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FEDERAL COMMUNICATIONS COMMISSION

Federal Communications Commission

CFR Citation: 47 CFR Part 64

Docket ID: [CC Docket No. 94-129; FCC 00-255 and FCC 01-67]

NOTICE: RULES

ACTION: Common carrier services:

DOCUMENT ACTION: Final rule.

SUBJECT CATEGORY: Implementation of the Subscriber Carrier Selection Changes Provisions of the Telecommunications Act of 1996, Policies and Rules Concerning Unauthorized Changes of Consumers Long Distance Carriers

DATES: Effective April 2, 2001 except for Secs. 64.1130(a) through (c), 64.1130(i), 64.1130(j), 64.1180, 64.1190(d)(2), 64.1190(d)(3), 64.1190(e), and 64.1195, which contain information collection requirements that have not yet been approved by the Office of Management and Budget (OMB). The Commission will publish a document in the Federal Register announcing the effective date of those sections.

DOCUMENT SUMMARY: In this document, the Commission adopts rules proposed in the Second Report and Order and Further Notice of Proposed Rulemaking to implement the slamming provisions of the Communications Act of 1934, as amended by the Telecommunications Act of 1996. Telecommunications carriers are prohibited from carrier from submitting or executing an unauthorized change in a subscriber's selection of a provider of telephone exchange service or telephone toll service. This practice, known as ``slamming,'' enables those companies who engage in fraudulent activity to increase their customer and revenue bases at the expense of consumers and lawabiding companies. The rules adopted in this document will improve the carrier change process for consumers and carriers alike, while making it more difficult for unscrupulous carriers to perpetrate slams.

SUMMARY: Telecommunications Act of 1996; implementation—; Unauthorized changes of consumers’ long distance carriers (slamming); subscriber carrier selection changes,

SUPPLEMENTAL INFORMATION

This is a summary of the Commission's Third Report and Order and Second Order on Reconsideration (Third Report and Order) in CC Docket No. 94129, which was released on August 15, 2000. This summary also contains amendments and modifications to the Third Report and Order that were adopted in an Order released on February 22, 2001. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY A257, 445 Twelfth Street, SW., Washington, DC 20554.

I. Introduction and Background

1. In this Third Report and Order and Second Order on Reconsideration (Order), we adopt rules proposed in the Second Report and Order and Further Notice of Proposed Rulemaking (Section 258 Order or FNPRM, 64 FR 07745 (2/16/1999) to implement Section 258 of the Communications Act of 1934 (Act), as amended by the Telecommunications Act of 1996 (1996 Act). Section 258 prohibits any telecommunications carrier from submitting or executing an unauthorized change in a subscriber's selection of a provider of telephone exchange service or telephone toll service. This practice, known as ``slamming,'' enables those companies who engage in fraudulent activity to increase their customer and revenue bases at the expense of consumers and lawabiding companies. The rules we adopt in this Order will improve the carrier change process for consumers and carriers alike, while making it more difficult for unscrupulous carriers to perpetrate slams.

2. In the Section 258 Order, we established a comprehensive framework designed to close loopholes used by carriers who slam consumers and to bolster certain aspects of our slamming rules to increase their deterrent effect. In particular, we adopted aggressive new liability rules designed to take the profit out of slamming. We also broadened the scope of our slamming rules to encompass all carriers and imposed more rigorous verification measures. In our First Reconsideration Order, we amended certain aspects of the slamming liability rules, granting in part petitions for reconsideration of our Section 258 Order. Although the petitions raised a broad range of issues relating to the slamming rules, the First Reconsideration Order addressed only those issues relating to our liability rules, which had been stayed by the D.C. Circuit. We chose to resolve those issues separately, and on an expedited basis, because of the overriding public interest in reinstating the liability rules in order to deter slamming.

3. When the Commission released the Section 258 Order, it recognized that additional revisions to the slamming rules could further improve the preferred carrier change process and prevent unauthorized changes. Thus, concurrent with the release of the Section 258 Order, the Commission issued a Further Notice of Proposed Rulemaking and sought comment on the following proposals: (1) Permitting the authorization and verification of preferred carrier changes over the Internet; (2) requiring resellers to obtain their own carrier identification codes (CICs), or, in the alternative, some type of pseudoCIC that would provide underlying facilitiesbased carriers and subscribers of resellers with a way to identify the service provider; (3) modifying the independent third party verification method; (4) defining the term ``subscriber'' for purposes of authorizing preferred carrier changes; (5) requiring carriers to submit reports on the number of slamming complaints they receive; (6) creating a registration requirement for all providers of interstate telecommunications services; and (7) requiring unauthorized carriers to remit to authorized carriers certain amounts in addition to the amount paid by slammed subscribers.

4. On June 30, 2000, the President signed into law a piece of legislation that is relevant to our slamming rules and some of the issues pending in this proceeding, particularly our proposal in the FNPRM to allow the authorization and verification of preferred carrier changes using the Internet. The Electronic Signatures in Global and National Commerce Act, S. 761 (ESign Act) is intended to foster the development of ecommerce, or commerce conducted electronically over the Internet. To accomplish this goal, the ESign Act establishes a framework governing the use of electronic signatures and records in transactions in or affecting interstate and foreign commerce. With certain exceptions not relevant here, the provisions of the ESign Act took effect on October 1, 2000.

5. In this Order, we adopt a number of the proposals discussed in the FNPRM, and we also address the remaining issues that were raised on reconsideration of the Section 258 Order. Specifically, in this Order, we amend the current carrier change authorization and verification rules to expressly permit the use of Internet Letters of Agency (Internet LOAs) in a
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manner consistent with the new ESign Act; we direct the North American Numbering Plan Administration (NANPA) to eliminate the requirement that carriers purchase Feature Group D access in order to obtain a CIC; we provide further guidance on independent third party verification; we define the term ``subscriber;'' we require each carrier providing telephone exchange and/or telephone toll service to submit a semiannual report on the number of slamming complaints it receives; and we expand the existing registration requirement on carriers providing interstate telecommunications service to include additional facts that will assist our enforcement efforts. This Order also contains a Second Order on Reconsideration, in which we uphold our rules governing the submission of preferred carrier freeze orders, the handling of preferred carrier change requests and freeze orders in the same transaction, and the automated submission and administration of freeze orders and changes. In addition, we reaffirm our decision not to preempt state regulations governing verification procedures for preferred carrier change requests that are consistent with the provisions of Section 258. We also decline to adopt a 30day limit on the amount of time an LOA confirming a carrier change request should be considered valid and instead adopt a 60day limit. Finally, we clarify certain of our rules regarding the payment of preferred carrier change charges after a slam.
II. Third Report and Order

A. Preferred Carrier Changes Using the Internet

6. Discussion. We continue to believe that the Internet provides a quick and efficient means of signing up new subscribers and should be made widely available to carriers and consumers. We recognize that consumers' use of the Internet for electronic commerce has grown tremendously in recent years, as more and more businesses provide services online, and a greater percentage of consumers and businesses utilize computers and the Internet to transact business. In addition, we recognize that Section 104(e) of the ESign Act directs us not to differentiate between written LOAs and LOAs that are submitted and signed electronically. In view of these developments, we hereby amend our carrier change authorization and verification rules to expressly permit the use of Internet LOAs, in a manner consistent with the provisions of the ESign Act.

1. Authorization and Verification of Internet LOAs.

7. As stated in the FNPRM, we believe that subscribers using the Internet to change telecommunications service providers are entitled to the same level of protection against slamming that we have mandated for other forms of solicitation. Internet LOAs must comply with the requirements of our rules governing written LOAs, subject to the clarifications and modifications adopted in this Order. Carriers who wish to sign up new subscribers over the Internet must adhere to the informational requirements for written LOAs, as specified in Sec. 64.1130(e) of our existing rules. In light of the ESign Act, we now conclude that an electronic signature used for a carrier change submitted over the Internet will satisfy the signature requirement of Sec. 64.1130(b) governing LOAs, and that the information submitted to authorize and verify a carrier change request may be submitted in the form of an electronic record.

8. Carriers using Internet LOAs to sign up subscribers will be required to comply with the consumer disclosure requirements of Section 101(c) of the ESign Act. Section 101(c) requires, among other things, that the carrier obtain the subscriber's consent to use electronic records, obtain the subscriber's acknowledgment that he or she has the software and hardware necessary to access the information in the electronic form (i.e., Internet LOA) used by the carrier, and give the subscriber notice of the procedures for withdrawing consent. Section 101(c) also requires carriers to inform subscribers of any right (after consent to the transaction) to a nonelectronic (that is, paper) copy of the electronic record of the transaction, to tell them how to obtain such a copy, and to make clear whether a fee will be charged for the copy. Accordingly, we modify our rules to incorporate by reference the requirements of Section 101(c) of the ESign Act. We note that these consumer disclosures, in conjunction with the form and content requirements for LOAs under Sec. 64.1130 of our rules, are likely to address concerns about unwary consumers who might inadvertently switch their telephone service providers while exploring websites or participating in contests on the Internet. At the same time, we recognize that many commenters expressed concerns regarding fraudulent use of Internet LOAs that may not be fully addressed by the protections afforded by compliance with Section 101(c) of the ESign Act. In this regard, we note that, if a subscriber contests the authenticity of an Internet LOA, the carrier will have the burden of proof to counter the subscriber's allegation. For this reason, we would expect a carrier to employ procedures that would enable it to demonstrate that the electronic signature on an Internet LOA could not have been submitted by anyone other than the subscriber. While it is our expectation that the consumer protection measures afforded by the combination of the requirements in the ESign Act and our LOA rules will suffice, we note that, if we detect an inordinate increase in slamming after these changes take effect, we may choose to reevaluate our rules.

9. We are aware that some consumers may be concerned about security and privacy issues associated with submitting carrier change requests and associated personal information over the Internet. Security and privacy issues arise because Internet communications are sent from computer to computer until the communications reach their final destinations. When information is sent from point A to point B over the Internet, every computer involved in the transmission path has an opportunity to intercept and view the information being sent. As a result, we acknowledge the concerns of commenters who argue that carriers should provide subscribers with a secured web transaction for submitting Internet LOAs. At this time, we decline to impose specific requirements regarding security and privacy as it relates to Internet LOAs, but we strongly encourage carriers who utilize Internet LOAs to sign up new subscribers to employ security measures in keeping with the best practices used for Internet transactions, such as providing subscribers with secured web access. In addition, we strongly encourage carriers to provide notice to subscribers regarding the level of security that applies to the submission of Internet LOAs. We also support the use of digital signatures, when they are made widely available, in order to more precisely establish the identity of the subscriber submitting an Internet LOA, the date of the submission, and other specifics.

10. We also acknowledge that consumers have a legitimate interest in the privacy of personal information that they may be asked to submit with an Internet LOA. Again, we decline to mandate a specific action with regard to such information at this time. However, we encourage carriers to keep such information confidential and not use a subscriber's information, including his or her electronic mail (email) address, for marketing or other business purposes without the express consent of
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the subscriber. In addition, we recognize that some consumers may prefer, for a variety of reasons, not to use the Internet to authorize carrier changes. Consistent with Section 101(b)(2) of the ESign Act, we will amend our rules to state that carriers must give subscribers the option of using one of the other authorization and verification methods specified in Sec. 64.1120 of our rules, in addition to the use of Internet LOAs.

2. PreExisting Relationships

11. We recognize that some carriers and subscribers who have pre existing business relationships may wish to follow a more truncated authorization and verification process for making carrier changes than required for written and Internet LOAs. AOL and other commenters assert that subscribers and carriers belonging to a closed user group (CUG) or linked in a similar ongoing business relationship should be permitted to utilize a less stringent verification method for Internet LOAs. However, we see no compelling reason to determine that our LOA rules, which are designed to protect subscribers, should apply to a lesser degree when the subscriber belongs to a CUG or has a similar type of preexisting relationship with the carrier. Therefore, at this time, we decline to permit carriers and subscribers with preexisting business relationships, such as CUG providers and members, to use less stringent verification methods to authorize and verify carrier changes processed over the Internet.

3. Separate Screen Requirement

12. In the FNPRM, we sought comment on the extent to which change requests submitted over the Internet may or may not contain all the required elements of a valid LOA, and we also sought comment on ways in which we might ensure that consumer interests are protected when Internet LOAs are used. In certain respects, our existing rules on the form and content of LOAs reflect the fact that they were written with paper documents in mind. For example, a written LOA must be a separate document not combined with inducements of any kind. In order to conform Internet LOAs to this preexisting requirement, we amend our rules to specify that Internet LOAs must appear on a separate screen from any inducements or solicitations for a carrier's services and contain only the authorizing language found in Sec. 64.1130(e) of our rules. We regard this requirement as the functional equivalent of the pre existing requirements that a written LOA must be a separate document not combined with inducements of any kind. Moreover, as noted by several commenters, this separate screen requirement is easily achievable and is necessary to eliminate the possibility of customer confusion and the potential for inadvertent selection of a new preferred carrier.

13. We believe that this determination is consistent with Section 104(b)(2)(C) of the ESign Act. That section of the ESign Act allows agencies to include requirements for electronic records that are ``substantially equivalent to the requirements imposed on records that are not electronic records,'' that will not ``impose unreasonable costs on the acceptance and use of electronic records,'' and will not ``require, or accord greater legal status or effect to, the implementation or application of a specific technology or technical specification for performing the functions of creating, storing, generating, receiving, communicating, or authenticating electronic records or electronic signatures.'' As stated above, this separate screen requirement is substantially equivalent to the requirements found in Secs. 64.1130(b) and (c) as they apply to written LOAs. Moreover, the record in this proceeding indicates that this separate screen requirement will not impose unreasonable costs on the acceptance and use of electronic records.

4. Choice of Telecommunications Services

14. We adopt our tentative conclusion that carriers who solicit service over the Internet and require subscribers to sign up for more than one service (e.g., interLATA and intraLATA) in order to authorize a carrier change, rather than giving subscribers the option of signing up for individual services, violate our rule requiring all LOAs to contain separate statements regarding choices of interLATA and intraLATA toll service. While we presented this issue in the FNPRM as a ``general concern[] about the content of the solicitation using the Internet'' and cited some IXC webpages as examples of the practice, we note that there is no reason to believe this type of inappropriate carrier change solicitation would only appear in an electronic medium. We emphasize that carriers must clearly and conspicuously delineate on any LOA, written or Internet, the individual services that the subscriber may choose to be covered by the carrier change request, including, but not limited to, local, intraLATA, and interLATA services. Consumers should know what specific services are being offered and should have the discretion to subscribe to only the services they desire. Such consumer choice and discretion are essential to maintaining and advancing the development of a competitive telecommunications marketplace.

5. Preferred Carrier Freeze

15. Consistent with our amendment of the rules governing LOAs, we are also amending our rules to allow subscribers to submit, and carriers to process, the imposition and/or lifting of preferred carrier freezes over the Internet, as recommended by many commenters. Carriers must comply with the same verification requirements that apply to LOAs, as discussed, to help prevent the unauthorized imposition or lifting of preferred carrier freezes over the Internet. In addition, we encourage carriers to employ measures to protect the security and confidentiality of subscribers' personal information.

6. State Authority

16. We note that the amendments to our rules that we adopt in this Order for Internet LOAs represent a minimum threshold for carrier change authorization and verification with which all carriers must comply. State jurisdictions may adopt verification requirements for Internet LOAs, so long as they are consistent with Section 258, as implemented by our rules, and the ESign Act. We disagree with Cable & Wireless that we should preempt state laws regarding the legality and form of Internet LOAs at this time. Carriers already must comply with state requirements for written LOAs that are consistent with Section 258 and the Commission's rules, and state requirements for Internet LOAs that are consistent with Section 258, as implemented by our rules, and the ESign Act warrant the same compliance.

B. Resellers and CICs

17. Discussion. As set forth below, we shall direct the NANPA to eliminate the requirement that carriers purchase ``Feature Group D'' to obtain CICs. This action will facilitate the assignment of CICs to switchless resellers and remove one obstacle to their independent use of CICs. At the present time, we are not requiring resellers to obtain their own CICs, nor are we adopting either of our other two proposals. Although we believe that requiring switchless resellers to obtain CICs may well be an effective solution to soft slamming and related carrier identification problems, commenters have raised a number of concerns regarding the potential impact of such a requirement on the carrier industry. Based on our review of the record, as discussed herein, we are not persuaded that we should adopt a CIC
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requirement for switchless resellers at this time. However, in order to continue developing the record, we shall refer the CIC assignment and use issues discussed below to the North American Numbering Council (NANC) for analysis and recommendations. We intend to reevaluate the costs and benefits of the proposed CIC requirement when we receive the NANC's report.

18. Under the current CIC Assignment Guidelines, a carrier must purchase Feature Group D access service to be assigned a CIC. A switchless reseller does not require the physical or trunk access to the public switched telephone network (PSTN) available through the purchase of Feature Group D, and is unlikely to bear the expense simply to obtain a CIC. The NANC's CIC Ad Hoc Working Group has recommended elimination of the Feature Group D requirement as ``an unnecessary administrative burden for resale providers[.]'' In light of this recommendation, and based on our examination of the record in this proceeding, we direct the NANPA to eliminate the Feature Group D requirement. This action, which is an aspect of our first proposal, ``will facilitate the assignment of CICs to resellers, and thereby allow easier [carrier] identification * * *, enhancing the ability to resolve conflicts, including disputes which involve slamming.''

19. Commenters are divided on our proposal to require switchless resellers to obtain their own CICs. Generally, supporters argue that it would be a costeffective and administratively simple solution to soft slamming and related problems. Opponents raise a number of concerns regarding the impact of a CIC requirement on the carrier industry, including that it would: (1) Impose undue financial burdens on resellers and damage them competitively; (2) require expensive and timeconsuming LEC switch upgrades; and (3) accelerate exhaustion of the fourdigit CIC pool. Opponents also contend that the record contains insufficient evidence of the dimensions of soft slamming and related problems to warrant regulatory action and, in any event, that other recent Commission actions are likely to address such problems. We address these issues in turn below.

20. Turning to the first issue, the principal cost of the subject proposal for a switchless reseller would be deploying or loading a CIC in LEC switches in each LATA where it operates. In this regard, ``the use of translations access does not significantly reduce the time or expense required'' to deploy a CIC. On a nationwide basis, most estimates of this cost range from $500,000 to $1 million for a single CIC. Relying on such estimates, and on the small size of many resellers, opponents maintain that a CIC requirement would create a substantial market entry barrier for resellers. Our review of the record suggests that in many cases such estimates are unrealistic because resellers typically operate on a regional basis. In addition, CIC deployment costs may be viewed as ``a legitimate cost of doing business,'' and the independent use of CICs clearly has competitive advantages for resellers. Nevertheless, we are concerned about restricting competition in the wholesale long distance service market by limiting resellers' ability to change and/or use multiple underlying carriers. Although some resellers use their own CICs despite the asserted disadvantages, we are reluctant to adopt a requirement that resellers obtain their own CICs pending further review of the conclusions reached by the NANC.

21. Second, GTE, SBC, and USTA express concern that a CIC requirement may exhaust the limited capacity of certain types of LEC switches. For example, GTE states that:
[GTE] generally averages over two hundred CICs per switch in its 1600 plus switches. Almost half of these switches have a capacity of only 255 codes today. * * * The GTD5 switch, which comprises over a third of [GTE's] total, has a capacity of only 500 CICs. A 500 CIC capacity could well be insufficient in some locations to handle all resellers who would obtain CICs. * * * [GTE] cannot add any new CICs to its switches in Hawaii because international operations have already utilized the total capacity.

It is unclear how many LEC switches are implicated by this issue, as only GTE has identified the number of limitedcapacity switches deployed in its territory, and the likelihood of exhausting switch capacity depends on the related questions of demand and location. To the extent that upgrades are necessary, however, GTE, SBC, and USTA state that they are likely to be costly and timeconsuming. Furthermore, although the need for upgrades was contemplated when the carrier industry moved from a threedigit to a fourdigit CIC format, USTA suggests that requiring investment in switch upgrades may be wasteful because the industry now is moving towards new technology platforms. There may be ways to ensure that any systems modifications necessary to accommodate the use of additional CICs do not impose undue burdens on LECs. Nevertheless, we believe that this matter warrants further consideration.

22. Third, several commenters argue that adoption of a CIC requirement would accelerate exhaustion of the pool of fourdigit CICs, thereby inflicting undue disruption and expense on the entire carrier industry. Preliminarily, we find no compelling evidence of a significant threat of premature CIC exhaustion. The pool of fourdigit CICs is 10,000, of which only 2,031 were assigned as of January, 2000, and the NANC CIC Report predicts that they will last for 22 years, assuming a limit of six per carrier. In addition, it is not clear that the subject proposal would substantially increase the longterm net demand for CICs, given that some resellers already have CICs, and those without CICs are likely to obtain them as their businesses develop, without any regulatory requirement.

23. Turning to the fourth issue, there is a consensus among commenters that the shared use of CICs by resellers gives rise to significant problems that warrant Commission action. Opponents of the subject proposal, however, argue that the record contains insufficient evidence for us to determine whether a CIC requirement is warranted in light of its potential costs. The Commission does not maintain data as to the specific dimensions of these problems, but our review of the record suggests that they represent a substantial percentage of all slamming complaints. We agree, however, that recent Commission actions in this proceeding and in the TruthinBilling proceeding may help to address soft slamming and related problems indirectly. In this regard, Bell Atlantic and USTA point out that the Section 258 Order imposes on facilitiesbased carriers the responsibilities of executing carriers in soft slam situations, and AT&T notes that the framework of the slamming rules is ``intended to increase effective deterrence of slamming, including * * * `soft slamming.' '' In the TruthinBilling proceeding, the Commission adopted a rule that the name of the service provider associated with each charge must be clearly and conspicuously identified on the telephone bill. AT&T contends that this action ``should substantially alleviate the `soft slamming' problem by making unauthorized carrier changes readily detectable by end users.''

24. Based on our review of the record as a whole, we are not persuaded that we should adopt a CIC requirement at this time. Rather, as explained below, we wish to have more information on the financial and competitive issues discussed herein before imposing a CIC requirement. By directing that the Feature Group D requirement be eliminated, we are taking a step that will facilitate the ability of switchless resellers to obtain and use their own
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CICs, while allowing them to choose whether to do so based on their own competitive needs. Nevertheless, we continue to believe that requiring resellers to obtain their own CICs holds promise as a direct and effective solution to the significant problems that arise from the shared use of CICs. We therefore wish to continue developing a record on the subject proposal, in order to be in a position to take informed and expeditious action, should we deem it necessary to do so. Accordingly, we shall refer the CIC use and assignment issues discussed herein to the NANC for analysis and recommendations. To the extent possible, we also request that the NANC submit any data it develops that may shed light on the financial and competitive issues discussed herein, as well as the dimensions of soft slamming and related problems. We request that the NANC provide its report to the Commission by August 1, 2001. We intend to reassess the costs and benefits of the proposed CIC requirement after receiving the NANC's report. In the meantime, we anticipate that the reporting requirements we adopt herein will help to furnish us with more data as to the ongoing significance of the problems at issue and the impact of the Commission's recent antislamming and truthinbilling measures.

25. Finally, we conclude that adoption of either the second or the third proposals set forth in the FNPRM would not serve the public interest. Whereas a CIC requirement would rely on existing call routing and billing systems and provide consumers with equal access to switchless resellers, the ``pseudoCIC'' proposal would require extensive systems modifications by both LECs and underlying carriers, without the advantage of equal access. Commenters argue persuasively that the third proposal, carrier systems modifications, is not viable because, among other things, it would be costly and timeconsuming to implement, would be likely to complicate and delay the carrier change process, and would not comport with existing billing systems. C. Independent Third Party Verification

34. Discussion. The first issue we address is whether a carrier's sales representative should be permitted to remain on the line during the threeway verification call. NAAG raises concerns that the subscriber might remain under the influence of the sales representative during the verification process. NAAG argues that third party verification should be separated completely from the sales transaction, so that a carrier would not be permitted to connect the subscriber to the third party verifier by initiating a threeway call. Other commenters support allowing the carrier's representative to remain on the line during the threeway conference call.

35. As we stated in the FNPRM, the threeway call is often the most efficient means of accomplishing third party verification. We believe that subscribers may benefit from the convenience of authorizing and verifying the carrier change in one phone call. In addition, use of this method of verification minimizes the risk that the subscriber will not be available when the third party verifier calls to confirm the change.

36. Some commenters propose that the Commission impose certain limited restrictions on such calls to ensure that the verification process will not become tainted, cause subscriber confusion, or go forward without the subscriber's express consent. The proposed restrictions range from prohibiting carriers from remaining on the line once a connection is established with the third party verifier to requiring that all conversation on a threeway conference call be recorded.

37. We agree with NAAG and others that the Commission should delineate minimum requirements to ensure that verification ultimately involves only the consumer and the third party verifier. Given the convenience and costeffectiveness of the threeway conference call as a verification method, we will retain the threeway call as a verification method, subject to one limited restriction. The carrier's sales representative may initiate the threeway conference call but must drop off the call once the connection has been established between the subscriber and the third party verifier. We believe that this limited restriction will help ensure the independence of the third party verification process and prevent the carrier's sales representative from improperly influencing subscribers, without burdening the verification process. Once the connection has been established between the subscriber and the third party verifier, there is no need for the carrier's sales representative to stay on the line.

38. With respect to the content and format of the third party verification, we asked parties in the FNPRM to comment on a possible requirement that all third party verifications include certain information, such as information on preferred carrier freezes or the carrier change process. We also asked parties to comment on any benefits that might be gained from permitting or requiring third party verifiers to provide subscribers with such additional information. This proposal generated both strong support and opposition. Although many commenters argue that requiring third party verifiers to follow a scripted format would impose unnecessary, additional rules on the carrier change process without producing a significant corresponding benefit, several other commenters ask the Commission for additional guidance regarding the format and content of the third party verification. For instance, Media One states that third party verifiers should be required to confirm the identity of the subscriber, to ascertain that the person contacted is authorized to make a change, and to frame the request for confirmation of the change as a simple yes/no question.

39. We decline to mandate specific language to be used in third party verification calls. In order to eliminate uncertainty as to what practices are necessary and acceptable, however, we adopt minimum content requirements for third party verification. We believe that having minimum content requirements for third party verification calls will provide useful guidance to the third party verifiers and carriers without locking carriers into using a set script. These requirements also allow for more streamlined enforcement because they will assist the Commission in determining the adequacy of steps taken by independent third parties in the verification process. Accordingly, we conclude that a script for third party verification should elicit, at a minimum, the identity of the subscriber; confirmation that the person on the call is authorized to make the carrier change; confirmation that the person on the call wants to make the change; the names of the carriers affected by the change; the telephone numbers to be switched; and the types of service involved (i.e., local, instate toll, outof state toll, or international service). We note that these content requirements do not differ in substance from our rules regarding LOAs.

40. In addition, the third party verification must be conducted in the same language that was used in the underlying sales transaction. We also conclude that the entire third party verification transaction must be recorded, a practice that is already common in the industry. Consistent with our requirements under Sec. 64.1120(a)(1)(ii), submitting carriers must maintain and preserve these recordings for a minimum period of two years after obtaining such verification. If a slamming dispute arises, having a recorded verification will help determine whether the subscriber was
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simply seeking information or was in fact agreeing to change carriers and, if so, which service(s) the subscriber agreed to change.

41. We further conclude that third party verifiers may not dispense information concerning the carrier or its services, including information regarding preferred carrier freeze procedures or other non telecommunications services that the carrier may offer to the subscriber. Allowing third party verifiers to effectively market the carrier's services could compromise the third party verifiers' independence and neutrality because verifiers could easily be drawn into presenting the particular market viewpoints of carriers by whom they are retained. In addition, providing the verifier with certain carrier information could result in the disclosure of proprietary information to competing carriers. We also believe that incorporating information about preferred carrier freezes into the verification script is likely to be confusing to subscribers and would prolong the verification process unnecessarily.

42. Finally, we conclude that automated systems that preserve the independence of the third party verification process may be used to verify carrier change requests. The use of automated third party verification systems not only promotes consistency in the verification process and adequacy of the information provided to subscribers, but also gives carriers a costeffective way to create a readily accessible record of each order confirmation. Moreover, the recordings generated by this automated process may be useful in addressing subscriber complaints of slamming. For instance, the recording can reveal whether the carrier change at issue was properly verified and whether an authorized person provided the verification. Automated systems may also help provide predictable and consistent service.

43. Although several commenters argue that using automated verification systems that record the verification should obviate the need for more detailed script requirements, we conclude that these systems should elicit, at a minimum, the same information that our rules currently require, as well as the information specified. To reiterate, automated verification systems must elicit, at a minimum, the identity of the subscriber; confirmation that the person on the call is authorized to make the carrier change; confirmation that the person on the call wants to make the change; the names of the carriers affected by the change; the telephone numbers to be switched; and the types of service affected by the transaction (i.e., local, instate toll, outofstate toll, or international service). In addition, automated verifications must be conducted in the same language that was used in the underlying sales transaction and must be recorded in their entirety to ensure that there is a record of the verification in the event of a slamming dispute. As with the threeway conference call, and for the same reasons, a carrier's sales representative initiating the automated verification call may not remain on the line after the connection has been established. We further conclude that automated verification systems should provide subscribers with an option of speaking with a live person at any time during the call. We believe that, in situations where the subscriber cannot follow the prompts of an automated system (or has questions once the automated verification commences), the subscriber should be able to reach a live person who can complete the process. If the subscriber does not want to complete the verification process, or is unable to do so, the third party verifier must end the call, and the transaction must be treated as unverified.

44. We note that, although our rules do not generally prohibit automated third party verification systems, certain types of automated verification systems undermine the independence requirement and contradict the intent behind our rules to produce evidence, independent of the telemarketing carrier, that a subscriber wishes to change his or her carrier. In particular, we conclude that the ``livescripted'' automated verification system is at odds with our rules because it permits the carrier's agent, who is not an independent party located in a separate physical location, to solicit the subscriber's confirmation. From a subscriber perspective, the ``livescripted'' version may be appealing because the subscriber is interacting with a live person, even though that person is following a set script. The fact that the questions on the script are being read by the carrier's sales representative, however, compromises the independence of the verification. The risk that the sales representative may ask the questions in a pressuring or misleading manner is inherent in the ``livescripted'' version. Because the carrier's sales representative is usually compensated for sales completed, and not for sales attempts, the sales representative could not be considered an unbiased third party that lacks motivation to influence the outcome of the verification process.

D. Definition of ``Subscriber''

45. Discussion. Based on our consideration of the comments filed in this proceeding, we adopt the following definition of the term ``subscriber'' for purposes of our rules implementing Section 258 of the Act: ``The party identified in the account records of a common carrier as responsible for payment of the telephone bill, any adult person authorized by such party to change telecommunications services or to charge services to the account, and any person contractually or otherwise lawfully authorized to represent such party.'' We believe that this definition will serve our public interest goals of promoting consumer protection, consumer convenience, and competition in telecommunications services. Specifically, this definition will allow customers of record to authorize additional persons to make telecommunications decisions, while protecting consumers by giving the customers of record control over who is authorized to make such decisions on their behalf. In addition, this definition will provide carriers with the flexibility to establish authorization procedures that are appropriate to their own and their customers' needs, consistent with the framework of our rules.

46. The definition we adopt is similar to the SBC proposal set forth in the FNPRM, in that it allows customers of record to authorize additional persons to make telecommunications decisions. We believe that it is preferable to the SBC proposal, however, because it clearly identifies the customer of record as the source of authority over who is authorized to make telecommunications decisions. In addition, the definition we adopt distinguishes between two different types of authority: (1) Authority based on the express or implied authorization of the customer of record, as reflected in carrier account records or elsewhere; and (2) authority based on federal and/or state law and regulations concerning agency and authority.

47. The principal concern expressed by commenters opposed to a definition that allows customers of record to authorize additional persons to make telecommunications decisions is that such a definition invites disputes among household members. We conclude that this concern does not warrant restricting customer options. Commenters favoring a broad definition generally indicate that the current carrier practice is to allow persons other than the customer of record to make telecommunications
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decisions subject to varying authorization procedures, and that consumers expect and value this service. Examination of the record does not indicate that this practice has given rise to a substantial number of slamming complaints. Moreover, as discussed below, we believe that our current rules provide sufficient incentives for carriers to adopt appropriate safeguards to ensure that only authorized persons are permitted to change telecommunications services. Absent more concrete evidence of the likelihood of harm to consumers, we agree with the majority of commenters that consumers ``should be able to make decisions about their preferred carrier [and] delegate that authority if needed[.]''

48. We emphasize that, by adopting a definition, we are not imposing additional responsibilities on carriers in the submission or execution of carrier changes. Rather, carriers' responsibilities are determined by the framework of the current rules. Under these rules, submitting carriers are subject to liability for the submission of unauthorized changes, regardless of intent. As we held in the Section 258 Order, strict liability ``provides appropriate incentives for carriers to obtain authorization properly and to implement their verification procedures in a trustworthy manner.'' Within this framework, the definition that we adopt will permit submitting carriers to utilize varying authorization procedures based on their own and their customers' needs, without tolerating procedures likely to enable unauthorized persons to make telecommunications decisions. With regard to executing carriers, their responsibility is limited to prompt execution of changes verified by a submitting carrier. Carriers that execute changes verified by submitting carriers are not subject to liability for unauthorized changes. For these reasons, we are not concerned that the definition we adopt will impose unreasonable burdens on executing carriers.

49. In sum, we believe the ``subscriber'' definition that we adopt herein will serve our public interest goals of promoting consumer convenience and competition in telecommunications services, without leading to increased slamming. The definition we adopt is consistent with the framework of our rules and will enable carriers to adopt safeguards against unauthorized carrier changes that are suited to their own and their customers' needs.

E. Submission of Reports by Carriers

50. Discussion. We will require carriers providing telephone exchange and/or telephone toll service to periodically submit reports regarding slamming complaints they received. Carriers objecting to this reporting requirement are concerned that the reports on slamming complaints received by carriers would produce inaccurate and misleading information. Specifically, these carriers argue that such information, when provided by LECs, will inflate the number of slams attributed to other carriers because what is reported is the total number of slamming allegations, without reference to their validity or their underlying causes. We believe the reporting requirement adopted herein is designed to address these concerns, and we are confident that reliance on the reported information as an ``early warning'' system will not misdirect the enforcement of the Commission's slamming rules. Moreover, the information will be invaluable in enabling the Commission to identify, as soon as possible, the carriers who repeatedly initiate unauthorized changes. In addition, because the reports will be available for public inspection, they may compel carriers to reduce slamming on their own to avoid public embarrassment or loss of goodwill.

51. We recognize that a subscriber complaint is not, in and of itself, dispositive proof of a slam. Nevertheless, an excessive number of complaints directed at a particular carrier, or an increase in the number of such complaints, suggests that an immediate investigation into that carrier's practices may be warranted. Accordingly, to assist our enforcement efforts in this area, we conclude that each carrier providing telephone exchange and/or telephone toll service must submit to the Commission via email, U.S. Mail, or facsimile, a slamming complaint reporting form which will identify the number of slamming complaints received and state the number of such complaints that the carrier has investigated and found to be valid. This report also must include the number of slamming complaints involving local intrastate and interstate interexchange service, investigated or not, that the carrier has chosen to resolve directly with subscribers. Moreover, because most subscribers who are slammed by an IXC report the slam to their LEC, rather than the IXC, LECs should include in their reports the name of each entity against which slamming complaints have been directed and the number of complaints involving unauthorized changes that have been lodged against each entity. Carriers shall file their first slamming complaint reports on August 15, 2001, to cover the period commencing on the effective date of this requirement, as announced in the Federal Register, and ending on June 30, 2001. Reports for the second half of 2001 shall be filed on February 15, 2002, covering the period between July 1, 2001 and December 31, 2001. Thereafter, carriers shall submit their semiannual slamming complaint reports on August 15 (covering January 1 through June 30) and on February 15 (covering July 1 through December 31). The slamming complaint reporting form may be obtained in the Commission's Public Reference Room or by accessing the Commission's website.

52. Based on the record before us, we do not believe that this requirement will impose significant additional costs or administrative burdens on carriers. Indeed, several carriers have indicated that they already track slamming complaints received from subscribers. It would be a reasonable business practice for all telecommunications carriers, including small carriers, to track slamming complaints they receive in the course of their business; we would be surprised if carriers did not do this. Thus, we do not believe we are requiring carriers to keep information that they would not otherwise keep.

F. Registration Requirement

53. Discussion. The Commission currently requires carriers providing interstate interexchange telecommunications service to submit various types of information, and the Commission recently streamlined many of these information collection requirements. For example, the Commission has consolidated several different worksheets into the Telecommunications Reporting Worksheet (FCC Form 499), which is used to calculate carriers' contributions to fund four different programs: interstate telecommunications relay service (TRS), federal universal service support mechanisms, the costrecovery mechanism for the North American Numbering Plan Administration, and the cost recovery mechanism for the shared costs of longterm local number portability. In addition, to assist carriers in meeting the requirement of Section 1.47 of our rules that all common carriers must designate an agent for service of process in the District of Columbia, we have allowed carriers to report such information on the Form 499. Our rules now provide that carriers may file the relevant portion of the
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Form 499 with the Commission to satisfy this requirement, and must update the information about the registered agent for service of process by submitting the revised portion of the Form 499 to the Chief of the Enforcement Bureau's Market Disputes Resolution Division within one week of any changes. The rules also provide that a paper copy of the designation list shall be maintained in the Office of the Secretary of the Commission.

54. We adopt our tentative conclusion that all new and existing common carriers providing interstate telecommunications service must register with the Commission. We believe such a registration requirement will bolster our efforts to curb slamming by enabling us to monitor the entry of carriers into the interstate telecommunications market and any associated increases in slamming activity. This requirement will also enhance our ability to take appropriate enforcement action against carriers that have demonstrated a pattern or practice of slamming. Slammers that simply change their names and/or move to different jurisdictions will find it difficult to escape detection if they cannot escape the obligation to register with the Commission. This registration information will enable the Commission to identify those entities providing interstate telecommunications service, it will complement the certification and registration requirements in effect in almost every state for intrastate service providers, and it will enable the Commission and state authorities to coordinate enforcement actions through the creation of a central repository of key facts about carriers providing interstate telecommunications.

55. While we decline to rely exclusively on existing annual reporting mechanisms, we are mindful of the importance of not overburdening carriers with obligations. Therefore, we will revise the annuallyfiled Telecommunications Reporting Worksheet (FCC Form 499A), which must be filed by all telecommunications carriers in April of each year, to include the following additional information that is targeted to assist our antislamming efforts and thereby minimize the burden of this registration requirement: the carrier's business name(s) and primary address; the names and business addresses of the carrier's chief executive officer, chairman, and president, or, in the event that a company does not have such executives, three similarly seniorlevel officials of the company; the carrier's regulatory contact and/or designated agent for service of process; all names under which the carrier has conducted business in the past; and the state(s) in which the carrier provides telecommunications service. The next scheduled filing of the Form 499A is April 1, 2001, at which time carriers will file the revised form containing the additional information described above in accordance with the Instructions to FCC Form 499A. This information shall be submitted under oath and penalty of perjury, and must be updated to reflect any changes. Pursuant to the existing requirement in Sec. 1.47 of our rules, a carrier shall update its registration to reflect any changes by submitting the revised relevant portion of the FCC Form 499A within no more than one week of the change. The Commission will make the registration information described above available for public inspection in its reference room and on its website.

56. We believe that all carriers providing interstate telecommunications service, including small carriers providing such service, should be able to submit this information without much expense or difficulty because it is readily available and, to a large degree, must already be submitted in state jurisdictions. In addition, we note that making the registration information part of an existing form that must be completed and submitted for other obligations will minimize the burden on carriers. We therefore conclude that carriers failing to register with the Commission may, after notice and opportunity to respond, be subject to a fine. Carriers providing false or misleading information in their registrations may have their operating authority revoked or suspended, after receiving appropriate notice and opportunity to respond.

57. We further conclude that any telecommunications carrier providing telecommunications service for resale shall have an affirmative duty to ascertain whether a potential carriercustomer (i.e., a reseller) has filed a registration with the Commission prior to providing that carriercustomer with service. Once the
telecommunications carrier that provides telecommunications service for resale determines the registration status of its potential carrier customer, such carrier will not be responsible for monitoring the registration status of that customer on an ongoing basis, although we believe that a prudent carrier may choose to do so. In situations where such carrier is currently providing a reseller with service, we direct the reseller to notify its underlying carrier that it has submitted the registration information to the Commission, within a week of having done so.

58. We note that a telecommunications carrier providing telecommunications service for resale will not be responsible for the accuracy of the registration provided to the Commission by its potential carriercustomer, nor will such carrier, relying in good faith on the absence of such registration, be liable under Section 251 of the Act for withholding service from the unregistered entity. The Commission may, however, after giving appropriate notice and opportunity to respond, impose a fine on carriers that fail to determine the registration status of other carriers before providing them with service. The dollar amount of the fine imposed on such carrier for failing to meet its affirmative duty with respect to an unregistered reseller will depend on the egregiousness of the facts surrounding the particular incident. We conclude that this will deter carriers from providing service to resellers that have not registered with the Commission, which will, in turn, make it more difficult for ``bad actor'' resellers to stay in business.
G. Recovery of Additional Amounts from Unauthorized Carriers

59. Discussion. We believe that the issue of recovery of additional amounts from unauthorized carriers has been effectively resolved in the context of our First Reconsideration Order. As discussed, in that order, we reaffirmed our decision to absolve consumers of liability for slamming charges for a limited period of time, i.e., within the first 30 days after the unauthorized change. We established procedures that apply when a consumer has not paid charges to the slamming carrier and also modified the liability rules that apply when a subscriber has paid charges to a slamming carrier. Specifically, we concluded that, when the slamming carrier receives payment from the subscriber, such carrier must pay out 150% of the collected charges to the authorized carrier, which, in turn, will pay to the subscriber 50% of his or her original payment. In addition, the order provides specific notification requirements to facilitate carriers' compliance with the liability rules. Given these modifications, we do not believe that there is a need for further action in this area at the present time.
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III. Second Order on Reconsideration
A. Administration of Preferred Carrier Freezes
1. IXC Submission of Preferred Carrier Freeze Orders and Freeze Lifts

60. Several parties argue on reconsideration that the Commission should allow carriers to verify and submit orders to implement or lift preferred carrier freezes, just as the Commission allows carriers to verify and submit preferred carrier change orders. We decline to modify our rules and retain the requirement that subscribers must implement or lift preferred carrier freezes through contact with their local carriers.

61. In the Section 258 Order, we decided carriers should not be permitted to submit preferred carrier freeze lifts, even if those lift orders were first verified by a neutral third party. We stated that ``the essence of a preferred carrier freeze is that a subscriber must specifically communicate his or her intent to request or lift a freeze [and it is this] limitation on lifting preferred carrier freezes that gives the freeze mechanism its protective effect.'' We determined that subscribers would gain no additional protection from the implementation of a preferred carrier freeze if we were to allow third party verification of a carrier change to override a preferred carrier freeze. Although such a proposal minimizes the risk that unscrupulous carriers might attempt to impose preferred carrier freezes without the consent of subscribers, we concluded that it frustrates the subscriber's ability to change carriers. Petitioners have not persuaded us that we erred in making these determinations. We therefore affirm our decision that only a subscriber may request or lift a preferred carrier freeze.

62. Consistent with this purpose, we also take this opportunity to clarify that LECs may not accept preferred carrier freeze orders from carriers on behalf of subscribers, even if they are properly verified. We believe that limiting the submission of preferred carrier freeze requests to subscribers will help curb the potential for abuse by slamming carriers. To interpret our rules otherwise would undermine the effectiveness of preferred carrier freezes. For example, if a slamming carrier were allowed to submit an unauthorized freeze order with an unauthorized change order, not only would the subscriber be slammed, but it would also be more difficult for the subscriber to be switched back to the authorized carrier because of the unauthorized freeze. This freeze mechanism assures that no carrier change is processed without the direct involvement of the subscriber.
2. Simultaneous Submission of Preferred Carrier Change Requests and Preferred Carrier Freeze Requests

63. RCN and Excel seek clarification that a subscriber request a change and obtain a preferred carrier freeze in the same transaction. Nothing in our rules prohibits a subscriber from changing a carrier and requesting a freeze in the same transaction. We emphasize that the LEC must, however, verify both the freeze request and the carrier change request in accordance with our rules. Specifically, the LEC must obtain a Letter of Agency, electronic authorization, or third party verification that applies to the freeze request and, if the LEC is the provider of the requested long distance service, the LEC must also properly verify the carrier change request. We note that, in situations where a customer initiates or changes long distance service by contacting the LEC directly, verification of the customer's choice is not necessary by either the LEC or the chosen IXC because neither carrier is the ``submitting carrier'' as we have defined it. 3. Effecting Freeze Lifts and Change Requests in the Same ThreeWay Call

64. MCI asks the Commission to clarify that executing carriers have an obligation to lift a preferred carrier freeze and switch a customer during the same threeway call. MCI states that it has experienced difficulties in making authorized carrier changes where preferred carrier freezes have been in place. MCI explains that, after a carrier change request is properly verified, MCI electronically sends the request to the executing carrier. In situations where the customer has a preferred carrier freeze in place, but may have forgotten, the change request has been rejected by the executing carrier. At that point, MCI states that it contacts the customer and initiates a threeway call between the executing carrier, the customer, and MCI. According to MCI, the executing carrier will only sometimes accept the threeway call, will only sometimes lift the preferred carrier freeze during the three way call, and will never execute the carrier change during the three way call. Thus, MCI appears to argue that, in situations where the submitting carrier initiates a threeway call for the purpose of simultaneously lifting a preferred carrier freeze and submitting a carrier change request that has been already properly verified, the Commission should require the executing carrier to accept the freeze lift and effect the carrier change request in the same threeway call.

65. Although we agree with MCI that accepting both freeze lift and properly verified carrier change requests during the same threeway call may be an efficient means of effectuating a consumer's carrier change request, we need not mandate that executing carriers follow this course at this time. As we stated in the Section 258 Order, carriers must offer subscribers a simple, easily understandable, but secure way of lifting preferred carrier freezes in a timely manner. We concluded that LECs administering a preferred carrier freeze program must accept the subscriber's authorization, either oral or written and signed, stating an intent to lift a preferred carrier freeze. We determined that LECs also must permit a submitting carrier to conduct a threeway conference call with the LEC and the subscriber in order to lift a freeze. Our rules do not, however, prohibit LECs from requiring submitting carriers to use separate methods for lifting a preferred carrier freeze and submitting a carrier change request. If MCI is concerned about the delay that may result from some LECs refusing to accept properly verified carrier change orders during the same three way call initiated for the purpose of lifting a freeze, it may file a complaint in the appropriate forum.

66. We also note that, in the Section 258 Order, we declined to enumerate all acceptable procedures for lifting preferred carrier freezes. Rather, we encouraged parties to develop other methods of accurately confirming a subscriber's identity and intent to lift a preferred carrier freeze, in addition to offering written and oral authorization to lift preferred carrier freezes. We continue to believe that, as long as these other methods are secure and ``impose only the minimum burdens necessary on subscribers who wish to lift a preferred carrier freeze,'' we need not mandate an automated process for carrier freezes, as requested by AT&T.

67. Furthermore, for the same reasons articulated in the Section 258 Order, we will not require LECs administ

FOR FURTHER INFORMATION CONTACT Dana Walton-Bradford, Attorney, Accounting Policy Division, Common Carrier Bureau, (202) 4187400.