BILL ANALYSIS AB 535 Page 1 Date of Hearing: April 12, 1999 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Roderick Wright, Chair AB 535 (Reyes) - As Amended: April 7, 1999 SUBJECT : Custom calling and enhances calling telephone services. SUMMARY : Prohibits local exchange carriers that automatically provide custom calling services on a pay per use basis from providing such service to a subscriber unless the subscriber agreed to sign up for the service by returning a prepaid postcard to the carrier. Specifically, this bill : 1)Requires all local exchange carriers (LEC) to provide information to all subscribers about per use custom calling features; 2)Defines a current subscriber as a residential subscribing of a local exchange carrier (LEC) as of December 31, 1999; 3)Defines a new subscriber as a residential customer initiating service or ordering additional service lines that become operational on or after January 1, 2000; 4)Requires customer notification to be in the form of a postage-paid postcard included in the regular bill; 5)Prohibits the local exchange carrier from providing any per use custom calling features without the subscriber's authorization; 6)Specifies that the California Public Utilities Commission (CPUC) must approve the content of the postcard; 7)Requires the LEC to provide new telephone subscribers with information relating to per use custom calling features during the verbal initiation of a service request; 8)Requires that new customers and customers ordering additional services be informed that they may block any or all of the per use custom calling features; 9)Requires that the service confirmation letter identify the per AB 535 Page 2 use custom calling features and specify whether the customer has blacked any or all of those features; 10)Exempts customers from liability for charges unless the LEC has received the postcard authorizing the provision of per use custom calling features; 11)Specifies that a current customer may be liable for charges incurred up to 14 days from the date the LEC sends the notification in the regular billing envelope; 12)Specifies that a current subscriber may not be liable for charges incurred after the notification has been mailed unless the LEC received authorization for the provision of per use custom calling features; and 13)Authorizes a subscriber to seek a bill adjustment for the inadvertent or unauthorized use of the per use custom calling features. EXISTING LAW authorizes CPUC to investigate the billing practices of every telephone corporation in billing its subscribers. Requires every telephone corporation to annually issue to its customers a listing of the residential telephone services it provides, the rates or charges for those services and the state or federal regulatory agency responsible for regulation of those services. FISCAL EFFECT : Unknown. COMMENTS : 1.The author has introduced this bill to address a number of complaints filed with the Office of Ratepayer Advocates (ORA). Customers have complained that they have been billed in error for using per use custom calling features that they inadvertently activated. Many of the complainants were unaware that per use custom calling features were available as part of their telephone service until the charges appeared on their bills. This bill would require the LECs to obtain written authorization from current subscribers prior to making per use custom calling features available on a subscribers' telephone. The written authorization would be in the form of AB 535 Page 3 a postcard that is mailed to every subscriber in their regular bill. The author has suggested use of a postcard in a regular bill for service in an effort to reduce the costs associated with informing all subscribers of the services the LEC offers. Unless the subscriber returns the postcard specifically agreeing to sign up for specified services, the LEC must discontinue providing said custom calling services on a per use basis. Based on the amount of information contained in the monthly customer bill, the Utilities and Commerce Committee members should consider whether customers will actually see, read, and act on the postcard. 2.At present at least three custom calling features are available on a per use basis through the LECs operating in California -- Call Return, Repeat Dialing and Three-Way Calling. Per use custom calling features are reasonable alternatives for customers who do not chose to subscribe to those services on a monthly basis. 3.Pacific Bell indicates that in order to activate call return or repeat dialing, customers must first dial a code. Three way-calling, on the other hand, does not require a code, but is activated by depressing the flash or switch hook while on a call with one person, dialing another number, and then depressing the flash or switch hook again to connect all three parties. Pacific Bell attests that the billing does not begin until all three parties have been on the line for 18 seconds. In order to continue to allow an LEC to make these services available to customers on a per use basis, customers must return the above-described postcard. 4.MCI WorldCom has suggested that the author amend the bill to exclude services that require an access code to trigger the service. Call Return and Repeat Dialing would be exempt if the author were to accept that proposed amendment. If a customer dials an access code prior to utilizing a service, the customer is not likely to inadvertently access the service. The ORA also asserts that per use Three-Way calling has generated the bulk of the customer complaints in this area. The LECs should seek to modify the manner in which the Three-Way Calling is activiated on a per use basis to require an access code to prevent the inadvertent use of the service. In preliminary discussions, the LECs have suggested that it may be cost prohibitive to make such a modification. Further study should be given to this proposal. AB 535 Page 4 5.Some of these custom-calling features have been available for over three years. Three-way calling, which appears to be causing the greatest concern to the author, has been available for only one year. As presently drafted, this bill would require the LECs to block access to per use custom calling features unless the postcard is returned and authorizes a continued desire to receive the services. At present, thousands of customers access the per use features on a daily basis. The author might want to consider requiring the return of the postcard solely for those customers seeking to block their service, rather than requiring customers to return the postcard to continue the service. Additionally, the author should consider requiring the LECs to advise consumers, in all marketing materials, of the ability to block access to the per use custom calling features. 6.GTE California indicates that "the current CPUC process requires that customers be educated on the price, accessing, terms and conditions" in using per use custom calling features. The author should also consider requiring CPUC to include a review of these services and determine whether new consumer protection rules should be developed as part of an Order Instituting Rulemaking that will commence soon at the CPUC. 7.The bill also requires LECs to adjust a subscriber's bill for the inadvertent or unauthorized use of per use custom calling features. So that this provision is not abused, the author should require the LECs to advise customers of the ability to block the service at the time of the bill adjustment. Once the customer has been advised of the service availability of per use custom calling features and the ability to block, the burden for responsible use of the services should be shifted to the subscriber. REGISTERED SUPPORT / OPPOSITION : Support Office of Ratepayer Advocates (ORA) The Utility Reforn Network (TURN) Utility Consumers Action Network (UCAN) California Alliance for Consumer Protection AB 535 Page 5 Opposition Pacific Telesis GTE California Analysis Prepared by : Carolyn Veal-Hunter / U. & C. / (916) 319-2083