a news flash.

We are at the point where we are supposed to

have public participation, and I want to do that, and

then we may run a little over and hear some more

comments, but I know we had one public person back there

who wants to participate, and could you -- hold on a

minute, we have our own open practice figure coming at

you with a microphone. Allen?

MR. HILE: Yes, yes, it works. Who is it that

wants to participate?

MS. HARRINGTON: Tell us who you are, please.

MR. LOADER: My name is Nick Loader. I am with

a company called Loader Communications. I appreciate a

few minutes here.

I just want to discuss a few items that I saw

glazed over in your discussions here. Our company

provides services for international carriers. We

operate in about seven different countries, terminating

local services as well as international, some of which

receive calls from the United States. I want to make

aware that every carrier that we work with subscribes

wherever technically feasible to the TDDRA rules and

regulations on a voluntary basis, okay?

There are some things that technically cannot be

done according to TDDRA, but there is carriers out there

that are doing it properly. There are a few that still

need to be talked to as opposed to try and regulate. I

think a word from the FTC about what should be being

done would serve to bring them on line to operate in a

proper method or fashion.

The carrier agreements that we have to sign, I

believe the Commission has been furnished with a copy of

the code of conduct of the ITA and the NIS. They are

now inherently a part of any and all carrier agreements

that we sign.

Additionally, there was some mention here about

preambles and they may not necessarily be all that

effective, but I'm an old body in this business, been in

it about 13 years, and I remember when preambles were

offered on a local market basis in the 976 industry.

Depending on the total price cap, those preambles

reduced the number of public complaints by 30 to 70

percent. So, I think we should give a lot of credit to

just that simple step alone in helping reduce a

tremendous amount of public complaints.

MS. HARRINGTON: Do your international carriers

require information services to put preambles on their

numbers?

MR. LOADER: We have preambles on every one of

our services.

MS. HARRINGTON: And do your international

carriers include carriers in Muldova?

MR. LOADER: We do not go to Muldova.

MS. HARRINGTON: How about Guyana?

MR. LOADER: We do not deal directly with

Guyana.

MS. HARRINGTON: Dominican Republic?

MR. LOADER: We do, and they require preambles

on all messages.

MS. HARRINGTON: Sao Tome?

MR. LOADER: We do not. As I say, a few

carriers need to be brought on board, but a few words

from the appropriate authorities would ensure that we

are all playing the same game. Additionally, there are

no real high premiums for these calls. Our average call

costs less than a dollar to the consumer, and because of

the increase in international traffic overall, I'm sure

the Commission is aware, it is passing down a consumer

benefit that all international rates are coming down and

coming down very rapidly.

MS. HARRINGTON: Are you going to be here

tomorrow?

MR. LOADER: Yes, I am.

MS. HARRINGTON: Tomorrow, because we think the

quality of everyone's participation today has been

excellent, and we are hoping we haven't burned you out,

because tomorrow, as far as we're concerned, we come to

a very hard issue, and that is what to do about the

definition of pay-per-call services, and I'm

particularly interested in what you're saying now as it

relates to that discussion.

MR. LOADER: And in closing I just want to say

that the industry as a whole, 900, international, is not

unsensitive to the little lady that gets, you know,

stuck with a large phone call because somebody clipped

onto her phone or children, latch key kids typically

that rack up a massive phone bill. What you have to

remember is there are over a hundred million of these

transactions done per annum. I think overall the

Commission, the various policing agencies and the

associations we have in place now are doing a pretty

good job of keeping most of those complaints to a

minimum.

MS. HARRINGTON: Thank you very much, thank you

for

your patience and participation during the day.

We are going to run for another five minutes and

then we are going to let you all go to your corners for

the evening.

Mark has a question.

MR. HERTZENDORF: Yes, earlier we talked about

the LECs passing on the 900 number blocking information

on something called LIDB, which I think I forgot what it

was already, but I was wondering if we could talk about

the relationship between doing something like that and

this industrywide data base. Is one approach strictly

preferred by the IPs and what are the costs and benefits

of doing either one, and is it an either/or situation or

do the IPs actually want both somehow implemented?

MS. HARRINGTON: Gary?

MR. PASSON: They somewhat speak to two

different issues. The LIDB data base discussion

associated with bringing the 900 -- the 900 blocking

information into LIDB -- let me just back up a half

second and put this in some context.

LIDB is line item data base. Basically, major

players can connect into a network that's provided by a

couple different players, and they can send a message

into that network, along with a telephone number, and

receive back from the network a number of pieces of

information about that telephone number, whether or not

it accepts a collect call, whether it will take

third-party billing, whether or not it's a hotel,

whether or not it's a prison, a number of pieces of

information. There is a lot of available space in that

message.

One of the pieces of information that's not

available in that is whether or not that specific

telephone number has 900 blocking.

MS. HARRINGTON: Does LIDB -- but could that be

made available in LIDB?

MR. PASSON: LIDB is made available to

everybody.

MS. HARRINGTON: No, could the 900 number

blocking information become part of LIDB? Is there a

technological reason why --

MR. PASSON: No, I don't believe so.

MS. HARRINGTON: It is just not there.

MR. PASSON: It is not there, and obviously

there is some amount of programming, and obviously you

have got the 900 data base over here and LIDB over

there, so you have to get them to talk to each other,

but it's not -- it's just information, and I suspect

that if it was deemed important enough, it could be made

available in a reasonable period of time. So, LIDB

really addresses whether a certain telephone number

wants to receive certain services, and I think we can

define information services so we don't have to deal

with the issue of 900 blocking or not.

The question is do you want information services

or enhanced services or any other term that we could

come up with, and that could be a characteristic of a

telephone number.

MS. HARRINGTON: So, consumers could have their

telephone -- certain of their preferences with regard to

use of telephone services included in LIDB.

MR. PASSON: And, in fact, they do today.

MS. WILLIAMS: It is there now.

MS. HARRINGTON: But it could be a richer source

of information.

MS. WILLIAMS: Earlier I had said it was only

really designed for operator-assisted calls only, and

that's really who handles it today, operator services

people, but they are working towards this get-data

request that will tell you more about an account. It is

just not in place yet. They are working on it piece by

piece, and some information is there and some isn't.

Frankly I left for a year to have a baby and

never -- wasn't around to keep pushing at the time to

say 900 needs to be there. I don't think it's a bad

place for it to be, but the LECs -- it's a Bellcore

product that we're paying for, somebody has to agree to

funding. It's a big deal in that respect I think for

some LECs to get information out there.

MS. HARRINGTON: It sounds as though LIDB could

be a very empowering thing for consumers.

MS. WILLIAMS: Right, right, and again, it would

just be the 900 restriction. So, I guess those services

that are not offered on 900, we're making the leap here

that those same customers don't want to reach other

services, and I don't think it's a bad leap.

MS. HARRINGTON: Would the LECs and others --

what would the LECs and others think about giving their

customers sort of a preference choice form so that you

could know whether a consumer's choice of 900 number

blocking means that they also don't want X, Y or Z?

MS. WILLIAMS: From a network perspective, I'm

not sure how easy that is to do. I know when you have a

certain type of block, and I'm getting way out of my

area here, but you're taking up certain things in the

network and line class codes, and then for each

different type of blocking you have, you're taking up

even more network space. I think that's difficult.

I mean, I think it would be a better assumption

to just say if you have 900 blocking, you probably don't

want access to those same kinds of services that are

provided now over in other dialing patterns. Again,

it's an issue of getting all the LECs to put the data

out there and spending the money to do it.

MS. HARRINGTON: Jon?

MR. SHAUB: Let me just ask before we go to

another agenda tomorrow, I indicated AT&T's support for

an industry data base with a qualifier, and I would

appreciate it for the record to state what those

qualifiers are. Can I have my second here?

MS. HARRINGTON: Yes.

MR. BREE: My name is Dermott Bree, I'm an

attorney with AT&T, I support AT&T Multiquest. As Jon

said, in principle, we're not opposed to a data base of

consumers who have refused to pay legitimate 900

charges, not in principle certainly. We already

participate, AT&T already participates in something

called the National Telecommunications Data Exchange,

which is a data base which reports on business customers

who failed to pay undisputed legitimate charges on their

telephone bills, and we're currently working on the

National Consumer Telecommunications Data Exchange,

which similarly reports on consumers who have failed or

refused to pay on disputed legitimate charges.

With respect to a 900 data base, we would not be

opposed to that either, but we would want to know and

study exactly what goes into the data base. There are

issues, not the least of which are state law issues,

like libel and slander, because although it's factual

information in there, it is possible that pejorative

inferences could be taken from that factual

information. We want it known, sure, that AT&T and any

participating entity were protected from that by

avoiding having consumers be injured by having their

names or information about them in this data base.

In addition, there may be fair credit reporting

issues involving such a data base, and they would have

to be examined, as well, but those are just the

qualifications. Let me just say that we are not opposed

to this data base, but we want to know and study exactly

what -- how it's structured and what information goes

into it and how it's administered.

MS. HARRINGTON: Thank you.

We are going to hear from Peter, Alan, Gary,

Albe, Susan, and then we're done for the day.

MR. BRENNAN: Just quickly, a couple of mop-up

issues. I would like to remind the panel that

historically, the last time we were around this table

for this purpose, the determination -- that's when the

determinations were made as a result of congressional

intent that it would be carriers who would be listed on

the phone bills rather than information providers, and

the reason was, and it seems to have played out, is that

they are more accessible, they are more able to be

reached, and they have the billing data available.

I'll also, a remark that was made down at the

other end of the table about a lack of trust between IPs

and LECs, and I would amplify that by saying that in

this new competitive telecommunications environment,

information providers compete with LECs, frankly, and we

will be competing with our carriers as they begin to

offer communications services, as well, so, I would ask

just sensitivity to that issue, because we have someone

step through the looking glass vis-a-vis those issues,

and those are of great importance to those of us who

consider them in the competitive environment. So, with

that I'll close. Thank you.

MS. HARRINGTON: Thank you.

Alan?

MR. TAYLOR: Thanks.

In closing, I just want to point out how close

the industry -- well, first of all, let me say I'm not

too much concerned about the data base that contains the

names of the folks who don't pay and so forth, but I'm

delighted that some of the focus has at least come to

the data base being used for an opt-out position.

That's very close to what we've proposed in our

comments. I invite you to read it.

As long as consumers, whether it's through LIDB

or whether it's through some other data base, as long as

I can tell consumers that if they want no more of these

calls, it would be very great that they would be able to

go to a data base -- it would be wonderful if the LECs

would voluntarily do that, if the industry would do

that.

Thank you.

MS. HARRINGTON: Thank you, Alan.

Gary?

MR. PASSON: I will make just one last closing

point, and that is that we have now authorized the

concept of CLECs, competitive LECs, which are going to

provide telephone service in the physical locations that

the current LECs have. Without this kind of information

being made available, it really opens up an incredible

opportunity for abuse really on both sides, and I think

by having some kind of data base with proper

protections, with proper thought and processes put into

this, I think we can stem a very significant problem

that might have us back here in a couple years trying to

figure out what to do about it.

MS. HARRINGTON: Albe?

MR. ANGEL: I just want to articulate a proposed

solution that may not have made it into the ISA comments

but was discussed last night as we prepared for this

meeting, and that has to do with the timeliness of

information input into the data base. Assuming we can

get together as an industry and define what information

is in there, how it's routinely maintained and updated

and clarified, we would then be in a position to have

direct inputs of information into that data base.

So, apart from the access question, whether or

not a person can dial and get through the network, there

will be an independent inquiry into the data base to

determine whether or not billing can be made to a

particular number and whether or not service extended to

a particular number, and as has been proposed earlier,

if there is an ambiguous situation, there is always the

opportunity to connect the proposed caller to a customer

service person to clarify any issue that might exist.

But if we were to construct the data base, we

could shorten the time very significantly by having

local exchange carriers, billing entities, interexchange

carriers, report right into that data base, and then

people who were relying on that data base accessing the

information instantaneously. So, for example, if an

account has gone bad and it's known on day 23 in a

cycle, on day 24, another call will not be made and

charged to that line, because on day 23, at the end of

the day, the data base has been updated, and we don't

have to wait the 60, 90, 180 days and have all those

charges in the interim.

MS. HARRINGTON: Susan?

MS. GRANT: I'm confused about whether we're

talking about one data base or two. I thought that one

of the data bases that we were talking about was the one

that was originally alluded to this morning where the

industry was looking for information from the LECs about

consumers who had blocks for 900, who didn't want to get

900 number calls, and that was the data base that I

thought some of us were suggesting could incorporate

other consumer preferences.

MS. WILLIAMS: That's LIDB.

MS. HARRINGTON: That's LIDB.

MS. GRANT: The other data base -- and I hope we

are talking about two separate ones here, because I

don't think it's appropriate to merge them -- is a

deadbeat data base, for lack of a better description,

and that's one that if such a thing was to be created

would have to be modeled after fair credit reporting

protections and take a lot of thought and care about how

to do it. So, I just wanted to clarify that we were

talking about two different data bases and not one.

MS. HARRINGTON: Although I think what we have

heard is that at least in terms of toll calling, such a

data base already exists. Consumers who don't pay toll

calls go into the toll --

MR. PASSON: Both data bases.

MS. HARRINGTON: Both of them exist already?

MR. PASSON: LIDB is the one for local toll

calls, and then --

MS. HARRINGTON: But there is also some sort of

industry data base for people who have a history of not

paying phone bills. It does already exist.

MS. GRANT: Maybe it just isn't as well known

yet, because those disputes are not as numerous as

pay-per-call disputes.

MS. HARRINGTON: I am sure we can talk about

this more, and we can take a little bit of time in the

morning if you all want to think about some of these

issues overnight to have a little bit of discussion in

the morning, but we are now at the ending point. I

think you should all give yourselves a tremendous round

of applause, nobody fell asleep, and you have all stayed

very engaged, and we look forward to seeing you back

here at 9:00 in the morning, and we will have more of

this wonderful "make-hair-grow-on-your-chest" coffee,

and we will see you then. Thank you.

(Whereupon, at 5:08 p.m., the conference was

adjourned.)

- - - - -

C E R T I F I C A T I O N O F R E P O R T E R

DOCKET/FILE NUMBER: R611016

CASE TITLE: PAY-PER-CALL RULEMAKING

MEETING DATE: JUNE 19, 1997

I HEREBY CERTIFY that the transcript contained

herein is a full and accurate transcript of the notes

taken by me at the hearing on the above cause before the

FEDERAL TRADE COMMISSION to the best of my knowledge and

belief.

DATED: 6/26/97

SUSANNE Q. TATE

C E R T I F I C A T I O N O F P R O O F R E A D E R

I HEREBY CERTIFY that I proofread the transcript

for accuracy in spelling, hyphenation, punctuation and

format.

DIANE QUADE