Recent Developments in Anti-Slamming Regulation
In our March 28, 2003 DWT Telecom Alert, we advised you of new and significant changes to the FCC’s “slamming” rules. Since then, a new Federal Court of Appeals decision and two new FCC actions have thrown the rules of the road in this area into even greater turmoil. Indeed, these actions may have serious implications for the entire FCC/state scheme regulating the verification of telecom service changes and enforcement of slamming rules.
First, on April 7 the FCC upped the ante for carriers accused of slamming by actually proposing the “death penalty”—revocation of operating authority—of two carriers for repeated slamming and willful misrepresentations to consumers and the agency. In an “Order to Show Cause and Notice of Opportunity for Hearing” (“Show Cause Order”) issued to NOS Communications and its affiliate Affinity Network Inc., the FCC asserted—on the basis of audiotapes and transcripts furnished by a former NOS VP-turned-whistle-blower—that NOS engaged in a flagrantly misleading “winback” telemarketing campaign, including a web of false representations and threats of service cutoffs, to trick former customers to authorize switches back to NOS. The FCC cited the “egregious nature of NOS/ANI’s apparent violations” of Communications Act sections 201(b) (unjust and unreasonable practices) in ordering a hearing into whether NOS/ANI’s common carrier operating authority should be revoked, and further, whether specific FCC authorization should be required for any future interstate service offering by NOS/ANI or its principals.
In a second Show Cause Order, the FCC asked whether the same penalties should be levied on Business Options, Inc. (BOI), due to a combination of repeated instances of slamming and a series of false representations to the FCC in BOI’s responses to agency inquiries. Among other things, the Show Cause Order alleges that BOI both engaged in slamming and repeatedly provided incorrect and misleading information to the FCC, including BOI’s characterization of its application to discontinue service in Vermont as motivated by a reevaluation of its business plan, when in fact it was compelled to do so under a settlement of slamming and other allegations with Vermont regulators.
To cap off this turbulent week, on the following day, the U.S. Court of Appeals for the D.C. Circuit reversed an FCC order assessing an $80,000 forfeiture against AT&T for slamming two customers. In AT&T v. FCC, D.C. Cir. No. 01-1485 (Apr. 8, 2003), the Court found that the FCC had exceeded its statutory authority in insisting that AT&T not only verify a subscriber’s carrier change order under the FCC’s rules but that it must also ensure that the person authorizing the change is the actual subscriber to that line.
Although the court’s ruling technically applies only to the FCC’s forfeiture order against AT&T, the basis for that ruling— that under the relevant Communications Act provision (section 258) “carriers must comply with the Commission’s verification procedures, and nothing more”—calls into question the lawfulness of the FCC’s entire scheme of carrier anti-slamming regulations, of which its verification procedures is but one aspect. Further, since more than 35 states now apply and enforce these FCC regulations, the court’s decision casts substantial uncertainty on the legality of both state and federal anti-slamming policies.
As our March 28 DWT Telecom Alert described, the anti-slamming obligations of telecom service providers have become dramatically more complex in recent years. The BOI and NOS Show Cause Orders demonstrate that the stakes involved also have escalated greatly. At virtually the same time, the D.C. Circuit Court of Appeals ruling in AT&T v. FCC suggests that many of these anti-slamming obligations may now be under a legal cloud. As we stated in our alert, Davis Wright Tremaine stands ready to assist existing and new clients in complying with this complex, uncertain and ever-varying maze of federal and state regulations. Depending on your company’s unique needs, we can:
- train company personnel and vendors regarding compliance with the rules;
- audit a company’s existing practices and procedures for compliance, recommending changes and additions where necessary; and
- defend the company’s interests in the event of slamming complaints or agency enforcement actions.