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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Implementation of the Subscriber Carrier ) Selection Changes Provisions of the ) Telecommunications Act of 1996 ) ) CC Docket No. 94-129 Policies and Rules Concerning ) Unauthorized Changes of Consumers' ) Long Distance Carriers ) SECOND REPORT AND ORDER AND FURTHER NOTICE OF PROPOSED RULEMAKING Adopted: December 17, 1998 Released: December 23, 1998 Comment Date: 30 days from publication in the Federal Register Reply Comments Date: 45 days from publication in the Federal Register By the Commission: Commissioners Ness and Tristani issuing statements; Commissioner Powell concurring in part, dissenting in part and issuing a statement and Commissioner Furchtgott-Roth dissenting and issuing a statement Table of Contents Paragraph No. I. Introduction. . . . . . . . . . . . . . . . . . . . . . . .1 II. Background. . . . . . . . . . . . . . . . . . . . . . . . .9 III. Discussion. . . . . . . . . . . . . . . . . . . . . . . . 13 A. Section 258(b) Liability . . . . . . . . . . . . . . 17 1. Liability of the Slammed Subscriber . . . . . . 17 2. When the Slammed Subscriber Pays the Unauthorized Carrier34 a. Liability of the Unauthorized Carrier. . . 35 b. Subscriber Refunds or Credits. . . . . . . 38 3. Investigation and Reimbursement Procedures. . . 41 a. When the Subscriber has not Paid the Unauthorized Carrier41 b. When the Subscriber has Paid the Unauthorized Carrier43 4. Restoration of Premiums . . . . . . . . . . . . 47 5. Liability for Inadvertent Unauthorized Changes. 50 6. Determining Liability Between Carriers. . . . . 53 B. Third Party Administrator for Dispute Resolution . . 55 C. Verification Rules . . . . . . . . . . . . . . . . . 58 1. The Welcome Package . . . . . . . . . . . . . . 58 2. Application of the Verification Rules to In-bound Calls62 3. Independent Third Party Verification. . . . . . 69 4. Other Verification Mechanisms . . . . . . . . . 73 5. Use of the Term "Subscriber". . . . . . . . . . 80 D. Extension of the Commission's Verification Rules to the Local Market81 1. Application of the Verification Rules to the Local Market81 2. Application of the Verification Rules to All Telecommunications Carriers84 3. The States' Role. . . . . . . . . . . . . . . . 86 E. Submitting and Executing Carriers. . . . . . . . . . 91 1. Definition of "Submitting" and "Executing" Carriers91 2. Application of Verification Rules to Submitting and Executing Carrier . . . . . . . . . . . . . . . . . . . . 97 3. Concerns with Executing Carriers. . . . . . . .102 a. Interference with the Execution Process. .102 b. Timeframe for Execution of Carrier Changes104 c. Marketing Use of Carrier Change Information106 F. Preferred Carrier Freezes. . . . . . . . . . . . . .112 1. Background. . . . . . . . . . . . . . . . . . .112 2. Overview and Jurisdiction . . . . . . . . . . .113 3. Nondiscrimination and Application of Rules to All Carriers119 4. Solicitation and Implementation of Preferred Carrier Freezes121 5. Procedures for Lifting Preferred Carrier Freezes127 6. Information About Subscribers with Preferred Carrier Freezes133 7. When Subscribers Change LECs. . . . . . . . . .134 8. Preferred Carrier Freezes of Local and IntraLATA Services135 9. Limitation on Freeze Mechanisms for Resold Services138 IV. Further Notice of Proposed Rulemaking . . . . . . . . . .139 A. Recovery of Additional Amounts from Unauthorized Carriers 140 B. Resellers and CICs . . . . . . . . . . . . . . . . .145 C. Independent Third Party Verification . . . . . . . .165 D. Carrier Changes Using the Internet . . . . . . . . .169 E. Definition of "Subscriber" . . . . . . . . . . . . .176 F. Submission of Reports by Carriers. . . . . . . . . .179 G. Registration Requirement . . . . . . . . . . . . . .180 H. Third Party Administrator for Execution of Preferred Carrier Changes and Preferred Carrier Freezes. . . . . . . . . . . . . . . . . . .183 V. Conclusion. . . . . . . . . . . . . . . . . . . . . . . .185 VI. Procedural Matters. . . . . . . . . . . . . . . . . . . .186 A. Final Regulatory Flexibility Analysis. . . . . . . .186 B. Initial Regulatory Flexibility Analysis. . . . . . .222 C. Initial Paperwork Reduction Act Analysis . . . . . .241 D. Final Paperwork Reduction Act Analysis . . . . . . .242 E. Ex Parte Presentations . . . . . . . . . . . . . . .243 F. Petitions for Reconsideration. . . . . . . . . . . .244 G. Comment Filing Procedures. . . . . . . . . . . . . .247 VII. Ordering Clauses. . . . . . . . . . . . . . . . . . . . .252 Appendices Amended Rules. . . . . . . . . . . . . . . . . . . . . Appendix A Proposed Rules . . . . . . . . . . . . . . . . . . . . Appendix B Commenters . . . . . . . . . . . . . . . . . . . . . . Appendix C I. INTRODUCTION 1. In this Second Report and Order and Second Further Notice of Proposed Rulemaking (Order), we adopt rules proposed in the First Further Notice of Proposed Rulemaking and Memorandum Opinion and Order on Reconsideration (Further Notice and Order) to implement section 258 of the Communications Act of 1934 (Act), as amended by the Telecommunications Act of 1996 (1996 Act). Section 258 makes it unlawful for any telecommunications carrier to "submit or execute a change in a subscriber's selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the Commission shall prescribe." The goal of section 258 and this Order is to eliminate the practice of "slamming." A subscriber may authorize a change of his or her long distance carrier, or other telecommunications carrier, by requesting the change directly from his or her local exchange carrier (LEC), or by authorizing the new carrier to request a change on his or her behalf. Slamming occurs when a company changes a subscriber's carrier selection without that subscriber's knowledge or explicit authorization. Slamming nullifies the ability of consumers to select the telecommunications providers of their choice. Slamming also distorts the telecommunications market because it rewards those companies who engage in deceptive and fraudulent practices by unfairly increasing their customer base at the expense of those companies that market in a fair and informative manner and do not use fraudulent practices. 2. The numerous complaints we continue to receive and the input of the state commissions and the state attorneys general provide ample evidence that slamming is an extremely pervasive problem. Indeed, slamming is so rampant that it garnered significant attention in Congress in 1998 during the post-legislative session, although ultimately no legislation was passed. Despite the Commission's existing slamming rules, our records indicate that slamming has increased at an alarming rate. In 1997, the Commission processed approximately 20,500 slamming complaints and inquiries, which is an increase of approximately 61% over 1996 and an increase of approximately 135% over 1995. From January to the beginning of December 1998, the Commission processed 19,769 slamming complaints. Furthermore, the number of slamming complaints filed with the Commission is a mere fraction of the actual number of slamming incidents that occur. 3. The Commission recently has increased its enforcement actions to impose severe financial penalties on slamming carriers. Since April 1994, the Commission has imposed final forfeitures totaling $5,961,500 against five companies, entered into consent decrees with eleven companies with combined payments of $2,460,000, and has proposed $8,120,000 in penalties against six carriers. Additionally, the Commission may sanction a carrier by revoking its operating authority under section 214 of the Act. The Commission recently has resorted to such sanctions against carriers for repeated slamming and other egregious violations of the Act and our rules. 4. The new rules we adopt in this Order are not merely intended to conform our existing rules with the provisions of section 258, but also operate to establish a new comprehensive framework to combat aggressively and deter slamming in the future. With our new rules, we seek to close loopholes used by carriers to slam consumers and to bolster certain aspects of the rules to increase their deterrent effect. At the heart of the new slamming rules is our determination to take the profit out of slamming. Our new rules absolve subscribers of liability for some slamming charges in order to ensure that carriers do not profit from slamming activities, as well as to compensate subscribers for the confusion and inconvenience they experience as a result of being slammed. As an additional deterrent, we strengthen our verification procedures and broaden the scope of our slamming rules. 5. Our new rules strengthen the rights of consumers in three areas: (1) the relief given to slamming victims; (2) the method by which a carrier must obtain customer verification of preferred carrier change requests; and (3) the method by which a consumer can "freeze" his or her existing carrier, thus prohibiting another carrier from claiming that it has been authorized to request a carrier change on behalf of the consumer. More specifically, with respect to compensation, under our new rules a subscriber will be absolved of liability for all calls made within 30 days after being slammed. If however, the subscriber fails to notice that he or she has been slammed and pays the unauthorized carrier for such calls, section 258(b) of the Act requires the unauthorized carrier to remit such payments to the authorized carrier. Upon receipt of this amount, the authorized carrier shall provide the subscriber with a refund or credit of any amounts the subscriber paid in excess of the authorized carrier's rates. The unauthorized carrier must also pay the authorized carrier for any expenses incurred by the authorized carrier in restoring the subscriber's service or in collecting charges from the unauthorized carrier. These liability rules will not take effect for 90 days, however to enable interested carriers to develop and implement an alternative independent entity to administer compliance with these rules on their behalf. If carriers successfully implement such a plan, we will entertain carriers' requests for waiver of the administrative requirements of our liability rules. 6. This Order also modifies the methods by which a carrier can fulfill its obligation to obtain consumer verification of carrier change requests. In particular, we eliminate the "welcome package" as a verification option because we find that it has been subject to abuse by carriers engaged in slamming. Also in connection with verification, we (1) extend our verification rules to apply to carrier change requests made during consumer-initiated (in-bound) calls to carriers, rather than being applicable solely to outbound calls made by carriers to consumers; (2) extend our verification rules to apply, with a limited exception, to all telecommunications carriers in connection with changes of all telecommunications service, including local exchange service; and (3) clarify that all carrier changes must be verified in accordance with one of the options provided in our rules, regardless of the manner of solicitation. Finally, we set forth rules governing the preferred carrier freeze process, including verification requirements for imposing a freeze and mandating certain methods for lifting a freeze. 7. This Order also contains a Further Notice of Proposed Rulemaking, in which we propose several additional changes to further strengthen our slamming rules and otherwise prevent slamming. In particular, we seek comment on: (1) requiring unauthorized carriers to remit to authorized carriers certain amounts in addition to the amount paid by slammed subscribers; (2) requiring resellers to obtain their own carrier identification codes (CICs) to prevent confusion between resellers and their underlying facilities-based carriers; (3) modifying the independent third party verification method to ensure that it will be effective in preventing slamming; (4) clarifying the verification requirements for carrier changes made using the Internet; (5) defining the term "subscriber" to determine which person or persons should be authorized to make changes in the selection of a carrier for a particular account; (6) requiring carriers to submit to the Commission reports on the number of slamming complaints received by such carriers to alert the Commission as soon as possible about carriers that practice slamming; (7) imposing a registration requirement to ensure that only qualified entities enter the telecommunications market; (8) implementing a third party administrator for execution of preferred carrier changes and preferred carrier freezes. 8. We emphasize that the way to attack the slamming problem is to combat it on several fronts: improving the verification rules, imposing forfeitures and creating other financial disincentives for unscrupulous carriers, and increasing consumer awareness. In addition to prescribing rules to eliminate slamming, the Commission will continue to mete out swift, meaningful punishment for carriers that slam subscribers. Furthermore, the Commission will continue to work with the states to alert consumers about slamming and other telecommunications trends that may affect them, so that consumers can protect themselves from these practices. II. BACKGROUND 9. The Commission first established safeguards to deter slamming when it implemented equal access requirements in 1985. Equal access, which facilitated the entry of multiple competitors into the long distance service market following the divestiture of American Telephone & Telegraph Company (AT&T), allows subscribers to access the facilities of a designated IXC by dialing "1" only, rather than having to dial a multi-digit access code for some IXCs. At the time of the divestiture of AT&T, IXCs began to compete for presubscription agreements with potential customers. Slamming did not occur prior to the advent of competition in the long distance telephone marketplace because consumers did not have any choices in long distance service. We note that slamming does not include instances where a subscriber is dropped from a carrier's service, for reasons such as nonpayment of service, and ends up not being presubscribed to any carrier. Even though this may be a "change" in a subscriber's carrier, the subscriber has not been changed to a new carrier and therefore has not been slammed. 10. The Commission's original approach required IXCs to obtain written letters of agency (LOAs) authorizing the IXC to request on behalf of a subscriber, a change in the subscriber's preferred interexchange carrier. Because some carriers continued to engage in slamming, however, the Commission in 1992 adopted procedures for verification of telemarketing sales of long distance services. In 1995, the Commission, on its own motion and in response to continuing complaints from consumers regarding slamming by IXCs, adopted rules establishing further anti-slamming safeguards to deter the use of misleading LOAs. The 1995 Report and Order specifically prohibited the potentially deceptive and confusing practice of combining LOAs with promotional materials, such as sweepstakes entry forms, in the same document. The 1995 Report and Order also prescribed the minimum content of LOAs, required that the LOA be written in clear and unambiguous language, prohibited "negative option" LOAs, and required that LOAs contain complete translations if they employ more than one language. In the Further Notice and Order, the Commission clarified that carriers using LOAs must fully translate their LOAs into the same language(s) as their associated promotional materials or oral descriptions and instructions. 11. The Commission's current slamming rules, which apply only to long distance carriers, require such carriers to first obtain authorization from subscribers for preferred carrier changes and then to verify that authorization. The current rules also require IXCs to verify all PIC changes using either a written LOA or, if the carrier has used telemarketing to solicit the customer, one of the following four procedures: (1) obtain an LOA from the subscriber; (2) receive confirmation from the subscriber via a call from the subscriber to a toll-free number provided exclusively for the purpose of confirming change orders electronically; (3) use an independent third party to verify the subscriber's order; or (4) send an information package, also known as the "welcome package," that includes a postage-paid postcard which the subscriber can use to deny, cancel, or confirm a service order, and wait 14 days after mailing the packet before submitting the PIC change order. A carrier that makes unauthorized changes to a subscriber's selection of telecommunications provider and charges rates higher than that of the authorized carrier must re-rate that subscriber's bill to ensure that the subscriber pays no more than what he or she would have paid the authorized carrier. The unauthorized carrier must also pay for any carrier-change charges assessed by the LEC. 12. As part of the 1996 Act, Congress for the first time established a specific statutory prohibition against "slamming." Section 258(a) of the Act makes it unlawful for any telecommunications carrier to "submit or execute a change in a subscriber's selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the Commission shall prescribe." The section further provides: Any telecommunications carrier that violates the verification procedures described in subsection (a) and that collects charges for telephone exchange service or telephone toll service from a subscriber shall be liable to the carrier previously selected by the subscriber in an amount equal to all charges paid by such subscriber after such violation. The enactment of section 258 by the 1996 Act necessitates that we reexamine our existing slamming rules to ensure that they conform with Congress' directives. The 1996 Act is intended, inter alia, to encourage competition in the provision of local exchange services and further enhance competition in the long distance market. In the environment created by the 1996 Act, LECs, IXCs, and other carriers will compete with each other to provide local exchange, intraLATA toll, interLATA toll, intrastate, and interstate services. Furthermore, because LECs will be competing with other carriers for consumers' local and long distance services, LECs may not be neutral third parties in implementing carrier changes. Because the anti-slamming provisions of section 258 apply to all telecommunications carriers, we must assess whether existing safeguards against slamming are adequate in a marketplace in which carriers can compete for local as well as long distance service customers, and where there may no longer be a disinterested party executing changes in subscribers' telecommunications carriers. III. DISCUSSION 13. Until now, our efforts to deter slamming have concentrated on enhancing the verification of carrier changes and on issuing monetary forfeitures against carriers who violate our verification rules. Despite the safeguards established by our existing rules, however, the problem of slamming has continued to grow. While some unauthorized changes may be inadvertent, and while it is too early to measure the impact of our recently heightened prosecution of slamming carriers, our experience in this area leads us to the inescapable conclusion that slamming has become a profitable business for many carriers. For this reason, the rules we adopt in this Order not only seek to strengthen the existing verification rules, but are more broadly designed to prevent carriers from making any profits when they slam consumers. 14. An essential element of this effort is the adoption of rules absolving consumers of liability to slamming carriers for charges incurred for a limited period of time after an unauthorized change. Where a subscriber does pay the slamming carrier, section 258 requires the slamming carrier to pay the charges it collects from the slammed subscriber to the properly authorized carrier. Hence, carriers that violate our verification procedures will either be deprived of, or be required to forfeit, revenues they heretofore have been able to keep. We have seen many cases where unscrupulous carriers have generated huge profits through slamming, only to disappear or declare bankruptcy when finally caught. One way to deter this behavior is to ensure that these carriers never receive any money from slammed consumers in the first instance. Moreover, even where carriers have not engaged in an intentional pattern of slamming, the strongest incentive for such carriers to implement strictly our verification rules is to know that failure to comply may mean that they will not get paid for any services rendered after an unauthorized switch. 15. Our new rules confront the problem of slamming in three ways by (1) adopting liability provisions that take the economic incentive out of slamming; (2) adopting more stringent verification requirements; and (3) broadening the scope of our rules. We conclude that this rigorous approach will combat effectively the slamming problem in the long distance telecommunications market, as well as prevent slamming occurrences as competition develops in the local exchange and intraLATA toll markets. The majority of commenters support our approach as outlined in the Further Notice and Order. Some commenters contend that we should not adopt additional slamming rules without further analysis of the causes of slamming. Our experience with consumer slamming complaints, however, as well as the very thorough record that has been compiled in this docket, have supplied us with abundant evidence concerning the problem and causes of slamming to adopt the rules contained herein. 16. We emphasize that the rules we adopt strike a balance between our goals of protecting consumers and of promoting competition. Rules that make it more difficult for carriers to slam consumers may also make it more difficult for carriers to gain new subscribers in a legitimate manner. Nonetheless, our ultimate concern in this proceeding is protecting consumers and consumer choice. We can not allow this fraudulent practice to grow unabated as it has in recent years. Moreover, for healthy competition to flourish, consumer choice must be protected vigorously. Thus, the slamming rules we adopt herein operate to foster meaningful competition that is not at the expense of important consumer protection. A. Section 258(b) Liability 1. Liability of the Slammed Subscriber a. Background 17. In the Further Notice and Order, the Commission stated that section 258(b) of the Act makes it clear that any unauthorized carrier is not entitled to keep any revenue gained through slamming. The Commission noted, however, that the Act did not address whether subscribers must pay any unpaid charges assessed by an unauthorized carrier to the properly authorized carrier, or whether charges collected from the unauthorized carrier should be returned to the subscriber who has been slammed. In the 1995 Report and Order, the Commission supported the policy of allowing unauthorized IXCs to collect from the consumer the amount of charges the consumer would have paid if the preferred carrier had never been changed. The National Association of Attorneys General (NAAG), in its petition for reconsideration of the 1995 Report and Order, urged the Commission to consider absolving slammed consumers of all liability for charges assessed by unauthorized IXCs. In the subsequent Further Notice and Order, the Commission concluded that it did not have sufficient information to determine whether total forgiveness of charges would further deter IXCs from slamming and sought further comment on the issue. b. Discussion 18. Our experience with slamming and the failure of our existing rules to stem the growth of this fraudulent practice convince us that strong prophylactic measures are necessary to ensure that consumers' choices of telecommunications service providers are respected. We therefore conclude that subscribers should not have to pay for slamming charges, a change that should prevent carriers from gaining any revenues from slamming activities. Moreover, consumers deserve some compensation for the inconvenience and confusion they experience from being slammed. Therefore we adopt a rule absolving consumers of liability for unpaid charges assessed by unauthorized carriers for 30 days after an unauthorized carrier change has occurred. Any carrier that the subscriber calls to report the unauthorized change, whether that entity is the subscriber's LEC, unauthorized carrier, or authorized carrier, is required to inform the subscriber that he or she is not required to pay for any slamming charges incurred for the first 30 days after the unauthorized change. If a subscriber pays charges to his or her unauthorized carrier, however, such subscriber's liability will be limited to the amount he or she would have paid the authorized carrier. We note that, as explained fully in the discussion on Third Party Administrator for Dispute Resolution, we delay the effective date of the liability rules for 90 days to provide interested carriers an opportunity to implement a dispute resolution mechanism involving an independent administrator. 19. Many state commissions and consumer protection organizations support absolving the consumer of liability for charges incurred after being slammed. We agree with those commenters, such as NCL, NAAG, and the Virginia Commission, that absolving slammed consumers of liability for charges will discourage slamming by taking the profit out of this fraudulent practice. Specifically, our liability rules that provide for limited absolution for slamming charges will deter slamming by minimizing the opportunity for unauthorized carriers to physically take control of slamming profits for any period of time. Even though section 258(b) requires the unauthorized carrier to remit to the authorized carrier all charges collected from the subscriber, this does not mean that the unauthorized carrier will be deprived of revenue, nor that the authorized carrier will receive such money. Several commenters state that absolution is preferable to using the remedy in section 258(b) because the slamming carrier is likely to refuse to remit revenues to the authorized carrier. In practice, unscrupulous carriers will have many excuses for not remitting any money to authorized carriers, including going bankrupt or simply disappearing. We have seen several carriers go bankrupt during or after our investigations for slamming violations, and have concerns that such carriers will simply reappear in another location, under a different name, and continue to slam consumers. We have also seen carriers change business locations frequently in order to avoid liability for slamming. We find, based on our experience, that unscrupulous carriers will attempt to take such evasive actions to avoid having to pay financial penalties to authorized carriers for slamming. Unscrupulous carriers would therefore be able to continue to profit from slamming if we require the consumer to pay the unauthorized carrier. Eliminating the cash flow to slamming carriers in the first instance prevents slamming carriers from keeping any slamming profits. 20. This rule also makes slamming unprofitable because it provides consumers with incentive to scrutinize their monthly telephone bills early and carefully. By encouraging consumers to police their own telephone bills, this rule enlists the public's help in detecting occurrences of slamming. By providing subscribers with a remedy that is easy to administer, i.e., consumers simply refuse to pay telephone bills containing slamming charges, we provide a quick and simple process to stop slamming. Although requiring consumers to pay charges to their authorized carriers would also prevent slamming carriers from obtaining slamming profits, this would involve a more complicated mechanism. Payment of slamming charges to authorized carriers at the rates of the authorized carriers would require re-rating of bills in every instance of slamming. It also would result in the authorized carrier being paid for services it never provided. Absolution provides consumers with the incentive to help themselves with an easily administered remedy. For these reasons, we believe that absolving consumers of liability for slamming charges will be far more effective than requiring them to pay charges to their authorized carriers, as many commenters suggested. 21. We also choose to absolve consumers of liability for a limited time because it provides some compensation to consumers for the time, effort, and frustration they experience as a result of being slammed, as well as for the loss of choice and privacy. We find that consumers suffer a great deal of confusion and outrage upon discovering that they have been slammed. We further find that a consumer often experiences great difficulty and inconvenience in correcting the slamming situation and being restored to his or her rightful carrier. Because slamming inflicts these burdens on consumers, slammed consumers should receive reparation for their troubles. 22. We balance this need to compensate the consumer, however, against the possibility of consumers improperly reporting that they were slammed in order to obtain free telephone service. The likelihood of this type of fraud is the main objection of most carriers to a rule absolving consumers of liability. To address such concerns about fraud, we point out that subscribers may only be absolved of liability if they have in fact been slammed. Carriers can, as described below, produce proof of valid verification to refute a subscriber's claim that he or she was slammed. This approach has the added benefit of strengthening carriers' incentive to comply strictly with our verification procedures in order to protect themselves from inappropriate claims by consumers that they have been slammed. Our rules will motivate carriers that submit legitimate carrier changes not only to verify carrier changes properly, but also to use forms of verification that provide solid evidence that a consumer has authorized and verified a carrier change. Specifically, we set forth in the Investigation and Reimbursement Procedures section of this Order the mechanism by which a carrier may refute a subscriber's claim of being slammed. 23. In the Further Notice and Order, the Commission asked commenters to consider, if subscribers were to be absolved of liability for unpaid charges, whether it should limit the time during which subscribers would not be liable for charges, and it asked for recommendations regarding what that time should be. Commenters state that if consumers are to be absolved of liability for charges incurred after being slammed, it should be for only a limited time. We agree that restricting the period of time for which the consumer is absolved of charges not only limits opportunities for consumers to take possible unfair advantage of carriers, but also provides incentive for consumers to review their bills carefully and promptly. We limit the absolution period to 30 days after an unauthorized change has occurred. Several carriers support a 30-day limit to absolution. To the extent that the subscriber receives additional charges from the slamming carrier after the 30-day absolution period, the subscriber shall pay such charges to the authorized carrier at the authorized carrier's rates after the authorized carrier has re- rated such charges. In most cases, the consumer will discover the unauthorized change upon receipt of the first monthly bill after the unauthorized change occurs, because that bill generally provides the consumer with the first notice that a carrier change has been made. The balanced approach we adopt today encourages consumers to become more vigilant in detecting slamming by giving them incentive to review their telephone bills carefully. 24. The limitation on absolution for the first 30 days after an unauthorized change may be waived by the Commission in circumstances where it is necessary to extend the period of absolution in order to provide a subscriber with a fair and equitable resolution. Waiver of the Commission's rules is appropriate only if special circumstances warrant a deviation from the general rule, and such deviation will serve the public interest. As explained above, we conclude that a 30-day limit is reasonable because subscribers generally discover within one month that an unauthorized change has occurred. The special circumstances that may affect this period of absolution would likely be practices used to delay the subscriber's realization of the carrier change. For example, a waiver of the 30-day limit might be appropriate if the subscriber's telephone bill failed to provide reasonable notice to the subscriber of a carrier change, or if the slamming carrier did not have a monthly billing cycle. Another factor that could extend the absolution period would be a situation in which the slamming carrier did not immediately bill the subscriber for calls made, but instead withheld charges for several months and placed all such charges on a later bill, such that the subscriber did not realize that a slam occurred until months after the fact. We note, however, that we expect these instances to be infrequent and will not grant waivers of the 30-day limit unless the request meets all of the criteria for waivers. 25. We recognize that in 1995 the Commission decided that slammed consumers should pay their unauthorized carriers for charges incurred after being slammed at the rate they would have paid if the unauthorized change had never occurred. The Commission based its decision on the fact that the slammed subscriber does receive a service, even though the service is provided by a carrier not of the consumer's choosing. The Commission recognized, however, that this solution "may not be the best deterrent against slamming . . . if 'slamming' continues unabated . . . we may have to revisit this question at a later date." Because slamming continues to be a major consumer problem, we now find that our approach to consumer liability must be revised. We conclude that the most effective deterrent to slamming is to absolve consumers of liability for a limited time. This will deprive slamming carriers of revenue while creating incentives both for consumers to read their telephone bills and for carriers to ensure that carrier changes are made in accordance with our rules. 26. Several carriers argue that slammed consumers should pay all charges because absolving them of liability would give consumers a windfall. We disagree. This argument fails to recognize that consumers who are slammed have suffered both the personal intrusion of having their choices denied, as well as the imposition of having to remedy the unauthorized change. That is, the consumer has been the subject of fraud, or even mistake, on the part of the unauthorized carrier and deserves some compensation for the intrusion, as well as for the time and effort expended in reinstating the preferred carrier. 27. Furthermore, we agree with those commenters that state that a limited absolution rule does not substantially harm the authorized carrier, who has not provided service to the slammed consumer during the period of absolution. In the Further Notice and Order, the Commission sought comment on the effect of absolving slammed subscribers of liability for unpaid charges, in light of the fact that the authorized carrier might be deprived of foregone revenue. We now conclude that, although the authorized carrier is deprived of profits that it would have received but for the unauthorized change, it also has not actually provided any service to the subscriber and it appears that the authorized carrier is not out of pocket for most costs that it would have borne if it had in fact provided service. This includes not only the cost of transmission, but other costs of providing service, such as access charges and other fees. We emphasize that, should the authorized carrier conclude that it is entitled to any compensation from the slamming carrier that it does not receive under our rules, such as lost profits or other damages, the authorized carrier has recourse against the slamming carrier in the appropriate forum, such as before the Commission or in a state or federal court. We conclude that the approach to liability we adopt herein strikes a reasonable balance between the interests of carriers and consumers. We also note that, in the Further Notice of Proposed Rulemaking section of this Order, we propose to permit the authorized carrier to collect from the slamming carrier either: (1) double the amount of charges paid by a slammed subscriber, or (2) the amount for which a subscriber has been absolved of liability. This proposal would provide limited absolution for all consumers -- thus satisfying Congress' policy that "consumers be made whole" -- while at the same time ensuring that authorized carriers are no worse off as a result of an unauthorized change. 28. Several commenters, including AT&T and GTE, state that consumers should pay for services received in order to give effect to the remedy in section 258(b), which requires unauthorized carriers to give authorized carriers all charges collected from slammed subscribers. By its terms, that remedy applies only when the consumer has in fact made payment to the unauthorized carrier. Section 258(b) does not require the consumer to pay either the authorized carrier or the unauthorized carrier. As discussed in the following section, if a subscriber does pay his or her unauthorized carrier, the authorized carrier will be entitled to collect that amount from the unauthorized carrier in accordance with section 258(b). Although we recognize that encouraging subscribers not to pay the slamming carrier may reduce the amounts authorized carriers may collect from slamming carriers pursuant to section 258(b), absolving subscribers of the responsibility to pay their slamming carriers in the first instance does not abrogate the section 258(b) remedy for authorized carriers. 29. We do recognize that by absolving the consumer of liability for a certain period of time, our remedy goes beyond the specific statutory remedy that is explicitly set forth in section 258(b) of the Act. Section 258(b) also states, however, that "the remedies provided by this subsection are in addition to any other remedies available by law." Absolving slammed subscribers of liability for a limited period of time is within the Commission's authority under section 201(b) to "prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of [the] Act," as well as under section 4(i) to "perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with [the] Act, as may be necessary in the execution of its functions." Pursuant to such authority, we have determined that the most effective method of deterring slamming is to deprive carriers of revenue from slamming by absolving consumers of liability for 30 days after the unauthorized change. As we have already stated, by enabling the consumer to forgo payment to the slamming carrier, we limit the opportunities for slamming carriers to profit from slamming. Furthermore, the absolution remedy we adopt is not inconsistent with section 258 because the section 258(b) remedy only applies to charges that have been paid to the slamming carrier and does not reference charges that have not been paid. 30. We also recognize that, to the extent that our rules permit authorized carriers to collect some charges, at their rates, for services provided by slamming carriers beyond the 30-day absolution period, these requirements are not in accordance with Section 203(c), which requires carriers to collect charges in accordance with their filed tariffs. Because tariffs only permit carriers to collect charges for service they actually provide, our new rule requiring authorized carriers to collect charges for service provided by slamming carriers would not be in accordance with their tariffs. Section 10 of the Act, however, permits the Commission to forbear from applying section 203 tariff requirements to interstate, domestic, interexchange carriers if the Commission determines that three statutory forbearance criteria are satisfied. We conclude that these criteria are met. 31. First, we find that enforcement of section 203(c) in this instance is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that carrier or service are just and reasonable and are not unjustly or unreasonably discriminatory. The circumstances under which we permit the authorized carrier to collect charges that are not in accordance with its tariff are very limited. In fact, by requiring the subscriber to pay the authorized carrier rather than the slamming carrier, our rule helps to deter the unlawful, unjust, and unreasonable practices of slamming carriers by preventing them from making profits from slammed consumers. Under these limited circumstances, our rule is not necessary to ensure that the authorized carrier's charges, practices, classifications, or regulations from being just and reasonable, and not unjustly or unreasonably discriminatory. 32. Second, enforcement of section 203(c) under these circumstances is not necessary for the protection of consumers. On the contrary, requiring subscribers to pay their slamming carriers rather than their authorized carriers would be harmful to consumers. Our rule operates to protect consumers from the abusive practices of slamming carriers by depriving such carriers of slamming profits. Therefore enforcement of section 203(c) in this particular situation is not necessary to protect consumers. 33. Third, forbearance from applying section 203(c) in this instance is consistent with the public interest. In making this determination, section 10(b) also requires us to consider whether forbearance will promote competitive market conditions, including the extent to which forbearance will enhance competition among providers of telecommunications services. We conclude that permitting the subscriber to pay the authorized carrier for charges imposed by slamming carriers after the 30-day absolution period is consistent with the public interest. Slamming distorts competition in the marketplace because it rewards carriers who employ fraud and deceit over carriers that are conducting lawful activities. Slamming also deprives a consumer of choice. Because our rule deters slamming by making slamming unprofitable, it promotes the public interest, including enhancing competition for telecommunications services. 2. When the Slammed Subscriber Pays the Unauthorized Carrier 34. We concluded above that a slammed subscriber is not liable for charges incurred during the first 30 days after an unauthorized carrier change. In the event that a subscriber nevertheless pays the unauthorized carrier for slamming charges, two rules shall govern. First, the unauthorized carrier is obligated to remit to the authorized carrier all charges paid by the subscriber. Second, after receiving this amount from the unauthorized carrier, the authorized carrier shall provide the subscriber with a refund or credit for any amounts the subscriber paid in excess of what he or she would have paid the authorized carrier absent the unauthorized change. a. Liability of the Unauthorized Carrier 35. We adopt the rule proposed in the Further Notice and Order to provide that any telecommunications carrier that violates the Commission's verification procedures and that collects charges for telecommunications service from a subscriber shall be liable to the subscriber's properly authorized carrier in an amount equal to all charges paid by such subscriber after such violation. This remedy is directed specifically by the language in section 258(b) of the Act. All of the parties commenting on the proposed rule support this approach. Consistent with the discussion above, this rule will apply in situations in which the subscriber has paid charges to an unauthorized carrier. 36. We also impose certain additional penalties on unauthorized carriers. As proposed in the Further Notice and Order, we also require the unauthorized carrier to pay for reasonable billing and collection expenses, including attorneys' fees, incurred by the authorized carrier in collecting charges from the unauthorized carrier. Several commenters support the imposition of these additional penalties. Although section 258 only requires the unauthorized carrier to remit to the authorized carrier all charges collected from the slammed subscriber, we conclude that we have authority to grant the authorized carrier additional remedies. Requiring the unauthorized carrier to pay for expenses incurred by the authorized carrier in collecting charges from the unauthorized carrier ensures that the authorized carrier does not suffer further economic loss because of the unauthorized change, and adds an economic incentive for the authorized carrier to seek reimbursement for slamming. Additionally, since the rule increases the penalty for slamming, the unauthorized carrier may facilitate reimbursement to the authorized carrier in order to avoid payment of any additional expenses for billing and collection. Although several commenters support this rule, several other commenters object, arguing that such expenses would be difficult to determine. We disagree because we find that carriers are sophisticated business entities that are well aware of the expenses of collection, including litigation costs. Moreover, we believe that collection expenses likely will become standardized among carriers in the relatively near future. More importantly, we conclude that an unscrupulous carrier should bear full financial responsibility for the costs of its unlawful actions. 37. We also require the unauthorized carrier to pay for the expenses of restoring the subscriber to his or her authorized carrier. We have previously stated that where an interexchange carrier submits a request that is disputed by a subscriber and the interexchange carrier is unable to produce verification of that subscriber's change request, the LEC must assess the applicable change charge against that interexchange carrier. We codify and expand our prior requirement to encompass any carrier, not just an interexchange carrier, that is unable to provide verification of a subscriber's change request. By requiring the unauthorized carrier to pay the change charge to the authorized carrier, we ensure that neither the authorized carrier nor the subscriber incurs additional expenses in restoring the subscriber to his or her preferred carrier. Furthermore, requiring the unauthorized carrier to pay these additional charges will serve as a further deterrent to unauthorized changes. b. Subscriber Refunds or Credits 38. Our new rules will enable subscribers to prevent carriers from profiting by absolving them of liability for the first 30 days after an unauthorized change. We conclude, however, that the specific provisions of section 258(b) appear to prevent us from absolving consumers of liability to the extent that they have already made payments to their unauthorized carriers. We conclude that Congress intended that subscribers who pay for slamming charges should pay no more than they would have paid to their authorized carriers for the same service had they not been slammed. Indeed, the legislative history reflects Congressional intent that "the Commission's rules should also provide that consumers be made whole." Therefore our rules will require the authorized carrier to refund or credit the subscriber for any charges collected from the unauthorized carrier in excess of what the subscriber would have paid the authorized carrier absent the switch. This approach is consistent with the Commission's current rules that ensure that the slammed subscriber pays no more for service than he or she would have paid before the unauthorized switch. Furthermore, we conclude that requiring a refund of the excess amounts paid by the subscriber does not harm the authorized carrier who has in fact received payment for service that it did not provide to the subscriber. Should the authorized carrier conclude that it is suffering some financial harm, nothing in our rules would preclude the carrier from filing a claim against the unauthorized carrier for lost profits or other damages. 39. We require the authorized carrier to refund or credit the subscriber with any amounts the subscriber paid in excess of the authorized carrier's rates, after the authorized carrier has received from the slamming carrier all amounts paid by the subscriber to the slamming carrier. This will prevent the slammed consumer from being financially harmed by the unauthorized change, in accordance with the Commission's belief, as stated in the Further Notice and Order, that a slammed subscriber should receive prompt and full reparation for harm suffered as a consequence of unauthorized carrier changes. We note that section 258 only requires that the unauthorized carrier remit to the authorized carrier all charges paid by the subscriber after the unauthorized change. We conclude that we have authority to impose these requirements on authorized carriers to prevent subscribers from suffering further harm from slamming. Moreover, the legislative history, which mentions restoring lost premiums to slammed subscribers, demonstrates Congressional concern that subscribers do not suffer losses due to being slammed. The authorized carrier may keep the amount that it would have earned absent the unauthorized switch and refund or credit the difference to the subscriber. 40. If the authorized carrier fails to collect the charges paid by the subscriber from the unauthorized carrier, the authorized carrier is not required to provide a refund or credit to the subscriber. The authorized carrier, who has done no wrong, should not be penalized by having to provide the subscriber with a refund paid out of the authorized carrier's pocket. The authorized carrier, however, has an affirmative obligation to notify the subscriber in a timely fashion of its failure to collect the charges paid by the subscriber to the unauthorized carrier. We require the authorized carrier to notify the subscriber within 60 days after the subscriber has notified the authorized carrier of an unauthorized change, if the authorized carrier has failed to collect from the unauthorized carrier the charges paid by the slammed subscriber. This failure to collect may be due to the slamming carrier's refusal to cooperate, or it may stem from the authorized carrier's decision not to pursue its claims against the slamming carrier. Upon receipt of the notification, the subscriber will have the opportunity to pursue a claim against the slamming carrier for a full refund of all amounts paid to the slamming carrier. The subscriber is entitled to the entire amount paid, rather than merely a refund or credit of charges paid in excess of the authorized carrier's rates. This is because it is the subscriber who is collecting the charges from the slamming carrier rather than the authorized carrier. The language of section 258(b) generally prevents the subscriber from being absolved of liability for charges paid because it indicates that the authorized carrier may make a claim for, and keep, amounts paid to the slamming carrier. Where the authorized carrier has failed in collecting charges from the slamming carrier, however, the language of section 258(b) would not apply. Therefore the subscriber, who is not bound by the carrier remedy in section 258(b), would be entitled to a refund from the slamming carrier of all slamming charges paid. If the subscriber has difficulty in obtaining this refund from the slamming carrier, the subscriber has the option of filing a complaint with the Commission pursuant to section 208. We anticipate that, with continued consumer awareness and education about our slamming liability rules, fewer and fewer consumers will find themselves in the situation of having paid their slamming carriers. We are confident that eventually slamming carriers will be completely unable to profit because consumers will refuse to pay them. 3. Investigation and Reimbursement Procedures a. When the Subscriber Has Not Paid the Unauthorized Carrier 41. A subscriber may refuse to pay any charges imposed by the slamming carrier for 30 days after the unauthorized change occurred. As stated above, we conclude that this simple remedy will prevent slamming carriers from profiting and will also compensate the consumer for the confusion and inconvenience of being slammed. The record supports, however, giving the carrier who has been deprived of charges the opportunity to refute a subscriber's slamming claim. We therefore impose the following mechanism to limit the ability of subscribers to fraudulently claim that they have been slammed. 42. After the subscriber has reported an allegedly unauthorized change and requested to be switched back to the authorized carrier, the slamming carrier shall remove from the subscriber's bill, whether billed through a LEC or otherwise, all charges that were incurred for the first 30 days after the unauthorized change occurred. Several commenters stated that the carrier that is accused of slamming must have the opportunity to provide proof of verification. Therefore, if the allegedly unauthorized carrier has proof of the consumer's valid verification of authorization to change to it, however, then such carrier may make a claim to the consumer's originally authorized carrier. Specifically, the allegedly unauthorized carrier shall, within 30 days of the subscriber's return to the originally authorized carrier, submit to the originally authorized carrier a claim for the amount of charges for which the consumer was absolved, along with proof of the subscriber's verification of the disputed carrier change. The proof of verification should contain clear and convincing evidence that the subscriber knowingly authorized the carrier change, such as a written LOA or audiotape of an independent third party verification. The authorized carrier shall conduct a reasonable and neutral investigation of the claim, including, where appropriate, contacting the subscriber and the carrier making the claim. Within 60 days after receipt of the claim and the proof of verification, the originally authorized carrier shall issue a decision to the subscriber and the carrier making the claim. We note here that, regardless of the originally authorized carrier's decision on the validity of the disputed change, that carrier shall remain the subscriber's authorized carrier, since the subscriber has validly switched back to it. If the originally authorized carrier decides that the subscriber did in fact authorize a carrier change to the carrier making the claim, it shall place on the subscriber's bill a charge equal to the amount of charges for which the subscriber was previously absolved. Upon receiving this amount, the originally authorized carrier shall forward this amount to the carrier making the claim. If the authorized carrier determines that the subscriber was slammed by the carrier filing the claim, the subscriber shall not be required to make any payments for the charges for which he or she was absolved. If either the subscriber or the carrier making the claim believes that the authorized carrier's investigation or adjudication of the dispute was in any way improper or wrong, then it has the option of filing a section 208 complaint. b. When the Subscriber Has Paid the Unauthorized Carrier 43. When the subscriber has paid charges to the slamming carrier, the following procedures shall apply. First, we require the authorized carrier to submit to the allegedly unauthorized carrier, within 30 days of notification of an unauthorized change, a request for proof of verification of the subscriber's requested carrier change. Our reimbursement procedure, as originally proposed in the Further Notice and Order, required the authorized carrier to make demand for payment on the unauthorized carrier within ten days of notification from its subscriber of an unauthorized change. Some commenters contend, however, that the authorized carrier may need more time than the proposed ten days. We agree that, under certain circumstances, a carrier may need more than ten days to make demand on an allegedly unauthorized carrier. Such circumstances could include, for example, situations in which the authorized carrier has difficulty in determining the identity of the unauthorized carrier or in contacting the unauthorized carrier. Therefore, we require the authorized carrier to make demand on the allegedly unauthorized carrier within 30 days, which gives the authorized carrier sufficient time to prepare its demand while still enabling both carriers to resolve the dispute in a timely manner, thus permitting the authorized carrier to resolve issues of overcharges and lost premiums as quickly as possible for the subscriber. 44. Second, we require the allegedly unauthorized carrier to provide proof of verification, such as a copy of a written LOA or an audiotape recording of an independent third party verifier, to the authorized carrier within ten days of the authorized carrier's request. If the allegedly unauthorized carrier does provide proof of verification, consistent with the Commission's verification procedures, of the disputed carrier change request, then the burden shifts to the authorized carrier to prove that an unauthorized change occurred. The proof of verification must provide clear and convincing evidence that the subscriber provided knowing authorization of a carrier change. 45. If the allegedly unauthorized carrier cannot provide proof of verification, then it must provide to the authorized carrier, also within ten days of the authorized carrier's request for proof of verification, a copy of the subscriber's bill, an amount equal to any charge required to return the subscriber to his or her authorized carrier, and an amount equal to any charges paid by the subscriber, if applicable. In adopting these rules, we take into account several of the commenters' viewpoints. AT&T suggests that the unauthorized carrier be required to provide proof of compliance with the Commission's verification rules by a certain deadline, while TOPC and U S West suggest that the unauthorized carrier be required to forward all bills and money paid by a certain deadline. We therefore provide the allegedly unauthorized carrier with the opportunity to prove that it did comply with our verification rules. We also require the allegedly unauthorized carrier to respond by a set deadline. If it is determined that an unauthorized change has occurred, timely receipt by the authorized carrier of the subscriber's bill and any charges paid will enable the authorized carrier to provide a quick resolution for the subscriber. In the event that the authorized carrier is unable to obtain an appropriate response from the slamming carrier, the authorized carrier may bring an action in federal or state court, where appropriate, or before the Commission, against the slamming carrier. Furthermore, as discussed above, the authorized carrier must also notify the subscriber of its failure to collect charges within 60 days after the subscriber has notified the authorized carrier of an unauthorized change, so that the subscriber may also attempt to collect a full refund of all amounts paid to the slamming carrier for charges incurred during the first 30 days after the unauthorized change. 46. We note that NAAG suggests that the unauthorized carrier's duty to send information and reimbursement to the authorized carrier should be triggered additionally by notification from the LEC, another carrier, or a government agency. ACTA opposes expanding the number of parties who can set the reimbursement procedure in motion because the only relevant parties to the dispute are the unauthorized carrier, the properly authorized carrier, and the subscriber. We find that the authorized carrier should be the party to make demand on the unauthorized carrier, although the authorized carrier may do so upon notification by the subscriber or the executing carrier. We find that confusion could result if unauthorized carriers are required to respond to several different parties within the deadlines we have set. This rule does not negate any other obligations an unauthorized carrier may have to respond to service of a complaint, such as the obligation to respond within 30 days to a notice of a consumer complaint issued by the Commission, pursuant to section 208 of the Act. We also do not purport to preempt the activities of states who take action against slamming carriers. 3. Restoration of Premiums 47. Premiums are bonuses, such as frequent flier miles, that are given to subscribers as rewards for each dollar spent on telecommunications services. The Commission noted in the Further Notice and Order that although section 258 does not specifically address the restoration of premiums, the legislative history states that "the Commission's rules should require that carriers guilty of 'slamming' should be liable for premiums, including travel bonuses, that would otherwise have been earned by telephone subscribers but were not earned due to the violation of the Commission's rules. . . ." We find, based on the legislative history, that Congress intended for subscribers to be reinstated in their premium programs and receive restoration of premiums that were lost due to slamming. 48. We require an authorized carrier to reinstate the subscriber in any premium program in which the subscriber was enrolled prior to being slammed, if that subscriber's participation in the premium program was terminated because of the unauthorized change. The record also supports a requirement that the authorized carrier restore to the subscriber any premiums that the subscriber lost due to slamming if a subscriber has paid the unauthorized carrier for slamming charges. Once an authorized carrier receives from the slamming carrier all charges that the subscriber paid, the authorized carrier has been made whole and is obligated to restore the subscriber's premiums. Since the authorized carrier in this event has received at least what it would have been entitled to absent the slam, they are no worse off from having to provide any premiums that subscribers would have received. We emphasize that the authorized carrier is entitled to receive from the slamming carrier charges paid by the slammed subscriber, and we expect that authorized carriers will make every effort to pursue their claims against slamming carriers. In the event that an authorized carrier is unable to recover from the unauthorized carrier charges that were paid by the subscriber, however, the authorized carrier is still required to restore the subscriber's premiums. A subscriber who has paid slamming charges deserves to receive the premiums that would have accompanied such payment in the absence of the unauthorized carrier change. Although this rule may result in some authorized carriers having to restore premiums without being compensated, we conclude that this is necessary to fulfill the intent of Congress and to prevent the subscriber from suffering any losses from being slammed. The authorized carrier is the only entity that is in a position to compensate subscribers for lost premiums and we believe that a carrier's cost of providing premiums is minimal. Furthermore, an authorized carrier that knows that it must restore premiums to subscribers who have paid slamming charges will make greater efforts to recover such charges from the unauthorized carrier. Encouraging carriers to pursue their claims against unauthorized carriers will increase enforcement efforts against all carriers who make unauthorized changes. On the other hand, an authorized carrier is not required to restore any premiums lost by that subscriber if the subscriber has not paid for the charges incurred after being slammed. Several commenters agree with our view that premiums should not be restored to subscribers who do not pay any charges. To do otherwise would grant the subscriber a windfall. It is sufficient that the subscriber be reinstated in any premium program from which he or she was terminated due to the unauthorized change. 49. Although the Commission proposed in the Further Notice and Order to require the unauthorized carrier to remit to the properly authorized carrier an amount equal to the value of premiums to be restored to the subscriber, we find that this is not necessary to enable the authorized carrier to restore premiums to its subscribers. If the unauthorized change had never occurred, the authorized carrier would have provided the premium to the subscriber on the basis of the subscriber's payment to the authorized carrier. Therefore the authorized carrier is no worse off than it would have been if it is required to restore subscriber premiums upon receipt of the amount paid by the subscriber to the unauthorized carrier. In other words, we believe that charges for telephone service incorporate the cost of any premiums that may be given to subscribers. The authorized carrier does not need to collect from the slamming carrier both the charges paid by the subscriber and an amount equal to the cost of the premiums because the cost of the premiums has already been incorporated into the charges paid by the subscriber. 4. Liability for Inadvertent Unauthorized Changes 50. We reiterate that the statute and our rules impose liability for any unauthorized change in a subscriber's preferred carrier, whether intentional or inadvertent. Section 258 of the Act makes it illegal for a carrier to "submit or execute a change in a subscriber's selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the Commission shall prescribe." Although several commenters assert that our rules should apply only to intentional acts that result in slamming, the statutory language does not establish an intent element for a violation of section 258. Several commenters, such as Ameritech, BellSouth, and the North Carolina Commission, support the application of a strict liability standard, in which a carrier would be liable for slamming if it was responsible for an unauthorized change, regardless of whether the unauthorized carrier did so intentionally. We agree that such a strict liability standard is required by the statute. 51. GTE, Frontier, and U S WEST argue that imposing liability for actions that are not intentional or willful would abrogate common carriers' limited liability tariff provisions. We disagree because we cannot condone allowing carriers to protect themselves from liability for unlawful or fraudulent conduct through the use of tariff provisions. Furthermore, the language of section 258 prohibits all unauthorized carrier changes and does not impose any requirement that such carrier change be intentional. ACTA contends that defining slamming to include inadvertent acts is so vague that it "creates numerous constitutional concerns." ACTA contends that imposing liability on carriers who are merely negligent may infringe upon First Amendment rights because "it is feared that regulators are consciously stretching the definition of slamming to encompass those customers who switch carriers based on allegedly misleading marketing materials." We do not agree that, by including unintentional unauthorized changes, we are "stretching" the definition of slamming, since it is Congress, not the Commission, that has concluded that any unauthorized change in subscriber selection is considered to be slamming. Further, the First Amendment does not provide absolute immunity for negligent or other non-intentional conduct simply because that conduct relates to speech. ACTA also argues that defining slamming to include inadvertent acts is so vague that it will lead to selective enforcement. Again, we disagree. We conclude, in fact, that defining slamming to include all unauthorized carrier changes, whether inadvertent or intentional, is in fact a bright line standard that will minimize the threat of selective enforcement because it does not depend on divining the subjective intent of the violator. Finally, ACTA contends that requiring a carrier who is merely negligent to remit revenues to the former carrier would constitute a taking in violation of the Fifth Amendment, because that carrier has done no wrong. We disagree with ACTA that our rules impact any takings issues because we conclude that a slamming carrier has no property rights in the charges for unauthorized service collected from another carrier's subscribers. More importantly, ACTA's assertion is simply mistaken in assuming that a carrier committing a negligent act has not committed a "wrong." Negligent conduct gives rise to liability and in this context, carriers have an affirmative obligation to both obtain authorization from the consumer and to verify that authorization. Any failure to fully and accurately comply with these requirements is not acceptable under either the statute or our rules. 52. We conclude that holding carriers liable for both inadvertent and intentional unauthorized changes to subscribers' preferred carriers will reduce the overall incidence of slamming and is consistent with section 258. We find that the rights of the consumer and the authorized carrier to remedies for slamming should not be affected by whether the slam was an intentional or accidental act. Regardless of the intent, or lack thereof, behind the unauthorized change, the consumer and the authorized carrier have suffered injury. We agree with those commenters who assert that imposing liability for both inadvertent and intentional carrier changes will make all carriers more vigilant in preventing unauthorized carrier changes and provide carriers with incentive to correct errors in a speedy and efficient manner. We conclude that holding carriers liable for all unauthorized changes provides appropriate incentives for carriers to obtain authorization properly and to implement their verification procedures in a trustworthy manner. We recognize, however, that even with the greatest care, innocent mistakes will occur and may result in unauthorized changes. In such cases, we will take into consideration in any enforcement action the willfulness of the carriers involved. 4. Determining Liability Between Carriers 53. Section 258 requires both the submitting and executing telecommunications carriers to ensure that a carrier change comports with procedures established by the Commission to protect consumers and promote fair competition. Hence, to the extent that a submission or execution fails to comport with established procedures, the Act contemplates that either or both telecommunications carriers could be liable for an unauthorized change in a subscriber's telecommunications service. In order to avoid or minimize disputes over the source or cause of unauthorized carrier changes, or over liability for such carrier changes, we delineate the duties and obligations of the submitting and executing carriers. 54. As proposed in the Further Notice and Order, we adopt the following "but for" liability test: (1) where the submitting carrier submits a carrier change request that fails to comply with our rules and the executing carrier performs the change in accordance with the submission, only the submitting carrier is liable as an unauthorized carrier; (2) where the submitting carrier submits a change request that conforms with our rules and the executing carrier fails to execute the change in conformance with the submission, only the executing carrier is liable for the unauthorized change; and (3) finally, where the submitting carrier submits a carrier change request that fails to comply with our rules and the executing carrier fails to perform the change in accordance with the submission, only the submitting carrier is liable as an unauthorized carrier. The majority of parties commenting on this issue support the adoption of the proposed liability test. They agree that this test not only properly allocates liability for unauthorized carrier changes, but also establishes clear standards for when liability will be imposed. With these clear standards, carriers can take appropriate measures to protect themselves against liability and therefore reduce all instances of slamming, whether intentional or inadvertent. B. Third Party Administrator for Dispute Resolution 55. We have formulated several mechanisms in this Order that rely on the authorized carrier to provide relief to its slammed subscribers and to determine whether its subscriber was slammed. We believe that these requirements form a necessary baseline for ensuring that consumer problems arising from slamming are addressed adequately. We recognize, however, that some carriers may find it to be in their interest to make other mutually agreeable arrangements that might better serve to address our concerns. For instance, several carriers, particularly MCI, have indicated that they are willing and able to create quickly a system using an independent third party administrator to discharge carrier obligations for resolving disputes among carriers and subscribers with regard to slamming, including re-rating subscriber telephone bills and returning the subscriber to the proper carrier. We agree that this concept has merit. Consumers would benefit by having one point of contact to resolve slamming problems. Carriers would benefit by having a neutral body to resolve disputes regarding slamming liability. LECs would no longer be the recipients of angry phone calls from consumers who have been slammed by long distance carriers, while IXCs would be able to divert their resources to preventing slamming rather than resolving slamming disputes. Although this approach holds promise, we do not believe that we should abandon the rules adopted herein because they provide an appropriate mechanism for all carriers to render appropriate relief and dispute resolution to slammed consumers and carriers. We do, however, encourage carriers to work out such arrangements and we will be open to receiving requests for waiver of the liability provisions of our rules for carriers that agree to implement an acceptable alternative. 56. To afford carriers time to develop and implement an industry-funded independent dispute resolution mechanism and to file waiver requests as described above, we delay the effective date of the liability rules set forth above until 90 days after Federal Register publication of this Order. We note that this is not a substantial delay in light of the fact that, due to statutory constraints, the rules adopted in this Order, aside from the liability rules, will not be effective until 70 days after publication in the Federal Register. Any waiver request must be filed in a timely manner so that the Commission may evaluate and grant or deny such request in enough time to enable carriers to implement and utilize the mechanism by the effective date of the liability rules. In submitting waiver requests, carriers should bear in mind that we would be inclined to grant a waiver only if we are satisfied that any such neutral entity would fulfill the obligations imposed by our rules with regard to liability, in the timeframes specified in the rules. Therefore, for example, with regard to charges imposed on slammed subscribers, the neutral administrator would be charged with ensuring that subscribers are absolved of liability for unpaid charges assessed by slamming carriers for the first 30 days after an unauthorized carrier change has occurred and that such charges are removed from the subscribers' telephone bills. Any charges assessed by the slamming carrier after this 30-day period would be re-rated to the authorized carrier's rates, if lower, to enable the subscriber to pay the authorized carrier. If the subscriber pays the slamming carrier, the neutral administrator also would be charged with ensuring that the slamming carrier remits all such amounts to the authorized carrier, as well as reasonable billing and collection expenses and any applicable change charges. The administrator should also ensure that, under appropriate circumstances, the subscriber receives a refund or credit of any amounts paid in excess of what the authorized carrier would have charged, as well as premiums if applicable. If the administrator fails to collect any amounts from the slamming carrier, it would be responsible for informing the subscriber of his or her rights with respect to charges paid. The third party administrator should be the investigator and arbiter for resolving disputes where the slamming carrier claims that it had proper authorization and verification of the subscriber's request to change carriers. We note that nothing in the Commission's liability rules or the use of the third party administrator shall preclude a consumer or carrier from filing a section 208 complaint or other action in state or federal court. 57. We encourage carriers to develop a plan that ideally enables the consumer to resolve his or her slamming problem with a single contact. We find that it would be greatly beneficial to provide the consumer with the ability to call one entity to explain the slamming problem, and have that entity switch the consumer back to the proper carrier, re-rate bills, provide refunds, and determine whether a slam has occurred in the event that a carrier claims that a change was authorized. This would provide the consumer with a convenient way to undo the damage caused by slamming. Furthermore, having one neutral party administer these numerous and complicated tasks would lessen any confusion that might be caused if several parties -- the consumer, the slamming carrier, the LEC, and the authorized carrier -- attempt to resolve the same problem at the same time. C. Verification Rules 1. The Welcome Package a. Background 58. One of the verification procedures available to carriers under the Commission's rules is the "welcome package." As set forth in section 64.1100(d), after obtaining the subscriber's authorization to make a carrier change, the IXC may send the consumer a welcome package containing information and a prepaid postcard, which the customer can use to deny, cancel, or confirm the change order. Section 64.1100(d)(8) provides that the package must contain a statement that if the subscriber does not return the postcard, the subscriber's long distance service will be switched within 14 days after the date the package was mailed. In its petition for reconsideration of the 1995 Report and Order, the National Association of Attorneys General (NAAG) asked the Commission to eliminate the automatic switching of consumers who do not return a postcard to the IXC because this aspect of the welcome package was a "negative-option" LOA. A negative-option LOA, which is prohibited under section 64.1150(f), is an unsolicited notice of a pending carrier change that requires a consumer to take some action to avoid the change. In the Further Notice and Order, the Commission sought comment on whether the welcome package verification option should be eliminated because it could be used in the same manner as a negative-option LOA. b. Discussion 59. The record, as well as our experience with consumer complaints, supports our decision to eliminate the welcome package as a verification option. The welcome package has been a significant source of consumer complaints regarding slamming. As many of the commenters note, consumers often fail to receive the welcome package, or they throw it away as junk mail, or they have their service switched despite the fact that they returned postcards requesting that their service not be changed. The welcome package becomes a particularly ineffective verification method when used in combination with a misleading telemarketing script. If a subscriber does not even realize that he or she has agreed to change his or her service because the telemarketing solicitation was so misleading, that subscriber would reasonably conclude that the welcome package is a solicitation, not a confirmation, and thus discard it without examination. In all instances, however, we find that the welcome package is an ineffective verification method because it does not provide evidence, such as a written signature or recording, that the subscriber has in fact authorized a carrier change. Moreover, even where the subscriber actually receives and reads the information in a welcome package, this approach places an affirmative burden on the subscriber to avoid having his or her preferred carrier switched. As with negative-option LOAs, we do not think consumers should have to take affirmative action to avoid being slammed. 60. Despite these consumer problems, many of the IXCs contend that the welcome package option should be kept because it is an economical method of verification. These commenters argue that the welcome package does not work like a negative-option LOA because the welcome package confirms consent already given. Although we agreed in the Further Notice and Order that there is a distinction between a post-sale verification and a negative-option LOA, we stated that, in practice, this distinction is easily blurred because a welcome package can be used to switch a subscriber who has not previously consented to a carrier change. We have seen many instances where unscrupulous carriers used the welcome package as a negative-option LOA by sending it to consumers from whom they have not obtained prior consent, and where such oral consent was obtained based on false or misleading telemarketing pitches. Thus, the argument that the welcome package is a benign form of verification because it merely confirms consent already given begs the question of whether consent in fact has been given. Also, like negative-option LOAs, there is no evidence after the switch that the welcome package was ever received, or mailed for that matter, by the correct party or that the party to whom it was sent was in fact authorized to change the preferred carrier for that telephone line. 61. We decline to adopt modifications to the welcome package, rather than eliminate the option, as suggested by several commenters, because we do not believe that any of the proposed changes would decrease significantly the fraudulent potential of the welcome package without also decreasing its utility. For example, several commenters, including NYSDPS and WorldCom, suggest that if the welcome package is not eliminated, then it should contain a positive-option postcard, so that a carrier change would not be considered verified until the customer signed and returned the postcard. Although requiring a positive-option postcard requirement might minimize one of the fraudulent aspects of the welcome package, we agree with AT&T that such a requirement merely transforms the welcome package into a written LOA requirement, which is already a verification option under our rules. ACTA states that carriers could prove that consumers received a welcome package by using certified mail, or by maintaining mailing manifests. We decline to adopt these proposals. Although such proposals may prove that a customer received a welcome package, they would not prevent carriers from sending welcome packages to consumers with whom they have never spoken or from whom they have not obtained valid consent. Nor would such proposals address the problem of consumers throwing away welcome packages as junk mail. We conclude that it is better to eliminate the welcome package entirely, rather than attempt to "fix" it with modifications that fail to provide adequate protection against fraud or that curtail its usefulness. 2. Application of the Verification Rules to In-Bound Calls a. Background 62. The Commission concluded in the 1995 Report and Order that it should extend our verification procedures to consumer-initiated "in- bound" calls. On its own motion the Commission stayed the application of the verification rules to in-bound calls pending its decision on several petitions for reconsideration by AT&T, MCI, and Sprint. In the Further Notice and Order, the Commission denied the petitions for reconsideration to the extent that they requested that the Commission decline to apply its verification rules to in-bound calls, but continued the stay. In the Further Notice and Order, the Commission stated its belief that it serves the public interest to offer consumers who initiate calls to carriers the same protection under the verification rules as those consumers who are contacted by carriers and tentatively concluded that verification of in-bound calls is necessary to deter slamming. b. Discussion 63. We find that verification of in-bound calls is necessary to deter slamming and, accordingly, we lift the stay imposed in the In-bound Stay Order. Our decision is supported by state commissions and some IXCs, including MCI and AT&T. These commenters argue, and we agree, that the opportunity for slamming is as great with in-bound calls as with out-bound calls. Equally important, we recognize that excluding in-bound calls from our verification requirements would open a loophole for slammers. Through this loophole, unscrupulous carriers could slam not only consumers who initiate calls for reasons other than to change carriers, but also consumers who have simply never called in. Consumers slammed in this way would have difficulty proving that they had never initiated calls to a carrier. We find that the commenters who opposed verification of in-bound calls failed to offer any solutions to the problem that no record is created during an in-bound call that can adequately demonstrate both that the subscriber called in and that the call was for the purposes of authorizing a carrier change. 64. Furthermore, we find that exempting in-bound calls from the verification requirements would undermine the policy underlying section 258, which we conclude was intended to provide protection for all changes to a subscriber's telecommunications service, regardless of the manner of solicitation. We also disagree with the arguments of some commenters who claim that customers will become frustrated if their in-bound carrier change requests are verified. Slamming has been a much publicized issue and we receive many calls and letters and complaints on a daily basis from consumers regarding slamming. We believe that consumers will welcome additional efforts to combat slamming from all of its sources. 65. Several commenters state that slamming from in-bound calls currently is not a significant problem. We conclude, however, that consumers who call carriers are just as vulnerable to being slammed as consumers who are called by carriers and are entitled to the same protection under section 258. We further conclude that, with the imposition of the more stringent verification rules that we are adopting in this Order, unscrupulous carriers will attempt to devise other schemes to make unauthorized carrier changes. If in-bound calls were not required to be verified, they would become an easy opportunity for slamming carriers to take advantage of consumers. For example, a carrier may advertise a sweepstakes for which a consumer must call a certain number to register for the drawing. The carrier could use this in-bound call to slam consumers, who would not have the benefit of subsequent verification to prevent themselves from being slammed. Our experiences with slamming carriers demonstrate the vital importance of foreclosing potential sources of fraud before they become a major subject of consumer complaints. In addition, we conclude that slamming using in-bound calling will become even more prevalent when carriers begin to combine services to market to consumers, e.g., combining intraLATA and interLATA toll services together. For example, if a consumer calls an unscrupulous carrier to order interLATA toll service, that carrier could make an unauthorized change to the consumer's intraLATA toll service as well. By imposing verification requirements on sales made from in-bound calls, we take an aggressive approach to combating slamming before it occurs. The magnitude of the slamming problem reveals that the Commission cannot simply wait for problems to appear before attempting to fix them. The Commission must take a pro-active approach to slamming and foreclose opportunities for slamming before unscrupulous carriers use them. 66. Our verification rules will apply to all carriers who receive calls that result in the submission of a carrier change request on a subscriber's behalf. We decline to apply our verification requirements only to certain carriers, based on their ILEC status or the fact that they conduct contests or sweepstakes, as suggested by some commenters. All calls that generate the submission of a carrier change on a subscriber's behalf, regardless of the carrier receiving it or how the request was received, must be verified. This uniform rule will ease administration by eliminating any possible confusion or disputes regarding the applicability of call verification. We agree, for example, with U S WEST that if verification of in-bound calls is applied only to carriers using contests or sweepstakes, it may be difficult to determine whether any particular promotional campaign is a contest or sweepstakes. We also find that uniform application of the verification requirements to all in-bound and out-bound calls will decrease consumer confusion about what to expect when making changes to their telecommunications services. We note that several commenters appear to believe that verification would be required only of calls made to a carrier's sales department or only for purposes of inquiry concerning a possible change request. We clarify that the in-bound call verification requirement applies to any call made to a carrier that results in a carrier change request being submitted on behalf of a subscriber. In this way, our verification rules will protect those consumers who may call a carrier for reasons other than to change service, but end up having their service changed. 67. We apply the same verification requirements to in-bound and out-bound calls. This will enable carriers to adopt uniform verification procedures for all calls. We conclude that the verification rules for out-bound calls will sufficiently protect consumers from in-bound call slamming. We note that several commenters propose that less burdensome verification procedures apply to in-bound telemarketing. ACTA and RCN, for example, suggest that the telemarketer be permitted to confirm the order verbally, just as a mail order telemarketer would. BellSouth, GTE, IXC Long Distance, and TOPC propose to allow carriers to make audio recordings of inbound calls. We decline to adopt these proposals because we find that they offer little protection to a consumer against an unscrupulous carrier. We have previously rejected in-house verification procedures as providing carriers with too much incentive and opportunity to commit fraud. Because we conclude that consumers deserve the same protection from in-bound call slamming as they do from out-bound call slamming, we cannot permit carriers to use less secure procedures to verify sales generated from in-bound calls. Furthermore, we find that our rules provide a carrier with sufficient flexibility to choose a verification method that is appropriate for that carrier. 68. U S WEST included in its comments a Petition for Reconsideration of that portion of the 1995 Report and Order that applied the Commission's verification rules to in-bound calls. U S WEST states that because the 1995 Report and Order pertained only to interexchange services and IXCs, a LEC such as U S WEST would not have been expected to seek reconsideration of those rules at that time. We find that U S WEST's Petition for Reconsideration of the Commission's 1995 Report and Order is untimely filed. Nevertheless, in making our decision regarding in-bound verification in this Order, we have taken into consideration the comments regarding in-bound verification submitted by U S WEST in its Petition for Reconsideration. Based on the evidence in the record, the additional comments sought and received, and the anticipated competitive climate, we conclude that imposing verification rules on in- bound calls is in the public interest and that U S WEST's request to the contrary should be denied. We note additionally that we have concluded earlier in this Order that, in accordance with the mandate of section 258, the Commission's verification rules apply to all telecommunications carriers that submit or execute carrier changes, including LECs. 3. Independent Third Party Verification 69. Several commenters submitted proposals regarding the independent third party verification method in response to the Commission's request in the Further Notice and Order for additional mechanisms for reducing slamming. Based on some of these proposals, and also to address some of the problems we have seen in conjunction with the use of this verification method, we modify our rules to set forth explicit criteria to meet the requirement of independence for an independent third party verifier. We also seek comment on additional modifications to our rules regarding independent third party verification in our Further Notice of Proposed Rulemaking. 70. Our existing rules provide for verification by using an "appropriately qualified and independent third party operating in a location physically separate from the telemarketing representative" who obtained the carrier change request. When we adopted independent third party verification as a verification option in the PIC-Verification Order, we stated that this verification procedure should create evidence that is "totally independent of the IXC's marketing operations." We have seen many instances in which carriers use third party verification in a manner that is calculated to confuse and mislead consumers. These carriers slam consumers by first using misleading telemarketing to induce consumers to change carriers, for example, by telling them that their local and long distance bills will be consolidated. Then third party verifiers close the deal for these slamming carriers by assuring the consumers that they have merely authorized billing consolidation, not any carrier changes. We emphasize that our existing rules mandate that a third party verification must be truly independent of both the carrier and the telemarketer in order to constitute a valid verification. In particular, a third party verifier that has any incentive, financial or otherwise, to approve a carrier switch would violate our rules and such verification would not serve as evidence to rebut a subscriber's allegation of an unauthorized switch. 71. We set forth the following specific criteria to determine a third party verifier's independence. These criteria are not intended to be exhaustive, but rather the Commission will evaluate the particular circumstances of each case. First, the third party verifier should not be owned, managed, controlled, or directed by the carrier. Ownership by the carrier would give the third party verifier incentive to affirm carrier changes, rather than to determine whether the consumer has given authorization for a carrier change. Second, the third party verifier should not be given financial incentives to approve carrier changes. For example, an independent third party verifier should not receive commissions for telemarketing sales that are confirmed because such a compensation scheme provides the third party verifier with incentive to falsely confirm sales. As another example, a carrier should not require an independent third party verifier to agree to an exclusive contract with the carrier, such that the independent verifier is wholly dependent on that particular carrier for revenue. Third, we reiterate that the third party verifier must operate in a location physically separate from the carrier. We note that our rules already require this, but we highlight this requirement because we find it to be an important one. Requiring third party verifiers to be in different physical locations from carriers reinforces the arms- length nature of their relationship. 72. Several commenters also propose disclosure requirements for the scripts used by third party verifiers. NAAG, for example, suggests that third party verification should include the disclosure of all material information, such as the information disclosures required for written LOAs. TPV Services also states that the verifier should only confirm that the subscriber understands the transaction and should refrain from telemarketing for the carrier. Based on the record, we conclude that the scripts used by the independent third party verifier should clearly and conspicuously confirm that the subscriber has previously authorized a carrier change. The script should not mirror any carrier's particular marketing pitch, nor should it market the carrier's services. Instead, it should clearly verify the subscriber's decision to change carriers. We note that we seek additional comment on proposals for script requirements in the Further Notice of Proposed Rulemaking. 4. Other Verification Mechanisms 73. The Commission sought comment in the Further Notice and Order on additional mechanisms for reducing slamming. We received multiple proposals and have evaluated them accordingly. We adopt a proposal made by certain commenters to require a retention period for proof of verification and decline to adopt several other proposals made by commenters. We also highlight or clarify certain aspects of our verification rules, including the application of our verification rules to all carrier changes, and our LOA requirements. 74. We adopt a rule requiring carriers to retain LOAs and other verification records for two years. Previously, we required LOAs to be retained for one year and we did not impose any retention period for other methods of verification. NAAG suggests that carriers be required to retain LOAs and verification records for three years. We conclude that requiring carriers to retain verification records for greater than two years would be an unnecessary burden for carriers and instead will require verification records to be retained for a period of two years. We choose a retention period of two years because any person desiring to file a complaint with the Commission alleging a violation of the Act must do so within two years of the alleged violation. A two-year retention period will enable carriers to produce documentation to support their claims regarding an alleged unauthorized change. Any carrier who is unable to provide evidence of verification during this period will be subject to a rebuttable presumption in any action before the Commission that the carrier has failed to obtain authorization before making a carrier change. 75. Other commenters make other suggestions that, although they might be helpful in preventing slamming, are impractical to implement. For example, NCL suggests that all subscribers be assigned a personal identification number (PIN) by their interexchange carriers to use when authorizing carrier changes. We conclude that, at this time, such proposal would be impractical. Allowing one party, the IXC, to control confirmation of PIN numbers could deter competition. Furthermore, because such PINs would be infrequently used, most subscribers would probably forget their PINs, resulting in considerable inconvenience to them. 76. Several commenters suggest limiting our verification options to only written LOAs or to independent third party verification, while others propose to add more options, such as audio recording. Many commenters object to any proposals that would limit the verification options available, arguing that carriers should be granted flexibility in their verification procedures. We decline to further limit the verification options. A range of verification options - written LOA, electronic authorization, and independent third party verification - is necessary to continue to give carriers the maximum flexibility to choose a verification method appropriate for their needs. Furthermore, the verification rules, as we have modified them in this Order will provide consumers with protection against slamming while still providing them with the ability to change carriers without unnecessary burdens. 77. Some commenters propose that the Commission adopt regulations to prohibit directly deceptive or abusive sales tactics. NAAG states that some carriers claim that Federal Trade Commission regulations prohibiting deceptive sales practices do not apply to common carriers. FLS states that some carriers claim that state consumer protection laws do not apply to common carriers. We decline to adopt any specific regulations at this time. We note that the Commission has authority under section 201(b) to prohibit all carrier practices that are unjust and unreasonable, including deceptive or abusive sales tactics. For example, recently we took enforcement action against a carrier because its fraudulent representation of itself as a billing consolidation service, rather than as an interexchange carrier, as well as its efforts to obscure the true nature of its service offering, appeared to constitute unjust and unreasonable practices in violation of Section 201(b). 78. We clarify that, regardless of the solicitation method used, all carrier changes must be verified. We modify our rules to make clear that a carrier must use of one of our three verification options (written LOA, electronic authorization, and independent third party verification) to verify any carrier change. Specifically, the current rules appear to create a dichotomy between verification methods to be used when a carrier change is obtained through telemarketing, and when other marketing methods are used. A strict reading of the rules would indicate that, pursuant to current section 64.1100, a telemarketing carrier has several verification options, but that a carrier that does not telemarket must obtain a written LOA pursuant to current section 64.1150. This would seem to penalize carriers that use methods other than telemarketing, such as in-person solicitations or Internet sign ups, by denying them flexibility in their verification methods. We are also aware that some carriers have interpreted the difference between current sections 64.1100 and 64.1150 to argue that they are not required to verify their carrier change requests because such changes were not obtained through telemarketing. This is incorrect, as the Commission's previous orders have clearly stated that all carrier changes must be authorized and verified. Because some confusion appears to exist among carriers regarding this subject, we modify our rules accordingly. 79. With regard to LOAs, we have seen a disturbing trend in the practices of certain carriers and their agents of marketing telecommunications services in conjunction with sweepstakes and contests at events such as fairs and other public gatherings. Such carriers encourage people to fill out and sign contest forms that also contain LOA language printed in an inconspicuous manner, and to drop the forms into a box in order to win a prize that will be awarded on the basis of an entry drawn from the box. Such practices are in violation of the Commission's rules. Our rules state that the LOA "shall be a separate document . . . whose sole purpose is to authorize an interexchange carrier to initiate a primary interexchange carrier change." In situations such as the one we have described, the LOA is not being used for the sole purpose of authorizing a change in carriers. The LOA is being used for two purposes - to change a subscriber's long distance service and to enter a contest or sweepstakes. We adopted this rule specifically to address the situation in which a consumer is "deceived by an LOA that is disguised as a contest entry, prize claim form, or charitable solicitation." We emphasize that carriers who utilize such practices are violating the Commission's rules and may be subject to the full range of sanctions at the Commission's disposal, including forfeitures and revocation proceedings. 5. Use of the Term "Subscriber" 80. We modify current section 64.1100 to use the term "subscriber" in place of "customer," as proposed in the Further Notice and Order. We also amend current section 64.1150(e)(4) to change the word "consumer" to "subscriber." Because section 258 uses the term "subscriber" rather than "customer," this will make the language in our rules consistent with the statutory language. D. Extension of the Commission's Verification Rules to the Local Market 1. Application of the Verification Rules to the Local Market 81. In the Further Notice and Order, the Commission sought comment on whether the current verification rules, which apply only to IXCs, should be applied to the local market (i.e., local exchange service and intraLATA toll service). We conclude that Congress has expressed its intent in section 258 to have the Commission adopt verification rules applicable to changes in both local exchange and telephone toll service. Accordingly, all changes to a subscriber's preferred carrier, including local exchange, intraLATA toll, and interLATA toll services, must be authorized by that subscriber and verified in accordance with our procedures. The slamming complaints we have received thus far are almost exclusively complaints about unauthorized changes in interexchange carriers. With the advent of competition in the provision of local exchange and intraLATA toll services, however, we anticipate an even greater incidence of slamming generally if effective rules are not put into place. State commissions are already receiving complaints concerning local service slamming. The Commission processed approximately 80 complaints regarding local service slamming in 1997 and 129 local service slamming complaints from January through October 1998. We agree with the majority of commenters that the current rules, with the modifications adopted in this Order, should be effective in preventing slamming in the local market. 82. We also require carriers to identify specifically the types of service or services being offered (e.g., interLATA toll, intraLATA toll, local exchange) in any preferred carrier solicitation or letter of agency, and to obtain separate authorization and verification for each service that is being changed. The separate authorization and verification may be received and conducted during the same telemarketing solicitation or obtained in separate statements on the same LOA form. We merely require that each service be identified and delineated clearly to the subscriber. For example, a carrier that calls a subscriber to market both intraLATA toll and interLATA toll services must explain to the subscriber the difference between the two services. Then the carrier must obtain separate authorization for each service. The subscriber's authorizations to change intraLATA toll and interLATA carriers must also be verified separately. We adopt this rule in response to the concerns of carriers such as Ameritech and CBT that consumers may experience considerable confusion about the differences among telecommunications services, especially the distinction between intraLATA toll and interLATA toll. By requiring carriers to describe fully the services they offer, and obtain separate authorization and verification for different services, carriers will be prevented from taking advantage of consumer confusion and changing the preferred carriers for all of a subscriber's telecommunications services where the subscriber merely intended to change one. We note that this rule builds on the existing requirement in section 64.1150(e)(4) of our rules that an LOA must contain separate statements regarding the subscriber's choice of interexchange carriers where a jurisdiction allows the selection of additional primary interexchange carriers (e.g., for intrastate toll or international calling). Our decision today expands the requirement of section 64.1150(e)(4) to encompass all telephone exchange and telephone toll services and establishes the same requirement for the verification of all carrier changes. 83. The verification rules are intended to deter slamming and protect consumers from unauthorized changes in their preferred carriers. Several commenters, however, support targeted proposals, rather than the general application of more rigorous verification rules, purportedly to avoid unnecessary costs and harm to competition. For example, Ameritech, SBC, and U S WEST propose systems that would impose fines or more stringent verification requirements on carriers with a history of slamming, as determined by the LEC or otherwise. In light of the high incidence of slamming violations we currently face, we prefer to adopt the approach taken in the rules in this Order because they will help to prevent carriers from slamming consumers in the first place. Furthermore, such proposals could permit LECs to target certain carriers, including those that are offering competing services. Considering that LECs may no longer be neutral parties in the carrier change process as a result of their entry or expected entry into the in-region long distance market and the advent of local competition, we do not believe that it would be prudent to provide LECs with incentive to act anti-competitively. We note that Ameritech states that, rather than permitting LECs to determine which carriers should be subject to fines or more stringent verification requirements, carriers could be targeted using a more neutral source of numbers of carrier change disputes, such as the Commission's Common Carrier Scorecard, which shows the number of disputed carrier changes for carriers. We share TRA's concern, however, about imposing disparate treatment before a carrier has the opportunity to prove that it did not slam a consumer. 2. Application of the Verification Rules to All Telecommunications Carriers 84. In the Further Notice and Order, the Commission proposed to incorporate the specific language of section 258(a) of the Act into its rules to reflect the statutory prohibition on slamming by any telecommunications carrier, and not just IXCs as is the case under the current rules. We adopt the proposed rule requiring that no telecommunications carrier shall submit or execute a change on behalf of a subscriber in the subscriber's selection of a provider of telecommunications service except in accordance with the Commission's verification procedures, consistent with the language of section 258. We note that the Commission's verification procedures would not apply to a situation in which a carrier drops a subscriber from its service, resulting in the subscriber not having any presubscribed carrier, because such a change would not result in the subscriber being presubscribed to another carrier. The commenters support our finding that incorporating the broad language of section 258 into our rule will appropriately implement Congressional intent. 85. Based on the record, however, we create an exception for CMRS providers. We conclude that CMRS providers should not be subject to our verification rules at this time because slamming does not occur in the present CMRS market. CMRS providers are not currently subject to equal access requirements. In other words, a CMRS provider is free to designate any toll carrier for its subscribers unless it has voluntarily chosen not to do so. We believe that many CMRS providers offer their subscribers telecommunications service packages that include local exchange, intraLATA toll, and interLATA toll services using particular carriers, and therefore any consumer who has agreed to subscribe to such a package as offered by a CMRS provider may have agreed to use only those carriers. Where a CMRS provider does not offer its subscribers any choices in toll carriers, verification of subscriber authorization to change toll providers would be inapplicable. We are aware, however, that some CMRS providers do provide their subscribers with choices in toll carriers. It is our understanding that the CMRS carrier, which has made contractual arrangements with the toll carriers, is in control of this selection process and must be contacted by the subscriber in order for any change in toll carriers to occur. Furthermore, Bell Atlantic Mobile and CTIA state that, at this time, a CMRS carrier cannot change a customer's wireless local exchange service without that customer's express approval, because the customer must typically physically reprogram the handset to initiate service with a new carrier. In light of these considerations, we believe that unauthorized changes are much less likely to occur and we are not aware of any slamming complaints in this area. Accordingly, in the absence of evidence that slamming is a problem in this area, we decline to apply our verification procedures to CMRS carriers at this time. We may revisit this issue should slamming become a problem in the CMRS market. 3. The States' Role 86. Section 258 charges the Commission with the responsibility for establishing verification procedures for carriers who "submit or execute a change in a subscriber's selection of a provider of telephone exchange service or telephone toll service." Therefore, section 258 explicitly grants the Commission authority to create verification procedures for both interstate and intrastate services, and our rules here indeed apply to both sets of services. Many carriers urge us generally to preempt state regulation of slamming by local exchange and intrastate interexchange carriers in order to create uniform rules. Carriers such as AT&T, BellSouth, and Excel state that compliance with multiple sets of federal and state rules would be expensive, delay competition, and confuse consumers. The issue of federal preemption of slamming regulation by states has also been raised in other fora. 87. We decline to preempt generally state regulation of carrier changes. The states and the Commission have a long history of working together to combat slamming, and we conclude that state involvement is of greater importance than ever before. We conclude that the Commission must work hand-in-hand with the states for the common purpose of eliminating slamming. In the context of this partnership, we expect the states and the Commission to continue sharing information about slamming and to develop together new and creative solutions to combat slamming. We conclude that, although a state must accept the same verification procedures as prescribed by the Commission, a state may accept additional verification procedures for changes to intrastate service if such state concludes that such action is necessary based on its local experiences. 88. In other words, absent a specific preemption determination, a state may provide carriers with further options for verifying carrier changes to intrastate service, in addition to the Commission's three verification options, if the state feels that such procedures would promote consumer protection and/or competition in that state's particular region. In this regard, we agree with the Maryland Commission, which contends that states may have valuable insight because they have substantial contact with consumers and are near to the slamming problem. We agree with the Oklahoma Commission, which states that a "one-size- fits-all approach," as recommended by the carriers, would not take into consideration the specific experiences and concerns of individual states in the slamming area. We further note that nothing in our rules prohibits states from deterring slamming through means other than regulation of verification procedures, such as general consumer protection requirements or direct regulation of telemarketing sales. 89. States must, however, write and interpret their statutes and regulations in a manner that is consistent with our rules and orders, as well as section 258. For example, a state may not adopt the welcome package as an additional verification method because we have determined that the welcome package fails to protect consumers. Furthermore, we are obligated and willing to examine state rules on a case-by-case basis if it appears that they conflict with the purpose of our rules, for instance, by prohibiting or having the effect of prohibiting the ability of any entity to provide telecommunications service. With regard to the issue of preemption of state verification procedures, the Commission will not make a preemption determination in the absence of an adequate record clearly describing the state law or action to be preempted and precisely how that state law or action conflicts with federal law or obstructs federal objectives. The record in this proceeding does not contain any comprehensive identification or analysis of which particular state laws would be inconsistent with our verification rules or would obstruct federal objectives. Some commenters reference state laws that differ from the Commission's rules, such as California's law that requires carriers to use third party verification for changes to residential service. These commenters, however, do not ask for preemption of these specific statutes alone, but rather for wholesale preemption of all state statutes that may be inconsistent with the Commission's verification requirements. The commenters do not provide any detailed explanation of how a particular state's verification requirements differ from those of the Commission, nor how any state requirements are inconsistent with our rules or obstruct federal objectives. The commenters merely allege generally that carriers will find it easier to comply with one uniform set of federal rules rather than with federal rules and multiple sets of state rules. Accordingly, the record does not contain sufficient information about various state requirements to allow us to assess the ability of carriers to comply with both federal and state anti-slamming mechanisms. To the extent, however, that these laws require a verification procedure that is acceptable under our rules, they would appear to be in compliance with section 258 and would not be preempted. 90. Section 258 expressly grants to the states authority to enforce the Commission's verification procedure rules with respect to intrastate services. A state therefore may commence proceedings against a carrier for violation of the Commission's rules governing changes to a subscriber's intrastate service. We conclude that enforcement is another area in which the states and the Commission may work together to eradicate slamming. A single unauthorized change may result in the switching of both a subscriber's intrastate and interstate service in violation of the Commission's verification procedures. In the case of an unauthorized change that results in changes to intrastate and interstate service, a state's proceeding to enforce the Commission's rules with respect to the intrastate violation will yield factual findings regarding the interstate violation as well. The state's factual finding in such a case will be given great weight in the Commission's proceeding to determine whether the carrier violated the Commission's interstate verification procedures. This will help to deter slamming by expediting the resolution of slamming complaints on a nationwide basis. We conclude that state regulation of carrier changes in the intrastate market that is compatible with our rules, along with state enforcement of our rules regarding carrier changes in the intrastate market, will enable states to play a valuable and essential role in the partnership with the Commission to combat slamming and protect consumers. E. Submitting and Executing Carriers 1. Definition of "Submitting" and "Executing" Carriers 91. In the Further Notice and Order, the Commission tentatively concluded that a submitting carrier is any carrier that requests that a consumer's telecommunications carrier be changed, and that an executing carrier is any carrier that effects such a request. The Commission sought comment on these definitions, and on whether they were sufficiently broad in scope to hold accountable all carriers involved in carrier change transactions. 92. We adopt a modification to our proposed definition of a submitting carrier in order to take into account the roles of underlying carriers and their resellers. Many commenters, including Bell Atlantic, Frontier, the North Carolina Commission, and Sprint, note that our proposed definitions did not take into account the role shifting that occurs when a facilities-based LEC or IXC sells service to a switchless reseller. For example, the reseller that generates carrier changes for interexchange service generally submits the change requests to the facilities-based IXC from which it purchases service. The facilities-based IXC then submits the change requests to the executing LEC. These commenters generally support redefining a submitting carrier so that the reseller, rather than its underlying facilities-based carrier, would have the obligations of being the submitting carrier. The rules we adopt build on suggestions made by WorldCom for defining a submitting carrier. Under the rules we adopt, a submitting carrier will be generally any carrier that (1) requests on the behalf of a subscriber that the subscriber's telecommunications carrier be changed; and (2) seeks to provide retail services to the end user subscriber. We note, however, that either the reseller or the facilities-based carrier may be treated as a submitting carrier if it is responsible for any unreasonable delays in the submission of carrier change requests or if it is responsible for submitting unauthorized carrier change requests, including fraudulent authorizations. If, for example, a reseller submits a carrier change request to its underlying carrier, and that underlying carrier changes that carrier change request so that the subscriber ends up being subject to an unauthorized carrier change, the underlying carrier would be liable as a submitting carrier for the unauthorized change. The underlying carrier would not be liable as a submitting carrier, however, if it innocently submitted to the executing carrier a change request that was not verified properly by its reseller. 93. We note that in situations in which a customer initiates or changes long distance service by contacting the LEC directly, verification of the customer's choice would not need to be verified by either the LEC or the chosen IXC. In this situation, neither the LEC nor the IXC is the submitting carrier as we have defined it. The LEC is not providing interexchange service to that subscriber. The IXC has not made any requests -- it has merely been chosen by the consumer. Furthermore, because the subscriber has personally requested the change from the executing carrier, the IXC is not requesting a change on the subscriber's behalf. If a LEC's actions in this situation resulted in the subscriber being assigned to a different interexchange carrier than the one originally chosen by the subscriber, however, then that LEC could be liable for violations of its duties as an executing carrier. 94. We adopt the definition proposed in the Further Notice and Order for an executing carrier, so that an executing carrier is generally any carrier that effects a request that a subscriber's telecommunications carrier be changed. This rule will apply even where a reseller competitive local exchange company (CLEC) receives carrier changes and submits such changes to its underlying facilities-based LEC. Some commenters argue that, in such a case, the reseller CLEC should be considered the executing carrier rather than the facilities-based LEC. BellSouth argues that both the CLEC and the facilities-based LEC should be considered executing carriers in this scenario. We conclude that the executing carrier should be the carrier who has actual physical responsibility for making the change to the subscriber's service, rather than a carrier that is merely forwarding a carrier change request on behalf of a subscriber. For example, if a consumer who is subscribed to a reseller CLEC for local exchange service requests a change in interexchange carriers, the executing carrier is the facilities-based LEC that makes the software change at its switch, not the CLEC that receives the change order from the IXC and forwards that change order to the facilities-based LEC. For a change from a facilities-based local exchange carrier to a reseller CLEC, the executing carrier would be the facilities-based local exchange carrier who makes the change in its billing records so that the subscriber is billed by the CLEC rather than the facilities-based LEC. In a carrier change situation, the reseller CLEC may have little responsibility except to forward the change request to the facilities-based LEC that actually makes the change. Defining the executing carrier as the carrier that actually makes the change is therefore most appropriate. We note that, where a subscriber is changing to a facilities-based local exchange carrier, that facilities- based local exchange carrier will both "submit" the change, albeit to itself, and also execute that change. We also emphasize, howev