An expensive reminder that the FCC is still policing the long distance industry.

If you’ve been thinking that the FCC doesn’t care about “slamming” anymore, think again. The Commission has proposed a multi-million dollar fine against long distance service provider Advantage Telecommunications Corp. (ATC) for slamming violations.

Which raises two obvious questions: (1) Is there still such a thing as a long distance service provider? and (2) “What did ATC do to deserve a $7.6 million fine?

Answer (1): Yes, long distance service providers still exist. There remains a niche market for standalone (i.e., unaffiliated with your local phone company) long distance carriers serving consumers with traditional landline telephones. They offer 1+ (i.e., long distance, dubbed “1+” because you have to dial “1” plus the rest of the number to make a long distance call) service plans in competition with the local phone companies.

Now, to the $7.6 million dollar question . . .

ATC got the multi-million dollar spanking for slamming, an illegal practice that involves switching consumers’ long distance carriers without authorization. Phone customers, of course, get to decide which carrier they use. The local exchange carrier (LEC) serving the customer’s landline number is notified of the customer’s choice by the selected carrier. If the customer later chooses a different carrier, the customer notifies that different carrier, which in turn notifies the LEC. The LEC is required to comply with change notifications from carriers.

The slamming problem arises when a carrier notifies the LEC of a change that hasn’t been consented to by the customer – that is, when the carrier effectively poaches the customer.

To discourage such underhanded activities, the Commission has developed rules governing what carriers must do – and what they must not do – in connection with changes in customers’ authorizations. (Note: some states have adopted their own additional requirements.) For example, a long distance carrier must obtain explicit authorization from the customer in order to initiate a carrier change. Another example, a carrier cannot use fraudulent or deceptive means to hoodwink a customer into using its services by, f’rinstance, pretending to be the customer’s local phone company when it isn’t.

How can a carrier get a change authorization that passes muster? There are various ways, but one of the most common is through the use of an independent third-party verification (TPV) service. The TPV service records the customer’s responses to a set of authorization questions. The FCC’s rules establish the type of information which must be obtained in these TPV recordings, although the rules stop short of specifying the specific wording of questions a verifier must ask.

If a carrier strays from the straight and narrow and submits a change notification that’s not backed up by an appropriate customer authorization, the carrier has engaged in “slamming”. Slamming occurs (obviously) when a carrier outright lies about a supposed change authorization. It can also occur (less obviously) if the FCC concludes that a TPV recording (or other form of authorization) doesn’t conform precisely to the Commission’s requirements.  For example, “are you authorized to make a carrier change” is an acceptable question, while “are you authorized to make changes to your account” apparently is not.

The FCC does NOT like slamming. It has historically enforced the prohibition aggressively, and when the hammer comes down, it comes down hard. Violators must pay compensation to the slammed consumer’s authorized carrier and, even worse, could be subject to a $40,000 fine PER SLAM.  In particularly egregious cases the FCC can double or even triple the base penalty.

Which was nothing but bad news for ATC, which got fingered for at least 165 possible slamming violations.   While not all of those 165 turned out to be actual violations, enough did to trigger the “egregious” treatment, in spades.

Here’s how the violations alleged in the NAL broke down.

For openers, the NAL determined that 64 of the alleged slamming incidents were violations. Out of those, 26 were just plain vanilla slams, warranting only the base penalty of a mere $40,000 each. Still, that alone comes to $1,040,000.

That left 38 violations that were, according to the FCC, particularly egregious because ATC’s telemarketers engaged in deceptive practices: the telemarketers apparently claimed – falsely – that they represented the consumers’ local phone companies. The FCC has said this kind of hanky-panky is a BIG no-no. Result: for each of these 38 miscues the Commission proposed to triple the base fine, for a per-slam penalty of $120,000, adding a whopping $4,560,000 to the bottom line.

And the hurt still wasn’t over for ATC.

In a surprise move, the NAL found 50 instances where ATC apparently violated the FCC’s “truth-in-billing” rules. Those rules generally require that charges listed in telephone bills be described in such a manner that consumers can determine what they are being billed for. The FCC found that ATC’s usage of acronyms like “MRC,” “CCRF,” and “PICC,” as descriptors in customers’ bills was inadequate. These are, of course, fairly common acronyms for telecom industry insiders, but not so much for consumers, absent some explanation. The FCC proposed a $40,000 penalty for each of the 50 alleged truth-in-billing violations, amounting to an additional penalty of $2,000,000.

Let’s do the math: $1,040,000 + $4,560,000 + $2,000,000 = $7,600,000. Ouch!

Interestingly, the NAL also faulted ATC for 56 alleged cramming violations because the company billed consumers for charges even though it was never the carrier of record – either authorized or unauthorized – for those consumers. While the NAL didn’t propose separate penalties for those apparent violations, a bunch of cramming violations lurking on the periphery likely didn’t help ATC’s overall position here.

Much of the FCC’s enforcement activity related to slamming came years ago in the heyday of the long distance industry. The slamming penalties proposed in the ATC case are the most severe seen in a long time. It’s also the only instance we can recall where the FCC has tacked on penalties for truth-in-billing violations together with penalties for slamming violations. 

Long distance carriers should take this NAL as a warning that the FCC is still actively pursuing slamming violators. And when it finds them, it’s not showing them any love at all. Now is a good time to revisit compliance processes, tighten up TPV scripts, and take other preemptive measures to avoid becoming the next ATC.