Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
PUBLIC FORUM ON LOCAL EXCHANGE
CARRIER BILLING FOR OTHER BUSINESSES
Room 856N
FCC Building
1919 M Street, N.W.
Washington, D.C.
Tuesday,
June 24, 1997
APPEARANCES:
Co-Moderators:
JOHN MULETA
Chief, Enforcement Division
Common Carrier Bureau
FCC
ROBERT SPANGLER
Deputy Chief, Enforcement Division
Common Carrier Bureau
FCC
Panelists (Panel 1):
E.E. (Stub) ESTEY
Government Affairs - Vice President
AT & T Corporation
Washington, D.C.
RONALD F. EVANS
Vice President - Operations
OAN Services, Inc.
Van Nuys, California
APPEARANCES (continued):
Panelists (Panel 1):
RAY LAWTON
Associate Director for Telecommunications
National Regulatory Research Institute
Columbus, Ohio
STEVE MERRILL
Assistant Vice President
WinStar Communications
Washington, D.C.
GREGG SAYRE
General Attorney
Rochester Telephone Corporation
Rochester, New York
Panelists (Panel 2):
CHARLIE DONALDSON
Assistant Attorney General
State of New York
New York, New York
MICHAEL POLANDICK
Director - Product Development
Consumer Markets
MCI Telecommunications Corporation
Arlington, Virginia
ALAN TAYLOR
Chief of Service Evaluation
Florida Public Service Commission
Tallahassee, Florida
CHRISTINE VAN SKYHOCK
Product Manager
GTE Telephone
Irving, Texas
APPEARANCES (continued):
Panelists (Panel 3):
PORTER CHILDERS
Executive Director
Accounting and Financial Matters
United States Telephone Association
Washington, D.C.
ADAM COHN
Attorney
Federal Trade Commission
Washington, D.C.
DAVID J. GILLES
Assistant Attorney General
State of Wisconsin
Madison, Wisconsin
KIM WILLIAMS
Area Manager - Product Management
Southwestern Bell Telephone Company
St. Louis, Missouri
LIONEL WILSON
Assistant General Counsel
California Public Utilities Commission
San Francisco, California
Audience Speakers:
BOB GULLADGE
JOEL VAN OVER
JOAN PIEROS
SHARON ADAMS
JAY NEWMAN
I N D E X
VOIR
WITNESSES: DIRECT CROSS REDIRECT RECROSS DIRE
None.
E X H I B I T S
IDENTIFIED RECEIVED REJECTED
None.
Hearing Began: 9:00 a.m. Hearing Ended: 3:33 p.m.
Recess Began: 12:18 p.m. Recess Ended: 1:40 p.m.
9:00 a.m.
MR. MULETA: Good morning, everybody. Thank you for coming to our public forum on LEC billing for other non-LEC services and businesses.
My name is John Muleta. I am Chief of the FCC's Common Carrier Bureau, Enforcement Division. I recognize a lot of people in the audience, and I appreciate you all being here. Today we have a group of panelists that are going to talk to us in three general areas concerning LEC billing for other businesses.
The goal of our forum today is to start a dialogue between industry, regulators, and the public about the method through which most consumers are billed for telecommunication and information services, the bills that are rendered by the local exchange companies on behalf of other carriers and companies.
This public forum is the last of a series of meetings between the staff of the Enforcement Division and industry representatives concerning this particular method of billing. Over the last two years, the staff has seen an increase in the number of non-LEC services that are being billed through the LECs, and commensurate with this increase, we have observed an increase in the number of complaints and also confusion about the bills and services being rendered in this fashion.
In February of this year, the staff met with the representatives of the information services industry, who related the critical importance of this mechanism to their industry. They suggested a number of actions that should be taken to improve the usefulness of the service to their particular industry. These representatives also related their concerns about the adequacy of the information they receive about the bills they issue through the LECs.
In April, the division organized two round tables. One for LEC representatives to give their viewpoint, and another for IXCs and IXBs and their representatives, mostly through the large billing consolidators, such as OAN, Integretell, Enhanced Billing Services, and so on. We discussed, in general, the pluses and minuses of this system as it exists today.
We learned a great deal about the mechanism and its effectiveness. And what we thought at the end of that was, we wanted to share what we learned with the public and solicit comments. We also wanted to hear from other regulators and public policy makers what their thoughts were on this general issue.
We have not formulated a specific position on this issue. What we're trying to here is, just again, start a dialogue with the people that are interested in the subject and give the viewpoints of a cross section of the industry. We want to pass on the information that we learned, and we also hope that some of the information that we are going to get today leads to a better understanding of the critical nature of this mechanism.
We also hope to identify, at the end of this process, what, if anything, needs to be changed or improved or added to the system to improve its efficiency, integrity, and usefulness, both for industry and for the consumers.
Before getting started with the first panel, I would just like to outline for you the rest of the day. We assembled three panels, as I said earlier, comprised of distinguished guests representing a broad section of industry, state and federal regulators, and public policy institutes. Each panel will be for approximately one hour and a half, and our first panel will start by discussing the role of LEC billing and its importance to the current structure of the industry.
The second panel will consider the technical issues that underlie the LEC billing system and discuss infrastructure and what its pluses and minuses are.
Finally, our third panel will consider sort of the safeguards that need to be added or enhanced in order to protect consumers. All of this we are doing, we realize, in the context of an industry that is changing significantly and dramatically. Every day there is news of consolidation, of new start ups, new types of services are coming on line. I think this would be an important time to discuss these issues.
What we will do now is, when we start with the panels, we will give each panelist an opportunity to introduce themselves to you and make a brief statement about what they think about this issue. Then we will open it up, having me as a moderator, or Bob Spangler, Deputy Division Chief of the Enforcement Division, acting as moderators, asking questions of the panels. After a period of time, we will open it up to the public and we hope to have some questions from the audience.
Before I turn it over to the panelists, I would like to note a few key people that have helped us arrange this public forum. Most of all, i would like to thank Gina Keeney, our Bureau Chief, as well as Mary Beth Richards, our Deputy Bureau Chief, who have strongly endorsed our attempt to understand more about this issue. Of course, I would like to recognize and thank Bob Spangler, who has been instrumental in organizing this, and also brings a wealth of knowledge into this area and deals with Congress and other people that are interested in this issue.
Darius Withers, who is in the back helping us out, one of our attorneys in the Enforcement Division, and Michael Carowitz, who is legal advisor of the division. All these people spent an inordinate amount of time preparing for this, and I want to thank them. I also want to thank Rochelle Cohen from the Bureau, who helped organize this, and also the staff of the Office of Public Affairs for help in setting this forum up.
With that introduction, I will turn it over to Stub Estey of AT & T Corporation, who will now speak on behalf of AT & T. Stub and I have gotten to know and like each other over the last couple of years, and I am glad that he is here. I will turn it over to Stub.
MR. ESTEY: Thank you, John. Thank you for that ringing endorsement. John said I could either speak from my place at the table or I could stand up, and usually if I'm standing up, people say, "Stand up, Stub." So I figured, if I'm sitting down they really can't see me, so I am standing up.
The heading for this panel asks the question, "Is LEC Billing for Others Important to Other Carriers and Consumers?" The answer, we think, is an overwhelming yes, for at least three reasons. Customer preferences for a single bill, the cost to consumers, and the continuing health of competition in the IXE industry.
My comments will address the question from the point of view of the paying customer, the end user of telecom services. First, the single bill issue. The research indicates that consumers want a single bill for their local and long distance services. A 1996 Yankee group study indicated that 80 percent of consumers prefer a single bill for telecommunications.
At AT & T we have our own market results, which demonstrate that the single bill issue can be important enough to consumers to impact their buying decision. In 1996, in Connecticut, 56 percent of the customers that left AT & T for SNET cited their interest in a single bill as the reason for leaving. So, LEC billing for others is extremely important as a factor in the provision of service by IXEs. Although AT & T typically bills our business customers directly for long distance services, we rely almost exclusively on billing collection contracts with LECs for consumer billing.
I think, the figures that were given to me are that industry wide, 90 percent or more of all consumer bills are generated by the ILEC.
Our competition has recognized that customers want one bill, and that a single bill provides competitive advantages. In October of 1996, NYNEX placed a full page ad in the New York Times with a question in large print, "Do you need another telephone bill?" And our view is, if a LEC takes that position in their advertising and then, as they plan for their entry into long distance, begin now to make it difficult for what will be their future competitors to provide billing for their service on the LEC bill, that would give the LECs an unjust competitive advantage.
Now, let's look at the cost issue. The cost to the paying customer. Today, telecommunications companies spend between five and ten percent of the revenues to generate bills and collect payments. Economies of scope and scale related to billing are limited, so it's doubtful that carriers could reduce their billing related costs by much more than, say, 10 percent.
The most effective way to minimize costs, and therefore to keep the costs of service down, is by sharing the envelope. Bundle billing provides billing for local and long distance service more economically than producing two separate bills and, as I mentioned, consumers prefer it. They prefer it for some of the same reasons that it provides economies in their own processing of the invoice. That is, one invoice instead of two.
And finally, how does all of this effect the health of IXE competition? Because the cost of establishing a stand alone billing system are so large, if LEC billing and collection services are curtailed, or if the cost of those services is increased dramatically, that would create an immense barrier to entry in this industry, and would threaten the ability of existing providers to compete with LECs as they enter the long distance business.
And although the commission's January, 1986, order that detariff billing and collection services anticipated competition in this area, so far that competition is not well developed. Carriers would have few options in the event LECs begin unilaterally to alter or cancel their contracts, because, as MCI's petition for rule making indicates, they are beginning to do.
Those are the reasons that AT & T says the answer to the question the FCC posed for this panel is an overwhelming yes. Thank you.
MR. MULETA: Before I introduce the next panel member, I just would like to remind everybody that we are going to include the transcript of this proceeding in the two petitions for rule makings which have been initiated, and we will get you the docket numbers at a later time.
The next panelist that will be speaking will be Mr. Steve Merrill, who is Assistant Vice President of WinStar Communications, a CLEC and also an IXE, I believe. You can come up or you can speak from there, whichever one you choose. Thank you.
MR. MERRILL: Good morning, ladies and gentlemen. It is certainly a pleasure to be here and have this opportunity to speak before you. I am Steve Merrill, Assistant Vice President of WinStar Communications. Unlike my friend from AT & T, perhaps most of you have not heard of WinStar as yet, though we are very aggressive in the marketplace. It may be helpful for me to explain, just for a moment, how WinStar is comprised, and then move through my discussion and my opinion on LEC and billing by the LEC.
WinStar is comprised of basically three subsets. One is the CLEC operation, Compatible Local Exchange Carrier, WinStar Telecommunications, Inc., which provides local dial tone and also has long distance services. We also have WinStar Wireless, Inc., which is a competitive access provider, and then we also have another subsidiary, which is WinStar Gateway.
To help with my discussion, perhaps you folks will identify me. I had kind of a winding trip to the telecommunications industry. I served for 13 years with NYNEX, in engineering and operations, and then decided I wanted to become a regulator. I then went and did two and half years with the New Hampshire Public Utilities Commission, where I got somewhat actively involved with billing issues from the consumer perspective, in regards to what consumers were wishing in their complaints that we heard up there in my brief time with the commission.
From there, I moved into the vendor community with DSC Communications, and was an applications engineer on their access product system, the Light Span 2000's fiber technologies, and from there, I wound my way to WinStar, a year ago. I am predominantly doing interconnect negotiations, and then general regulatory type activities.
From the outset, I would like to say that I agree with my colleague from AT & T, that yes, LEC billing is an absolute requirement in this emerging marketplace. Almost all of the, as I said, WinStar and subsidiaries use in house billing systems. Our CLEC operation is all in house billing systems. We are developing our own billing systems in concert with Perot Systems, and we are trying to do all of our billing in house.
Our long distance arm, however, the Gateway system, does use predominately LEC billing. Of course, the long term view is to have all billing in house, where we have control of the billing to our customers.
Customer wishes. And this is poignant to me for my time at the New Hampshire Public Utilities Commission. Sales feedback also indicates that most customers want a single, easy to read telecommunications bill. My experience with the New Hampshire PUC reinforces that. Call it one stop shopping, or at least the perception of one stop shopping. Customers like one bill, clear and concise to read and to understand.
WinStar, where it is marketing right now in the CLEC business, is dealing with the small to medium sized business customers. That is what we are trying to deal with right now, but also on the residence side, it is resounding. Experience indicates they want that clear, concise, one stop bill. They want to be able to read it. They want to be able to understand it.
At my time at the PUC, I was involved with all kinds of discussions concerning billing. I remember one very detailed, lengthy discussion of whether the bill should be one sided or on two sides. We went through quite a bit of debate and discussion, and had input from all parties, and we finally decided to do the environmentally correct thing and go with a two sided bill.
After that event, I recall there was some confusion initially by some consumers when they were looking at the bill and seeing that it wasn't straight forward in that type of approach. Also, such things as the appearances of surcharges, E-911, taxes, things like that. Consumers get very set in their ways. Billing has been going on for what, a hundred plus years. The consumer is somewhat set, and it is very difficult to educate and move them into a different environment.
As some IXCs have been moving over to doing their own billing, per se, there is a question of timing of bills, lag of the data coming in, out of sequence with what they have been traditionally used to as far as timely billing, and coming in on a regular monthly schedule. All this reinforced the idea that, for those telecommunications carriers who so desire to use LEC billing, it should be available in a quality manner.
Marketplace. Why do IXCs go to a LEC? The first thing is, and I am going to say it again, customers like a one time bill. They don't want to see multiple bills. It gets complicated for them. The whole perception of one stop shopping is very critical, and to have a competitive entry into the marketplace, you have to be on somewhat of a level playing field. I have 18 years in this business, and I haven't seen a level playing field, and perhaps in my lifetime I may never, but we like to move towards that direction.
Often in billing systems, our consideration is their availability. Take my company, WinStar. We are building our own in house billing system. Someday, we may go forth and try and offer that out into the general public also. It could be another business for us. But the bottom line for us is, right now, as we move into the marketplace, and as the local exchange carriers look forward to those days, the RBOCs in particular, are moving for the long distance arena to have somewhat of a level playing field. Absolutely, LEC billing, one stop shopping, is absolutely essential.
Those are my comments. Thank you.
MR. MULETA: Thank you very much.
Next, we will have Mr. Gregg Sayre, who is with the Rochester Telephone Company, and who will be giving his presentation.
MR. SAYRE: Thanks, John.
To introduce my company, we have 540,000 access lines in upstate New York. That makes us about one twentieth the size of New York Telephone, but is still leaving us the second largest independent LEC in New York state. We are a subsidiary of Frontier Corporation, the fifth largest, I think, right now in the United States on the long distance side. Frontier is really only a name change from Rochester Telephone.
We have had in region, inter LATTEL in Rochester, through a fully separate subsidiary, for the last 14 years. So, we are little bit used to that environment. We have had the open market plan in Rochester, which was a precursor to the Telecommunications Act, for about two and a half years now. Competition has developed on the local side, to the point where, our local cable TV company, entirely over its own facilities is providing dial tone to business and residence customers -- thousands of them across our service territory, including even single family residentials. Again, served entirely over cable TV facilities in three of our larger suburbs.
Also, of course, we have multiple resellers of the Rochester Telephone network on both the business and residential side.
Our billing and collection offerings right now, we do billing and collection on a One Plus pre-subscribed basis for two carriers. They allow us to do some of their products, but not all of their products. We do casual calling for anybody who is interested. Right now, we have contracts with four carriers, plus Illuminet, which clears a whole bunch more carriers.
We do operator service provider and information provider billing for five carriers and Illuminet. And, of course, like I think every other LEC in the country, we participate one way or another in the centralized message distribution system, the CMDS, if it clears intra LATA messages, when our customers are doing things like making an intra LATA call in California and billing it back to their home telephone number in Rochester. That comes back to us through that system.
If we don't have a billing and collection contract with a particular carrier, the question is, what are they going to do? The carrier can always block things like casual calling, or third number traffic, if they don't have an arrangement pre-existing with the end user. The carrier can always just let the message fall on the floor because there just aren't enough of them to make billing them worthwhile. I don't think either of those two alternatives are particularly acceptable to most long distance carriers, and probably not good business practice, and so I am not proposing either of them. But, they do stand out there as alternatives.
What happens on Rochester, when we don't have a billing and collection contract for any reason, or when we don't have the end user customer, is that we will reject the message back to the long distance carrier. In the open market plan, the typical situation for that is, if AT & T, which is reselling our local residential service, has a customer, and that customer makes a casual call over MCI, or accepts an incoming collect call from some other carrier, all that carrier knows is that looks like a Rochester telephone number.
So, they send it us, to bill and collect through the usual clearing process. We, no, that is AT & T. We don't have that customer. We can't bill it. We will reject it back to the carrier, but we will put on the rejection, in electronic format, the operating carrier number. So, MCI, which is trying to collect that collect call, will see that it is an AT & T customer, and it is to AT & T that they need to go to get either a billing and collection arrangement directly with them, or to get billing name and address.
Billing name and address is the second major alternative. It is available in Rochester for our own customers to all carriers and information service providers through the CARE clearing house process, which is pretty well understood, pretty well standardized automated process. The carrier sends us a request for BNA, we ship it back to them electronically.
What is interesting in Rochester is, we have convinced several of the resellers to participate in RTC's clearing house, so that for these carriers, if MCI has a message that they need BNA to bill directly, they send the BNA request to us, and with those participating carriers, including our own reseller affiliate, we will send the BNA request over to the reseller. The reseller will send it back to us, and we will ship it up to AT & T or MCI, or whoever requested it in the first place.
This works pretty well, because it saves the need for each interexchange carrier to have a clearing house interface with every reseller, or facilities based local exchange carrier in the market, and it saves the reseller something, in not having to have that carrier interface and build their own just to interface into our system.
We also have what is a little bit less usual, a home grown process that we call the toll clearing house process. The idea was fairly simple, and we set it up in an automated way in 1985, that if we have the kind of message that I've been talking about, collect call from AT & T reseller customer accepted from the MCI network, the interexchange carrier would simply sell the message to RTC, we would buy it, it's kind of a three way billing and collection agreement. We would sell it to the reseller, and the reseller bills it to the end user.
Very simple. We thought it would work. We thought it would be popular. But, it's not. We don't really know why, but interexchange carriers have so far declined to participate in that process. Some of the things that we've heard are, the interexchange carriers really don't want to be a step removed from the entity that is billing and collecting for them, because they don't have the control over the billing format or whatever it is they want.
We have also heard that maybe some of the resellers, who are carriers in their own right, may not be all that interested in billing casual calls that are carried over their competitor's networks. One way or another, that process isn't working too well yet, although it is set up and ready to go.
It works in a more limited way, where we have local messages to sell to resellers or facilities based carriers in Rochester. We use half of the toll clearing house process. For example, if we have a prison pay phone, and an inmate makes a collect call through the prison pay phone service to one of AT & T's reseller customers, AT & T will buy that message from us and bill it to their end user.
How we think we're doing in billing and collection, we think we are a fairly forward looking carrier. We're not afraid of a little competition. We were one of the first carriers to allow customer owned sets, and of course we have that open market plan. Our uncollectibles are very low. We believe that our carrier customers are pretty satisfied with the actions that we take to collect their bills, and while protecting customers, we mange to get a pretty good percentage of them.
We are willing to customize our systems. Of course, we expect to be paid for that if a carrier wants us to do that. But, we will try very hard to find solutions that don't require either us or our billing and collection customers to build huge systems to make things work. We view that relationship as a partnership, and although we realize that a lot of carriers in the long run really want to have their own billing system, and they really want to have that direct customer relationship -- we can understand that -- but we are looking for more business.
It is a good line of business, it's profitable, and we are in business to make money. This is one way to make money, and it is a service that we provide that we would like to continue to provide and have no plans to stop providing it.
A couple of things we won't do, that a number of carriers have asked us to do on a number of occasions in these lines. Several carriers want us to give them a list of the PLCs, which is the primary local carrier of each of those customers. We have declined to do that so far. We think it's proprietary to us. It is proprietary to the resellers who are reselling our network, and it is probably proprietary to the customers too.
Another thing that we won't do is, guarantee the performance and speed of resellers who participate in that CARE clearing house process. It is great for them to participate, but we are not going to guarantee to the carrier that the reseller is going to be responding within a particular period of time to a BNA request.
The future, in our view, is really a matter of incremental improvement. We are improving, probably of little interest to people outside of New York, but we hope to be dramatically improving the way we clear intra LATA third number type messages in New York state. We will replace CMDS, we hope, by a process that's not really a toll pool, it is using the New York state toll and access pool to clear these messages.
We plan to keep improving our billing and collection process. We want to bring in more B and C business. Thank you.
MR. MULETA: Thank you very much, Gregg.
The next speaker will be Mr. Ray Lawton, who is Associate Director of Telecommunications of the National Regulatory Research Institute in Columbus, Ohio. We appreciate his joining us today.
MR. LAWTON: Thank you. Good morning. In the packet that you received this morning, the last item in there, the stapled item, is my handout. I think you will also see them on the screen, but let me move ahead.
What I've done is, we were asked by the Ohio Commission, to do a survey on quality of service. One of the modules turned out to be a fairly large one on billing, so that is what I am speaking about. Perhaps before starting, I should say that, just before I was literally going out the door, we had a billing problem back home with my mother in law, and I thought I would share it with you.
She ordered caller ID, and her bill looked unusually large to her. So, she looked at it, and sure enough, there was a caller ID charge, but she didn't realize that there would also be an installation charge. At the same time, just through bad luck, she was also slammed. She had a carrier change. She used that same test. The bill was a lot larger than she thought it was going to be, but she couldn't understand the details. The details were, in fact, there, she just simply couldn't understand them.
You will see as I go through this, there is sort of a quality of service trilogy, that we find out that the customers that have had a repair experience, ask for new installation, or had a billing problem are drastically and significantly different than the rest of the customers in the survey. We did 400 business and 800 residentials.
I am going to start and just quickly go through some of the findings, and mostly make comments on them since they are before you, starting with page three. The two dot points on the top of this chart refer to the numbers at the bottom, and basically, you will see it shows that the business, non-residential customers consistently gave lower grades on understandability, detail, and accuracy, than residential. That is an interesting finding. We have people grade these attributes. If you went from accuracy to detail understandability, understandability is the lowest graded item, the one that received the fewest A grades.
On the next page, the two top dot points are kind of interesting. Basically, the first one suggests that a fifth of all the customers out there reported, in the last 12 months, that they had a billing error. I don't have a good standard to bounce it off, but that seems awfully high from our perspective. Roughly, looking at it, it is two percent of all customers have billing error every month. But if you look at the second dot point, it suggests, or implies but doesn't prove, that if you look at that 31.8 percent number, it suggests that 31 percent of the business customers thought they had a problem, but when the dust cleared, only 23 percent had a problem.
The last dot point was, where were the errors? Again, these were mostly open ended questions, and we had to go back to encode the responses and they are kind of loose. But basically, it suggested that long distance charge errors were responsible for half of the mentioned errors in business, non-residential, and two thirds of the residential. We don't have a lot more information past that, other than what people actually told us.
On the next two pages, we asked some implementation questions. The first dot point tells you that 74 percent of residential and 81 percent of business found that the recorded voice instructions were easy to follow. That suggests to me that that part of life works well. But only 40 percent, and 44 percent of residential, found it difficult to reach a live representative.
That again strikes us as an unacceptably low number, but again, you've got the hard job of deciding if these numbers are good or bad. If this 81 percent number, which looks pretty high, the flip side is to say, would you be happy with a system that had 20 percent of business finding the recorded voice instructions not easy to follow?
We asked customers to give grades. It turns out that that was something they all understood, and it was something that worked out well in the survey. We asked, when they were done with the billing module, to give a grade about knowledge. With the repair module, to give a grade about repair and installation. It turned out that the lowest number of As was consistently given in the billing module, if you look at that first cluster. 31 percent gave As for billing, 34.9 for residential.
We flipped it around to make sure it just wasn't a grading thing, and asked, what was your satisfaction level? And again, in terms of the percentage of people saying they were very satisfied, billing came in lower than installation or repairs. We found that consistently throughout all of the modules. Somehow repair seems to go real well, and then installation and billing was much weaker.
The next page has an interesting one too, on optional billing payment plans. Nineteen percent of all respondents, residential respondents, because we didn't ask this of business, said they were aware of an alternative payment plan. Close to 90 percent of the people said they were comfortable with the explanation about it, and about a third of those who were aware, said they used a budget billing type plan in the last twelve months. And 96 percent, nearly all, said they thought it was actively credited.
I think we can say that that works well, and part of me says, should we have an outreach program to let more people know, because only 20 percent of the people said they were aware of alternative payment plans. Would you want to go out and say, hey, by the way you don't have to pay, or you can pay slower. But it turns out again, only about a third of people seem to use that. So again, I call that to your attention.
The last page, for at least numbers, about a third of our business customers indicate specific billing improvements that they thought were needed. None of them aggregated into anything that I could report to you, but again, I say to all of you, if you are interested, give me your calling card and I will get you a copy of the larger report.
One of the findings we had consistently across the repair, installation, and billing, was that the active users differed significantly from the average user. The way to understand that in this chart that is in front of you, this page eight, we divided residential into those that made three or less calls per day and active were those that made four or more calls per day. I forget the exact business number.
If you look at the understandable row, that meant that the percent giving As for understandability, the average was 45, but the active user, it dropped off to 31.6. So, you see a consistent drop off all the time. If you go to the bottom for errors, it's even more dramatic. Remember, I said that approximately 20 percent of the people had billing errors, but if you look at the average customer, for residentials, you would look at that 6.2 number. But look at the percentage in the active residential users, that said they had problems was 37.7. There were 37.7 percent who said they had a billing error in the last 12 months.
So again -- do you have the chart in the back, page 13, the one that has the circles? We do, all right. One interesting thing we found, and this applies to billing and everything else, is that the plain vanilla telephone user, the group at this top circle, 403 respondents, half of them had no repair, no installation, and no billing problems. When we did our survey, they also tended to have fewer services and were less active users.
So, kind of the leading edge of our telecommunications revolution, are the people that are in that central part. The people that had a repair, an installation, or billing. They are the ones that gave the lowest grades. They're the ones that had the most problems happen to them. They're the ones that had the greatest concerns. So again, you can either look at all our policies and say, should we be forcing people out of those three central circles? In other words, should the status quo be in that larger part of the circle?
That's one way to be looking at our billing rules and service rules, or to say no, actually the flow is going the other direction. If we are really expecting the system to be modernized, to have a different competitive profile, then really, it is a flow into those circles that we should be expecting to see in the future.
I will just simply conclude with my comments. I share with the comments from my predecessors, is LEC billing for others important? Yes, as long as we have what we call a Linchpin model, as long as most people, most of the time, have got to get to the last customer by resale or unbundling, it is important. The red flag for us was third party billing, that when we looked at it, it did not seem that the errors were directly related to billing for local services, perhaps because people are used to a flat number they see each month.
I will simply conclude by saying also, the other thing to notice is the budget billing plans appear to work, and I guess why we're all preoccupied with complaints and introspection, it is important to know that there are good parts of what we have out there that work. I will conclude there, and be open for questions later. Thank you.
MR. MULETA: Thank you very much. As we move westward, we have Ron Evans from OAN, which is a third party billing company, and he will be speaking next.
MR. EVANS: Thank you, John.
I am going to give you a little bit of background on OAN and its customers, because we may not be familiar to all of you, and move into a discussion on what, from our experience, happens when the LEC billing process breaks down and is either reduced or eliminated.
OAN is a billing and collections clearing house that specializes in billing calls for small carriers in the local exchange envelope. We have our own contracts with all of the Bells, with GTE, and most of the independent telephone companies across the country and in Canada. It means that the bill page has an OAN logo on it, and on the envelope. Over the call detail, the carrier we are billing for is identified, and generally, across the country, it is our 800 number that calls into our inquiry center to answer questions if there is confusion on the bill.
So, needless to say, we are as concerned about confusion as anyone here. Our contracts allow us to bill to both casual and pre-subscribed usage, and we do both. The casual is calling cards, shared use calling cards, collect calls, bill to third, 10 XXX, and we have the ability to bill for 900 services, though we don't, in fact. On the pre-subscribed side, we bill primarily for One Plus services, either casual 10 XXX, or true pre-subscription.
Generally, it is toll and occasionally there are monthly service charges or enhanced services associated with it, such as, voice mail and paging. We bill for roughly four to five hundred small to mid size carriers. Many of them are start up companies. Many of them are niche marketers, either specializing in sales to segments of the population or to other special interests.
They come to us and they use LEC billing because it is the most cost effective means to get their billing market. Most of the carriers that we bill for are heavily dependent on the service. I would say, the vast majority of them don't have alternative means of getting their bill out. Let me talk, just briefly, about what it means to them, and ultimately, the consumer, when there is a breakdown in this kind of system.
I mentioned to Gregg before we started, the example that I am going to use is, what happened when local competition opened on Rochester Telephone region. We bill into the Rochester area through Illuminet, which Gregg mentioned, and we were billing, needless to say, at the time this competition began. Our carriers continued to do business as usual. They, on their casual calls, went out to the line identification database, to be sure that the number that they were going to bill to was valid, and in fact, there was no screening to prevent billing of collect calls or bill for third, prior to completing the call.
They got signalling back that, in fact, they were good lines. They appeared to be Rochester lines, because they were in the Rochester database, and they were, according to Bellcore standards, within the line number range belonging to Rochester. They sent them to us for billing, and we sent them through Illuminet to Rochester, and about 30 days later began to get unbillable calls back.
This was fairly early in the process, and Rochester hadn't developed some of the mechanisms that Gregg talked about earlier, which have improved the situation, but certainly haven't totally done away with the problem. What we saw at first was, unbillables coming back that roughly associated with the market share that the new local competitors had taken in that marketplace. And, it was fairly small, and the carriers we billed for wrote those off as unbillable.
They couldn't find alternative means at the time to get them billed, and I mean by that, either they could not get them billed, period, because they couldn't get line number information, or if billing name and address was available, it was cost prohibitive. Ultimately, it was going to cost them more than the price of the calls to get them to consumers.
Things worsened, actually, from that point. We had several carriers who had some fairly heavy traffic being billed into the Rochester area, prior to line number portability and local competition confusing the situation. Those carriers not only got market share returns, they ended up, because of the type of subscription fraud, where some end users realized that they would not have to pay bills because they wouldn't receive bills by moving to certain of the new competitors who had not or would not make billing arrangements within the other carrier.
That grew to the point where one of the customers ended up filing bankruptcy. I don't know if it was solely because of the situation in Rochester, but it was coincidentally right at the same time that everything came to a peak for them.
I am playing this out just because it is important to understand what the consequences are. To carriers, it means either they need to have billing arrangements in place, or they start shutting down optional services, especially casual services such as 10 XXX, dialing which allows end users to have a choice, and test new long distance services. It shuts down collect calling, bill to third calling, simply because there is no guarantee that it is going to be cost effective to ever get it billed, if it can be billed.
We haven't seen a situation quite as bad as Rochester subsequent to that. We're very concerned that we haven't seen the end of it yet, in fact, just two weeks ago, in talking to one of my Bell representatives, I was told that there is at least one competitive local exchange carrier, who as part of their marketing plan has made it clear that by using their services, consumers can, by using 10 XXX dialing, only pay local calls and avoid long distance charges indefinitely. We see that as the death nail to
10 XXX, and we think it is a significant loss, not only to carriers, but to consumers.
MR. MULETA: Thank you very much, Ron.
I appreciate everybody's comments on this general issue, and what I would like next to do, is just sort of put on the overhead what we're talking about, and just use as an example -- if you could put, from the sample, the first bill example, which is part of the package that you got from outside. For those who came in while we had started, there are packages outside.
What we have been talking about, essentially would be a bill that looks like what is on the screen. Essentially, there is language that talks like this, after the account number, the date, and so on, it says, "this portion of your bill is provided as a contractor service to such and such company, which provides billing service for themselves or for carriers who offer toll calling or operator assisted telephone service, which may originate from residential telephones or from business phones. Charges for these calls are determined by the carrier whose network is used at the time you placed your calls, and are not set by --" the two different companies that are listed in there.
One of them would be a LEC, the other one would be either IXC or a billing company such as OAN.
Then we go down, there is a helpful number which says, billing inquiries call a certain company, with a number, some summary information, and then an itemized section with toll calls, and that's the message we have on there. So, I know this is not representative of all the carriers and all the carrier services, and this is not the way that itemized calls would show up, but one of the questions I would like to ask from the panelists is, if you were a consumer, and you received this bill, is this adequate in the first instance?
And also, then as you as a business matter, is this adequate information? And anybody who might want to take a start at this?
Mr. Lawton, if you want to take a crack at this, where does this fit in with your understanding?
MR. LAWTON: I guess I would look at what's marked as C, the paragraph, and say that one has to go through an awful lot of reading to get to the punchline there, so my sense is that all those extra words probably make more sense to us as insiders than to somebody else. I think if I was just reading the bill, I would want to know that below is your bill for messaging, period.
MR. MULETA: I guess from the carrier's perspective, when a lot of the carriers, AT & T, as well as WinStar and Frontier and OAN, have all come in and said, this is a very important process. This billing mechanism is an important process. I guess the question that comes to my mind is, do you believe any customer expectations are set, either for the customer who is receiving this bill as an in package bill from a LEC, are there any customer expectations that are set in terms of service quality and things like that?
I guess I would like to ask AT & T and then maybe OAN and WinStar.
MR. ESTEY: I don't have any data, John, but I think that customers are sophisticated enough today that they would understand this. I think we've had a number of years experience now with, for example, long distance charges appearing on the local bill, and there is a clear disclosure statement that says, when I get my Bell Atlantic bill at home, it says on the AT & T page -- in fact there is an AT & T logo if I recall -- it says, this is a billing service provided to AT & T. This is not Bell Atlantic's charges. If you want to question these charges, please call AT & T at this number.
Ii don't know if there are studies to the contrary, but it seems to me that it's pretty plain English. As to the carrier, I assume we have worked out, as part of the billing and collection contract with the LEC who is doing that billing for us, what the language will be and it is satisfactory to us. So, I am not aware of a problem in this area.
MR. MULETA: I guess maybe before we go on to the other folks, from the perspective of a Rochester Telephone, do you think any customer expectations are set about quality of service, customer service, and so on, and is this adequate from a consumer's perspective?
MR. SAYRE: Well, I'm not entirely sure about this particular one. I don't know what message it is, but the consumer might or might now know what it is, depending on what their relationship is for the third carrier. So, we would expect, if they've got a question, they are either going to call us if we're handling the inquiry, or call the carrier. And if we are getting too many calls, then it becomes a little bit cost prohibitive for us to have a confusing bill format, and that situation is going to correct itself, because time is money and people are money.
If the carrier is getting too many calls, they are going to us, look, you need to make some changes in our billing and collection arrangements, because it just doesn't make sense. I think it is a process that tends to correct itself.
MR. MERRILL: I also believe it's a self correcting process. I found, through experience, that the fewer words the better, and have it as succinct as possible. Taking a look at this, it seems relatively straight forward, and one thing about the consumers that have had telephone service for any period of time, if there's a problem, generally speaking, they'll reach out and make that call. If it needs correction, then sometimes, quite frankly, the state regulators get involved also.
If you are in any specific jurisdiction, the state regulators also take a look at the billing formats and so forth, but keep it as succinct as possible, and if you are getting a calls either to the company or to the regulators, then you need to address the specific language.
MR. MULETA: I guess, following up on that, Ron, if you have --
MR. EVANS: Just one or two comments. The part that on the surface seems the most confusing is single line messaging, and not being a subscriber, it's guaranteed to confuse us. We work with the carriers. Because there are very definite limitations as to the number of characters available in fields in order to populate this kind of message on a telephone bill, it's incumbent on a carrier when marketing and selling the particular service that they bill for, to make it clear to the consumer how it's going to appear on the bill.
In general, we don't tend to get a lot of inquiry if it is done properly. If it's not done properly, just like Rochester Telephone, because it is our inquiry number on the bill, we get a lot of calls and we're on the phone with the carrier talking to them about their marketing techniques and what needs to change.
MR. LAWTON: Plus I guess, following up on the same mode of reasoning, this 800 number up here is unknown to me. I am not sure who I'm calling. Am I calling a LEC or somebody else?
MR. MULETA: No, it could be the billing company. It would be the third party billing company.
MR. LAWTON: The third party billing company?
MR. MULETA: I guess the sort of point that I've gotten out of this discussion is, it's not just a matter of impact of the billing and essentially putting a bill in the envelope. It's a lot more than that. There's questions about, prior to the billing, there's a question about how well you have explained what service it is that you're selling. That is one question, I think, Ron just brought up.
The second question is, what happens after you send out the bill, and if you have questions. There seem to be two points of contact. One would be in this example, Rochester, and asking the LEC, how can you explain this to me, or what's going on here? And then calling whoever it is that is issuing the bill.
And interestingly enough, there could be a third person, which is actually the exact service provider, the person who actually provided the service. So, it seems to me that, what other arrangements -- can you give some examples of the arrangements that you do to handle these sorts of things? For example, the customer service aspects of it. Are there any specific requirements, are there any standards that are set by state regulators, or -- I don't believe there are any at the federal level -- but are there any industry guidelines for answering calls and et cetera, or are these just simply contract terms?
MR. SAYRE: If it comes to the LEC, that is a separate service that is an optional billing and collection service that a carrier can buy or not buy. If they buy inquiry from us, we will handle the inquiry, and the calls will come to our customer service center. They will go in the queue with every other call, and the answer time performance and the accuracy and the cheerfulness and helpfulness are all regulated pretty heavily by the state commission.
This kind of call, for instance, has got a measurable standard that 80 percent of those calls have to be answered within 20 seconds in order to meet the objective level performance at the New York Public Service Commission.
MR. MULETA: Is that a standard across the country?
MR. SAYRE: That's a New York state standard.
MR. LAWTON: I was going to say that too, you're a good mind reader. I went through the policies of all the state commissions, and nearly every single one of them basically has rules. The rules are different in every state, but they don't differ by a lot. There are clear rules established for the local exchange carrier.
The data set I was looking at was behind that, it's unclear what the rules are for the new entrants, or someone who is offering a unregulated detariffed service.
MR. MULETA: When you come up with standards for -- let's say that a carrier or ISB chooses not to take the LEC service for the customer services aspects of it. Are there any standards, or how are they developed in terms of the carrier's customer service? What are the expectations? Is it based on customer expectations or are they just developed as a rule of thumb out of years of experience? As a CLEC, or as a new entrant, what do you think?
MR. MERRILL: Let me take a stab at it. If we go around the country and get our authority to conduct business, we are a regulated local exchange telephone company. Call us a CLEC, call us an ALEC, call us a local exchange telephone company. And as we get our authority to conduct business in any given state jurisdiction, they have their criteria, their rules, their process. To be successful in the marketplace, beyond the rules and process, we either have to meet or exceed the incumbents that are operating there.
So, the regulatory commissions, from my experience, usually put you through a very similar process. It can be somewhat abbreviated, but it's pretty well known that they have established rules and procedures and objectives for various aspects of telephony that have been going on for a long period of time.
We are held to that standard, and generally speaking, we have to hold ourselves to a higher standard than that if we hope to be successful in the marketplace. So, it's a pretty well laid out process.
MR. MULETA: AT & T, do you --
MR. ESTEY: You mean about the customer service standards?
MR. MULETA: Yes.
MR. ESTEY: I don't know to what extent they are mandated, but AT & T has a long history of having its own customer services practices and standards. I worked for a number of years in the operator services division, and it was mentioned earlier, answer time is one of the primary things that those units are measured on.
So, when these calls come in, and I guess it's on a separate page where you are talking about the long distance calls, and it will list on the bill to call the number if you want to talk about your AT & T charges. Those calls come in to an AT & T customer care center and that center, there are several of them around the country, has its own full set of measurements to insure that those customers are being treated promptly and with good service.
But, I don't know to what extent that is mandated by government. As far as we're concerned, I think it is mandated by competition and how we serve our customers.
MR. MULETA: I guess the general question is, there was a statement made earlier that, not only is this thing a necessity, but that it needs to be clear, concise, and easy to understand, and I just want to formulate, are we reaching those objectives? Everybody agrees that we should share the envelope, but the next question is, are we getting to clear, easy to understand and concise?
Let me ask, there were statements made about alternative arrangements, or alternative billing arrangements that are being considered or being developed. I would like to ask the competitors, or the third party billers, if you could describe what those are, or what they could be like. Any ideas about what those -- is it simply billing it on your own? Is that an alternative that's being considered? What are the limitations of that, other than the sort of competitive issue of customers want one bill or sharing the envelope concept? Ron?
MR. EVANS: The number one example of an alternative that's typically named is billing name and address. On casual calling, the carrier doesn't know the name and address associated with the billing telephone number. Consequently, either bills in the local exchange envelope and they handle the distribution, or purchases the name and address associated with that number from the local exchange carrier, and then directly bills the calls.
We've worked with a couple of billing name an address providers over the last few years, and actually, for a very short period, we experimented with it ourselves. Relative to the cost of billing telephone calls in the local exchange envelope on a per unit basis, it tends to be more expensive. But beyond that, when you're measuring total costs, it is just overwhelmingly more expensive.
Typically, consumers accept their telephone charges in the telephone company envelope, and have a very simplistic view of how they should be paying their telephone bill. And the collection rates, when they are combined, are much higher than when that's sent out separately, especially if it is a single collect call that someone accepted from their daughter who is away at camp, and the call comes in an envelope for $3.50. Typically, it gets thrown away rather than getting paid.
Consequently, the carrier ends up with all of the costs associated with purchasing the name and address, printing, stuffing, mailing, and then not collecting. So, we haven't found that it works well. When we worked with some of the B and A providers, there are actually one or two clearing houses out there who specialize in this, and talk to the carriers and see the results they've gotten. A 50 percent collection rate is considered very good, and that's obviously not something that could keep any carrier in business.
MR. MULETA: What is the collection rate in the industry today for these sort of services?
MR. EVANS: Depending on the type of services, it's high. It is in the 90s.
MR. MULETA: So, 90 percent of bills that go through the LEC billing system are collectible.
MR. EVANS: Absolutely.
MR. MULETA: At the round tables we heard figures, depending on the company, depending on the specific services, it could range anywhere from the low six to ten percent to 20 percent. What's the difference? Why do you have the range?
MR. EVANS: The low -- I don't have anyone collecting at six or ten percent. If I did, I don't think I would have them for more than a month or two. In fact, we've never -- I take that back. On one occasion, we had a carrier that had a billing error.
MR. MULETA: I'm sorry, I think I asked the question in reverse. I am saying that there is a range of uncollectibles of six to 20 percent, and I am trying to understand what the differences would be.
MR. EVANS: Uncollectibles, which is typically associated with bad debt, generally play into what socio economic group the carrier is selling into. I think, obviously, someone who has marketed primarily to mid size businesses, has a higher collection rate than someone who is providing collect call services out of a prison.
That's the kind of range that we end up seeing, and you're right, I did read you backwards. There is a range there because of the ability to pay on the part of the end users.
MR. MULETA: Can any of you describe sort of what the general principles of agreements that you enter with the local exchange companies would be in terms of the revenue sharing or how the payment structure works and things like that? Maybe Gregg, do you want to take a crack at that first?
MR. SAYRE: Well, they're all over the map, and in fact, we are trying to be a little more innovative with them. Whatever works from a business sense. It could be minimum usage, minimum revenue guarantees, X cents per message, or it could be X percent of the amount of billed revenue. Sometimes the LECs are responsible for a portion of uncollectibles if they exceed a certain threshold, sometimes not. Sometimes the LECs can freely recourse the bills back to whoever is feeding them to us, and typically that would be the case for information provider type bills. We're not willing to eat uncollectibles on those.
So, it's very much a business kind of decision, and whatever works for the two company works.
MR. MULETA: So, my understanding is, if a consumer disagrees with a bill statement, then there are different alternatives that could take place. One could be that the LEC handles the total collection issue.
MR. SAYRE: We may do an inquiry and we may not do inquiry. If we bill it though, we will attempt to collect it. I have to say there is a distinct advantage to doing collection through a LEC. We do not terminate local service for non-payment of toll in New York state, but if you don't pay your toll bill, you are going to get, eventually, toll restricted. If that bill comes through us, and it gets up above the treatable minimum and its gets to the point where your toll restricted, it's not just a bill you can throw away if you want to continue to have toll service.
MR. MULETA: This brings us to another issue, that was raised to us, which is the issue of secondary collection, and to what extent is the industry using secondary collection as a method of getting uncollectibles for bill disputes and things like that? Any thoughts on that?
MR. EVANS: I can't speak beyond our own experience. We typically don't use secondary collections, and some of it relates to contract restrictions. For instance, just generically, when we are billing in the local exchange carrier envelope, if an account is written off for bad debt, we, nor can the carrier, go out and pursue collections. Typically, it is because it has been turned over to a collection agency by the local exchange carrier and processed continuous.
However, there is an option with post-billing adjustments. Say there is a dispute between the consumer and the carrier as to the proper amount that they've been billed, where the local exchange carrier might write off that entire account, and say this is a dispute between the carrier, take it and resolve it between the two of you. A carrier can, contractually still go out and collect it, I know from my experience in errors we work with, none of our carriers are doing that today. It is certainly, though, their right.
MR. LAWTON: Not that numbers do a lot for you, but 41 states have formal dispute resolution mechanisms, that the LECs must maintain and develop, and 34 of them are required to be published either on the bill or in the telephone directory. And then this last one, I'm not certain I understand completely, but in terms of non-payment recourses available to exchange companies for uncollectibles, 17 states permit the use of a collection agency.
But, in 21 of them, it appears that it is basically the responsibility of the third party. The local exchange company can say, fine, that will come out of our next month's payment to you. In other words, if there were say $10,000.00 floating around, we'll make that adjustment. It will be a true up in the next billing cycle.
MR. MULETA: It seems to me that there seems to be a dichotomy as we move further and further away from telecommunication services. For example, what you just mentioned is, when it comes to toll service and to local service, there are certain mechanisms that are in place, but as we go further out, there seems to be no standards or limited standards for dispute resolution and things like that. Coupled with the fact that there are no standards for presentation or the discussion of these bills, I think it adds to our concern, I believe.
Are there any major issues that you think the changing competitive landscape will bring about in terms of this billing mechanism, and any thoughts you might have that? I would just like to open it up. Stubb is shaking his head, so --
MR. ESTEY: Well, you mentioned in here somewhere changes in the landscape from the Telecom Act of '96, for example, and I mentioned in my remarks the concern of ours is that as LECs are today contemplating getting into long distance business. Because of that strategy, they begin to make it more difficult for us to have our billing and collection contracts with them. That's a big problem. It gives them, as I said, an unjust competitive advantage if they can either raise the rates extremely or cancel a contract for cause.
We were unable to come to agreement with SNET for billing and collection contract, so we're doing our own billing. That's fine, we can do it, but customers have this tremendous predilection for wanting to get a single bill. Initially, at least, it is the biggest customer dissatisfier to be getting two bills.
So to the extent a LEC chooses the strategy of making it difficult for the IXC to do business on their bill, it will give them a tremendous competitive advantage.
MR. MULETA: I guess one question to ask, then, is this part of the regulative service that -- I guess the sense I'm getting is it is an integral service to telecommunication service providers, and I am seeing a lot of heads shaking, so I guess I have my answer on that one.
MR. SAYRE: May I speak to that?
MR. MULETA: Please, please.
MR. SAYRE: I think the FCC and the New York PSC did a similar thing and cut the cake pretty well in detariffing it, but not totally deregulating billing and collection service. When it comes to negotiating a rate, it's something that the businesses can work out for themselves, but if it's a matter of discrimination -- if I were given a sweet deal at Rochester Telephone to Frontier long distance, leaving AT & T and MCI out in the cold, then I would expect the regulators to come down on me.
That degree of regulation, the FCC and the PSC have retained, so I don't think there is a major problem with where it is sliced right now.
MR. MULETA: One of the questions that is recurring in all of this, when other LECs were speaking about this at one of our round tables, it came up as an issue about brand identity and keeping brand identity essentially pure, or whatever you want to call it, and I would like to hear the opinions of the competitors as well as Rochester about those kind of issues. Since a single bill or a single package is important, where does brand identity play in all of this, and is it a real concern for the LECs, this issue about LECs brand identity and preserving it.
I would like you to start, Gregg, if you don't mind.
MR. SAYRE: Brand identity is certainly important to us and every other carrier, because as both long distance and local become a commodity, there is less and less to distinguish the service from one carrier or another. We understand that, and when we bill and collect for other carriers, we'll put their logo in their preferred color on their page of the bill.
MR. MULETA: But does that really get to the notion that I think the other carriers had mentioned, and I'm paraphrasing, but the fact that it is a single bill, that's what really creates a brand identity, and not necessarily the single page. I know there are some heads shaking, so if anyone else could address it.
MR. LAWTON: I think in a slightly different direction, you don't want to get in a situation, since we all regard non-cutoff of local services as kind of the basic right, and that the other things should be collected, but you can't get cut-off for the others, you don't want to have the incumbent local exchange companies somehow -- it's color make you think that its long distance services are also included in that. I think there has to be a clear understanding as to where that non-payment line lies, and by the logos being too big, or colors being the same, that might confuse that issue to the detriment of the challenger.
MR. MULETA: Steve or Ron?
MR. EVANS: Actually, just to echo what we just heard, we think two things. We respect the need to keep what's in the envelope clean so that it is in no way tarnishing the image of the incumbent local exchange carrier. However, when the line gets crossed and the incumbent carrier starts arguing beyond what's reasonable for what they need to do in order to maintain retail leverage in their marketplace at the expense of the carrier's we're billing for or AT & T or MCI, or any of the other interexchange carriers, we see that as just flat out anti-competitive.
MR. MULETA: I would like to now open it up to the people in the audience if you have any questions that you'd like to ask. We have someone with a microphone so you can raise your hand and they will come to you. Any questions?
Can you identify yourself when you are speaking, please.
MR. GULLADGE: My name is Bob Gulladge. The question is mainly for AT & T and WinStar. As you pursue CLEC activities, are you going to allow people to request BNA from you?
MR. ESTEY: We are billing for local service and long distance in a consolidated fashion in four localities throughout the country, now just getting started and getting our feet wet in this business. So far, frankly, we don't have the infrastructure to do what the LECs can do today, having built that infrastructure, in their case, over a number of years.
I think we would see ultimately that that would be a good thing for the industry, perhaps on some sort of clearing house basis as was alluded to earlier. Today we don't have the capability of doing it.
MR. GULLADGE: Thank you.
MR. SAYRE: You do in Rochester. You do participate in our clearing house in Rochester, so if MCI needs your local resold customer's BNA, MCI asks Rochester, Rochester asks AT & T, and it flows back. You're doing it now.
MR. ESTEY: Where we have our own billing, we are not doing it. But, where we are taking advantage of Rochester, we are doing it.
MR. MERRILL: From WinStar's perspective, again, we brought our first switch up in New York in November, and since then, we've brought up four or five more switches, and we're developing our systems as we go. I would say down the road, as we evolve, yes. As we've negotiated our general interconnector agreements across the country, and so forth, we have always tried to keep a balanced approach of what's fair. Our reciprocal, symmetrical, whatever it be in compensation, and down road that's how we see everything going.
Today, I can't speak specifically if we are doing that today, and where we are, but we do, we have a CMBS host, we have standard industry arrangements and so forth. So, as we move forward, yes, I would say that what is going to happen on one side is going to happen on the other as we move forward.
MR. TAYLOR: Thank you, John. I am Alan Taylor from the Florida Public Service Commission. I wanted just to back, and I'm not sure who to ask the question of, but to the example of the bill that we talked about with the messaging service.
Correct me if I'm wrong, but it appears to be billed as operator assisted toll calls, so I would have to assume these are deniable charges then, is that correct? Yet, there are no individual calls listed there. Would anyone comment on whether these are regulated or nonregulated charges?
MR. SAYRE: It looks to me like that's voice message service, at a flat rate of $25.00 per month. That's unregulated on the federal side as an enhanced service. Some states choose to regulate it, and some don't.
MR. TAYLOR: But on this bill, it would appear to be a deniable charge because it falls under operator assisted toll calls.
MR. SAYRE: Sir, I'm not sure what you mean by deniable charge.
MR. TAYLOR: That means if you don't pay it, your phone is cut off by Rochester Telephone Corporation.
MR. SAYRE: Yes, for voice mail -- I'm not sure we bill and collect any voice mail.
MR. MULETA: This is not a Rochester bill.
MR. SAYRE: There certainly would not be any cut off of local service. The only question is, whether there might be a cut off of toll service if the customer were buying voice mail from a long distance carrier. In New York state, voice message service is actually regulated, and so I think, if it were intrastate, it would go with the rest of the toll services. It's actually tariffed in a lot of companies.
MR. MULETA: Ron?
MR. EVANS: All I was going to say is, I think probably the point has already been made, but a lot depends on which state this bill was in and whether or not it would effect disconnection or loss of services.
MR. DONALDSON: Charlie Donaldson, New York Attorney General's office. Using the same example the previous question brought up, I guess I am directing the question to Mr. Sayre and Mr. Evans.
How, based on this bill, is the consumer going to know who they're dealing with? If this is a billing aggregator, third party biller bill, and the reference is to a product, and I am assuming this is a product, not a company, then how is a consumer going to tell who they are actually dealing with?
MR. EVANS: If you don't mind, let me take the lead on this one. Only because I'm used to this.
(Laughter.)
MR. DONALDSON: Unfortunately, so am I.
MR. EVANS: If this were our bill page, and I don't know whether it is or not, the upper lefthand corner where it's blacked out, it would have our logo or the aggregator's logo, and our name would also probably be printed in the text at the top.
The part that's blacked out just above the summary on this bill page, I assume is the identification of the carrier associated with that product. So, it is all there. I'm not saying the type size is the best it could be or anything like that, but the information is there.
MR. DONALDSON: The problem I've got is, that you are making an assumption that in reality I don't think is followed out. We frequently will see bills which say, "Billed on behalf of 00402," or something like that. What does that mean to the consumer?
Another thing, that happens to be the subkick or whatever for a billing aggregator, not for a service provider.
MR. EVANS: You shouldn't be seeing that. Obviously --
MR. DONALDSON: We're seeing a lot of it. So, the other problem with the bill is, let's say you've got the ultimate service provider identified by letters. Let's say it's Mother Jones Voice Messaging Service. There is, however, nothing on this bill which allows the consumer to go straight to Mother Jones, nor is there anything in the bill which identifies whether the billing aggregator or the LEC has the authority to do any kind of bill adjustment or bill investigation.
The consumer is flying blind here. Typically what we see is, folks wind up peeling three layers of the onion. The first call goes to a LEC, the LEC says, we don't know anything about this. You have to call the billing aggregator. The billing aggregator says, we don't know anything about it, therefore, you have to call Mother Jones, who may or may not answer the phone.
Based on this bill, how is a consumer going to know who they are really dealing with and how to get in touch with the folks who can make the decision about whether or not to adjust the bill.
MR. MULETA: I think this is some part and parcel of what we have been talking about this morning, which is subject to the standards of each individual company, in each individual state, in each individual LEC. It is also a great preview for, I think, panel three, where we are going to try and address whether or not there should be some level of consistency.
This lady had a question right here.
MS. VAN OVER: Hi. Joel Van Over. I have a question that you, Mr. Evans, raised on the leveraging potential on billing and collections. Clearly, incumbents have an incredible power to leverage in the XXX area, casual calling area. If they stop billing and collections, a lot of people are out of business. But it seems to me, that could also impact, and I would like your comments on this, the subscribed calls for smaller IXCs, and the impact -- this is all an issue of cost and economics -- what would the impact be if incumbents raised their costs significantly in the billing and collections area, or if they entered into very short term agreements in billing and collections so that an IXC couldn't plan going forward what their costs are going to be over time.
I would like you to address some of the other leveraging issues that could come into play if an incumbent took aggressive action to leverage.
MR. EVANS: Actually, the carriers we bill for, the presubscribed carriers that we bill for, would probably be hurt the most by any significant change, either in pricing or in terms of contracts, simply because they are operating at the slimmest margin of any of the carriers we bill for.
They are in competition with much larger entities and are pricing very aggressively because the marketplace demands it. If they need to adjust their pricing to consumers in order to make up for increases in pricing on the billing and collection side, typically, they will no longer be competitive. A lot of them could very easily be driven out of the market altogether.
In a way, the example of Rochester I gave was extreme, however, the dangers of something like price changes, price shifts, short term contracts, are possibly even more of a threat on the current horizon. We are seeing, in our interactions with local exchange carriers today, demands made on us that we've never seen before. We're seeing local exchange carriers take positions which we consider outrageous, but when we go back to them to negotiate, we're being told that these issues are no longer negotiable, and take it or leave it.
We are very concerned, and that's, quite honestly, why personally I am here today, and why we have been talking to the Enforcement Division in other arenas, trying to shed some light on this, and at least bring it to the surface for discussion.
MS VAN OVER: Could I ask a follow up question, and I am happy for anybody to answer this, what is there at the state or federal level today to prevent the kind of conduct you're talking about. I just point out that, in some instances there may be a need for very quick action, and I'm not talking about --
MR. MULETA: Is this for the consumer?
MS. VAN OVER: Well, obviously consumers are the ultimate victims if small, competitive carriers are going out of business, and the rates are increased because billing and collection rates are increased. But what exists today, if anything, to address this issue at the state and federal level, and what is needed?
MR. SAYRE: Speaking from Rochester Telephone's perspective, are the anti-discrimination rules, such that we can't give a sweet deal to one carrier and not offer that to other carriers. But really, the main driver for my company, at least, is enlightened self interest. We raise our B and C rates, and drive carriers out of the marketplace, we are going to get less to bill and collect. We are going to lose money.
It's not our business either to lose money or to leave money on the table, and for the years in which this has already been detariffed, we have attempted to extract what profits we could out of this as a business. To the extent that we've raised that a little more, and that causes people to walk away from the table, well, that's bad negotiating for us, and bad business.
MR. LAWTON: Just as a quick point, the only real weak point out there, I think, is that it is a very reactive system. In other words, there is no proactive letting all the 1,000 small entrants out there know that, by the way, 675 of them out there have gotten a better deal in billing collection than you have. So it's a self enforcement kind of a situation. It works very well once you reach that point, but the ability of the underinformed challenge to know these things might not be as strong as it should be, and it's not really the mode of the FCC or the state commissions to reach out and be announcing to people what these better terms and conditions are.
MR. ESTEY: I think this is a very important question, because I think this is one of the most troubling aspects that this panel has talked about. In the federal arena, I am not aware of any rules and regulations that govern this, because in 1986, when the FCC detariffed billing collection, I went back and read that order, and it talks about the fact that it made an affirmative finding -- billing collection is not a communication service, so it will not be regulated under Title 2 of the act.
It went on to find that it is -- the commission would not relinquish regulation under Title 1 of the act, but chose not to formulate any rules at that time, because it felt competition had developed or would develop. As I said in my remarks, we don't see that competition in this area has developed.
People talk about, well, you could use Visa or Master Card or AT & T's Universal card billing system, and those are all very good billing systems, but it's very different from what you need as a communications company. And even though we have access to Universal card very directly, it so far is not part of the mainstream of our plan.
So, I think it may well be time for the commission to reexamine this, as MCI has requested in its petition as to casual calling use, and see if some rules are necessary to protect competition in this arena.
MR. MULETA: Well, with this preview for the discussion about the processes to follow in Panel 2, I would like to thank all the panelists for their statements in the discussion. I would like to summarize by saying, there seems to be three things that fall out of this issue. The first is the consumer protection aspects. Are consumers getting what they expect out of the LEC billing system?
The second issue, in my mind is, the competitive aspects of the LEC billing system, how it functions, how the arrangements are developed. And, the last issue is whether or not we need to do something in the future, both from the consumer protection aspects as well as from the business relationship aspects of this.
Again, I would like to thank the panelists. We will take a break until 10:50, since I have eaten up five minutes of your break, and we'll start with Panel 2 at that time.
(Whereupon, a short recess was taken.)
MR. MULETA: I would like to get started with panel two. I know we've eaten into a little bit of our time, but I think everybody needed to make a coffee run. I know there are some smiling and awake faces at this point.
Just a couple of minor points I want to talk about before we get started with panel two. There are two petitions for rule making that have been filed, of which the transcripts from here will be included as part of the ex partes in those rule additions. The first one is the ACTA petition for rule making, which is docket number ENF 97-05. The reply comment date closed on June 9. The comments here, again, will be treated as ex parte.
The second petition is MCI's petition for rule making, which the public notice should be going out very soon, in the next few days, hopefully tomorrow. Comment date is on July 25, and again, the comments that we elicit from the public, as well as from the panelists, will be included in that docket as well. I don't have a docket number for that, but the number is 9108. If you have any questions about either of these rule makings, please contact Darius Withers in the Enforcement Division. The number is 418-0960.
I would like to first thank the panelists that are appearing in Panel 2. Obviously, you have heard from the questioning, two tenacious defenders of the public interests. Charlie Donaldson, Assistant Attorney General for the state of New York in the first seat here. Mr. Alan Taylor from the Florida Public Services Commission in the third seat to my right. We also have two people from industry, Michael Polandick with MCI Communications, who is also a passioned defender of MCI's interest.
(Laughter.)
And also, we have from GTE, coming all the way from Irving, home of the Dallas Cowboys, would be Christine Van Skyhock.
MS. VAN SKYHOCK: Go Cowboys.
MR. MULETA: I had to plug that in as part of --
MR. DONALDSON: Go Redskins.
MR. MULETA: Charlie likes the Redskins, even though he is from Alabama and lives in New York.
It will be an interesting mix, and what we're talking about today, on this panel, is talking about some of the technical under pinnings of the LEC billing system, what it takes to make things happen, and also talk about what additional measures might be taken to enhance the integrity of these systems.
What I will do is, I will again turn it over to the panelists so that they can provide a few comments, ask questions as a moderator later on, and then open it up to the public.
So, first, Charlie. Thank you.
MR. DONALDSON: Thank you. If I understand what our task here is, we are supposed to talk about the accuracy of the billing process. Now like a good Baptist preacher, I'll take the word accuracy as a text, and then I will say whatever it is I want to say, and we'll somehow move it back around the word accuracy at the end.
(Laughter.)
But first, I want to give you the standard disclosure about who my office is and what we're up to. We are law enforcement, we are not regulators, and we are not telecommunication service providers. That means a couple of things. First, all we see is the problems. The company doesn't have any trouble -- and there's 500 some odd resellers licensed to operate in New York -- we don't get complaints about those folks, we get complaints about maybe a dozen.
When the complaint comes in, what we are seeing is the pathology, and not the help. That gives a somewhat jaundiced view of the entire industry, so some of you all may get, how shall we say, a look of suspicion or distrust whenever you're dealing with someone like a state AG's office. Hey, that's just how we are. Nothing personal, just business.
In terms of billing accuracy, I actually want to talk about four aspects of it. Let me run through them. They are going to be somewhat cryptic, and perhaps theological, but there is a reality behind it. The first question I have about bill accuracy, is there a physical event behind the charge? Was there an actual call made? Did something go on? Did somebody agree to accept a collect call? Did somebody agree to sign up for a voice mail service?
The second question I am going to have is, does the charge on the bill accurately reflect the physical event? Did somebody agree to pay for whatever they're being billed for? That's more of a problem with the sort of monthly service charges or access charges or whatever that we frequently see, than it is when there is an actual telecommunications event.
The third question I've got is, does the bill accurately reflect what the caller expected to get? Somebody, let's say, is being telemarketed for a discount calling card, and the next thing you know they have been signed up for voice mail. At least that is what the bill seems to say.
The fourth question about accuracy is, does the bill provide the essential information that the consumer really needs? This really is a continuation of my earlier question. Can you tell from the bill who is a real party in interest?
Let's go back to the first two points, and without identifying the long distance carrier, I want to tell you what happened. We got some bills from consumers saying, we're being charged several hundred dollars for a couple of dozen adult content calls. What we did then was, we issued subpoenas, we got the records from the information provider, who they were actually leasing their 900 number from, went to the facility based carrier, and said, okay, for these particular days and for that particular 900 number, we want your call detail.
What we got, when we put the two sets of documents side by side, was very interesting. The carrier showed that on the particular date, there were 27 calls originating from the consumer's number to the given 900 number. The consumer was billed for three. However, for the three calls the consumer was billed, there was no corresponding event in the underlying carrier's detail.
Let's say that the consumer was billed for a four minute call beginning at 11:01 a.m., on the date in question. You look at the underlying carrier's call detail, nothing happened in that hour. There was a call at 10:48. There was one at 1:15, but nothing occurred at 11:01. From that, I have been eternally suspicious as to any bill, as to whether or not it actually reflects reality. Was there an actual, physical event? Was there a call actually placed at the time that shows up on the bill?
Frankly, I have never had the time or the energy to follow up on that. I may be doing that shortly. I hope this is an isolated incident, because if it is not, then it calls into question the entire integrity of the billing process.
Does the charge reflect accurately what the consumer expected? Somebody calls you up and says, hi, how would you like to get a credit card? I use the term credit card, not calling card. And what you are going to be able to do, is we're not going to charge you anything for the credit card, and you're going to be able to order stuff from us, and maybe they're marketing folks that have had bad credit in the past.
The next thing they know, they've gotten a phone bill which says, messaging service, voice mail, or something like that. They also get in the mail a package of cents off coupons for grocery products, and they also get this catalogue saying, this is Happy Joe's discount house, and if you'll pay in front, we'll sell you this schlock merchandise. That's got nothing to do with the telemarketing event.
It is a very common complaint. And this winds up being billed to a telephone bill. I've got some real problems with that, and the phone bill says voice mail or personal service, or whatever, and clearly the consumer was marketed for one service, and they got something that they were not expecting.
Finally, does the bill provide the information the consumer needs to deal with the real party in interest? And I would submit to you, that the bills in New York, do not. Because frequently, all you are going to get is the billing aggregator's name. Actually, NYNEX does this pretty well, because they generally put the sort of incidental billing on a totally separate page. It's not buried in there with somebody else's charges.
So up at the top it will say, I'm not going to say OAN, but we see those from time to time, and then there would be -- I didn't say OAN. Okay, I'll say XYZ, right. There's a bunch of other out there, but I'm not going to pick on OAN. Then later on it will say, there should be a line that says, billed on behalf of, and you get some of the most god awful gobbledy gook in there you have ever seen.
Sometimes it's all zeros. Sometimes it's a bunch of letters which are totally unintelligible, and other times it's code numbers and in many instances, those code number are actually the identifiers for the billing aggregator. I see some heads shaking, I can show them to you. But, the typical round for the consumer is, I've got this bill in front of me. There are people out there that are perfectly capable of dealing with this on their own.
Again, the complaints we see are biased. We get the folks who don't know how to handle the system, who really don't understand that there's a difference between their local telephone company and long distance provider. And then you've got this host of other folks that provide telecommunication services. The standard question I get at least once a week is, why did the FCC break up Ma Bell?
(Laughter.)
It was so much better when I only had one company to deal with. Obviously, this reflects a great deal of misunderstanding on the part of the consumer, but that questions's still out there. Here we are, more than 10 years since 1984. But given all of these problems, again, I'm pointing out the problems, I think the system is going to have to be reformed. If nothing else, we need to have the identification of the real party in interest, so a consumer can go directly from the bill in front of him to the folks they really have to yell at to deal with the problem.
Among other things, I would like to see that identified in such a way that the folks can write them, because typically people will make a phone call, they'll get a person and the person will refuse to provide an address the consumer can write, or you get nothing but an answering machine and they may or may not call you back. It's really quite a wild goose chase in terms of the people we have to deal with.
Let me say one thing for the industry as a whole. On slamming, which is something we're all familiar with, and it has some billing aspects as well, such as the so called switch list resellers, which all of us are familiar with. We took a look at the slamming complaints against the major carriers, and what we're seeing is that, based on customer base in New York, you're looking at complaint rates that are less than a hundredth of one percent per unit time.
So, somebody out there is clearly doing their homework. No system is perfect, unlike our Public Service Commission, we don't expect the telephone company to have no slams. But then you look at some other folks out there, and you're talking about complaint rates of one, two, three, four percent of customer base. That tells you two things. There is a big difference between the facility based or the carriers in the major resellers, and the guys who are causing most of the trouble.
Actually, I lost my second point. Accuracy. We're for it.
(Laughter.)
MR. MULETA: Charlie, if anybody wants Charlie's card, you can get them a little later on, or he can give you a call. The second person would be Michael Polandick from MCI.
MR. POLANDICK: I'm glad to see that everybody's turned out for such an enormously exciting topic today, and keeping up with my track record with John, I will try to keep this as passionate as I possibly can, and also keeping with the track record, I will continue on the crusade for freedom for the preservation of casual billing. And of course, in this, I will have no self serving interest whatsoever.
(Laughter.)
A couple of things, and I had a more formal presentation put together, but as expected, we've covered a lot of ground already, and what I would prefer to do here is maybe touch on a couple of points and hone in on some things that have already been mentioned. The one that I think maybe needs to be brought to light a little bit more is that when we talk about this casual billing and LEC billing, I think a lot of people aren't real familiar with there are some distinctions within it that are kind of important to understand as we talk about the importance to the consumer environment.
There is a lot of this that is used for a subscribed customer, where a person is actually signing up for service with an interexchange carrier or another service provider, but there is also the non-subscribers and the things that Ron mentioned earlier in regards to collect calling kind of comes into play with this. Some of the other things that were discussed regarding tentracal LEC services comes into this, where people are collecting on a call by call basis, who do they use for service?
Just to go through a couple of statistics and some anecdotal information about how consumers view this, as you know, within this industry, the 80 billion dollars or so of long distance generated on an annual basis, eight to ten billion dollars of that currently makes up what we refer to as these non-subscribed calls. They aren't as incidental or casual as they may appear. They are a very, very important element of the telecommunications industry, and also within the world of consumers, they serve very important purposes.
If you look at the statistics in some of the stuff we provided to the FCC in our previous meetings, the collect calling without a doubt is used heavily towards the lower income household, and it is a very, very important telecommunication service to those callers.
The other thing that I think a lot of people -- we talked about this a little bit this morning in here, but it is important to bring out is, the tentracal LEC service, while it was barely a notion of an idea a year and a half ago, that industry is now generating over a billion and half dollars of revenue that is not associated with the big three telecommunications providers. It has become a very integral part of this business.
And, if you ask consumers why they do it, and why they use these services, and to a lot of people it may not make much sense, but to a growing number of the population, it makes a lot of sense. These are generally consumers who either can't qualify or for whatever reason, don't like to be put on calling plans. They like the ability to bargain. They like the ability to look at carriers on a call by call basis, and look for the best type of situation for whenever they need to make that telephone call.
So, while it is a small, growing business, orders of magnitude rise if you look at the growth rates. It is, without a doubt, for consumer voice services in this industry, probably the fastest growing segment of the industry.
As we also touched on, let's talk a little bit about what the world would look like without this casual calling, so as we need to keep balance, we obviously need to control abuses that may exist within the industry, and we have to keep it preserved and clean and fair to the consumer. We also have to keep balance that if these services were to go away, we could be talking about the true demise of collect calling.
And if you take some of the comments that Ron mentioned, that as casual billing goes away like it did in Rochester, New York, where certain LECs were no longer providing that service, what you were seeing was a breakdown in fundamental universal services like collect calling, where these services -- the carriers were being faced with either, I have to block these services to these terminating customers because I have no way of collecting them money from them, or I have to go without collecting, which usually means the rates are going to get raised on all the paying customers.
So, if Rochester Telephone is any kind of a snapshot of what the world could look like without casual billing, it would certainly be a good case study.
The other thing that you have here is, as this whole tentracal LECs area continues to grow, if you take away, as some of the panel members talked about earlier this morning -- without casual billing, a substantial part of the tentracal LEC business would just go away. So, that's a billion and a half dollars that pretty near overnight could begin to evaporate from this industry. And with that, consumer's choices actually begin to diminish.
In one fell swoop, you can take out 19 to 20 multi-hundred million dollar carriers, because they would not be able to face the substantial cost increases associated with having to find an alternative to the casual bill.
So, as we look at this, and to the topic at hand of our panel, what can we do from a quality standpoint? The abuse issue or the wrongdoings of some carriers, we can talk to towards the end of this, but I want to talk for just a few minutes. I think a couple of things need to be brought to light. When you look at the quality and the accuracy of casual billing, sometimes the bill is the last place where you should look for causes to quality issues. What you will generally find, quite frequently, is the bill is just the end result. The actual problem that occurred, occurred far upstream from when the bill was generated.
If you look at this, when you talk to consumers, there are some things that can help highlight you to these upstream problems. When they talk about things like they deny all knowledge of the telephone call happening, there is probably a small percent of the population that are into what we call in the industry, the gaming process, where they want their credits and that kind of thing, but that's usually the smallest part of the people out there that are making theses statements.
What you really start to find is, what are these deny all knowledge calls? It's either one of two things. Either the person doesn't understand what it is that they're being charged for, and we can talk about that when we get into the billing pages, but what it also is from our own research has found is that an enormous amount of telephone calls in this industry are the casual type of calls that are actually being mislabeled by the LECs themselves, in the interaction that goes on with the IXCs.
To articulate this a little bit further, and I'm going to get into a little bit of the technical layer here for just a second. I'll try to keep it as simple as I can. All billing in the industry, when you have this exchange going on back and forth between the local exchange carriers and the long distance providers, do offer these things called CICs or carrier ID codes. It's a little message in there, a three digit identifier, that says when this call is transporting through the local exchange network, whose network should it go to?
A lot of people think of it as 10 XXX where somebody has to actually dial those CIC codes to access the network, but believe it or not, those CIC codes also come into play on regular dial one calls. The consumer isn't actually dialing a 10 XXX number, but that CIC is still in the call record. From MCI's research, what we have found over the last nine months from the provisioning of services through the local exchange carrier is, that in the provisioning process, 19 percent of the traffic that is sent to MCI's network during the completion of the provisioning process, for about 60 days basically, until problems at the local exchange can be worked out, is that these calls are not even MCI's telephone calls coming into the network.
The carrier identification field on the call is being improperly loaded in the routing table, and when the call comes to the long distance carrier, it doesn't even belong to them. Now, what complicates the issue is, there is no field when the carrier does get the call, the carrier has to assume that it's theirs, because there's nothing in the call record. That carrier ID stops at the TELCO, and it doesn't get into the long distance network.
So, what you have is a lot of charges floating around this industry that, indeed, it can be a real telephone call that a consumer made, but it may not be the carrier that it so shows on the bill. You have this during the provisioning process, but you also have it downstream later, where it tends to trickle down as these problems get resolved in the provisioning process. But going forward, if you take any set of features for B trunks around the United States and do a survey of them, what you'll usually find is about one to two percent of the calls every month -- which, by the way, effects about three million consumers -- actually may not be calls truly designated for that carrier's network.
This is something that, obviously focused on that kind of a quality issue, can go a long way. You'll see this in these denies all knowledge. There is very definite tie to this type of quality management in the provisioning process with the billing aspect of this.
We have to keep this accurate and reliable because what we don't want to happen, I think by and large while we are dealing with some of these complaints and issues that are occurring, consumers still view telephone company billing from the local exchange providers, relatively clean and accurate and a convenient way to have services billed. But what we have to realize is, is what is also happening in this industry -- and this is where the industry has to step up to the plate, so to speak -- LEC billing has not kept up with the industry. It's very tired, it's old. If you look at it, a lot of the ways that this is done hasn't changed since the time of the vesture.
Meanwhile, you have hundreds of new services that are being offered out there, and more calling plans than anybody can count, and more types of ways the consumer can do business with the telephone company. But the billing system itself hasn't kept up. This is traditional with what you usually find in an anti-competitive environment.
Now, the Reform Act, as we know, is all about opening up the local exchange, and what we believe is, over time as the exchange opens up, so goes billing with that. Companies will be providing more flexible, better ways of providing billing to a consumer, which hopefully will help to drive down some of these complaints. In the window of time, as the exchange opens and as choices become available to local exchange providers, we have to also realize that in this new environment, where everybody's competing with everybody, the local exchange providers have to be managed not to their own devices, but to the industry devices.
And, we have this window that we have to deal with, where possibly regulation may be necessary to balance when free competition does open up in the local exchange, and making sure that they don't use billing in anti-competitive ways in the short run or in the way that they manage their clients.
In closing, what I would like to say is that as we go through this today, and as it sometimes looks like a cloak of darkness on some of these issues, try to keep in mind the incredible importance this has to the consumer arena of this industry. While we want to correct the problems, we have to make sure that the ability to do this casual billing on one local exchange bill stays in place.
Thanks, John.
MR. MULETA: Thank you, Michael.
Just to let Michael cool down, we'll have Alan Taylor, before Christine comes on.
MR. TAYLOR: Thank you John and bob for the opportunity to be here. Those of you in the audience, I appreciate their problem of knowing where to put me, since I will probably say what I'm going to say anyway, regardless of what panel I'm on.
First of all, let me say that my views are not necessarily those of the Florida Public Service Commission. In saying that, I want to go through the traditional dance that regulators always dow with industry, and that is, I will say I'm here to help you and Florida will say, we're glad to see you.
Then after those lies are put aside, let me just say that I do want to ask for the industry's help, and I do want to ask for the regulator's help. My concern is the integrity of the LEC billing system, especially the way third party billing occurs on the LEC billing system. I believe that regulators and the industry have failed to protect consumers.
Now, I know that it's been pointed out that many people are no doubt enjoying many innovative services, and they are very happy with them. But I have to tell you, from the complaints I look at, that many people are enjoying tremendous levels of frustration with their telephone bills and with the problems that come into their homes through their telephone bill, that they have no idea were going to happen to them.
How can all this happen? Well, I think one problem is -- there's no easy way to say it -- I think the LEC billing system is more open to fraud than any billing system in the world. Harsh words, but what other billing system regularly publishes the majority of its account numbers along with names and addresses? What other billing system will bill charges from around the world based on only a ten digit number and cut off your service if you don't pay for calls to Guyana, even if you don't know anything about it? What other system prohibits certain types of bills, but can't recognize when EMI records are masked to avoid those prohibitions?
I think there are problems there, and I'm not the only one that suggests that there are problems. I hope what all this means is that there will be a concerted effort to fix some of the problems, and that's why I want to ask for your help.
I want to just point out, in your handout, it's not an example that I provided, but it does mirror in some respects some of the bills I've seen. I believe it is number three, that purports to show a directly dialed call for teleconferencing services. This bill resembles very closely a bill that a lady in a nursing home in Florida had on her phone bill. Her phone was put in for the sole purpose of her son to be able to call her, but this lady was billed for some six or seven hundred dollars in teleconference calls to a 700 number. It is reflected on the bill as if they were direct dialed, and this particular lady, in the example I'm using, was not physically able to even hold on the line that long.
In our investigation, we found that A, the calls weren't really direct dialed, and B, that actually they were calling card calls, or allegedly calling card calls. I want to point out that calls such as these, there's no way that I know of that a consumer can block access to the 700 code without blocking access to all toll calls. I think that the dialing blocks that we're offering to subscribers today are inadequate in this environment.
Obviously, I think anybody that believes all information services are provided over the 900 service access code, they haven't been looking at the complaints I've been seeing, and so we have to recognize that all service access codes are used for what might be viewed as unregulated charges. We have to recognize that information providers may have other reasons for classifying those calls as regulated code. One benefit of doing that is that it improves their collection efficiency as opposed to showing it to some other service or to the 900 code -- well, I guess they have pretty good collection efficiency if they have the 900 number -- but that brings to mind the incident that I've discovered that you might be interested in.
That is, a subscriber who was billed for 900 calls. The problem is that the subscriber had 900 blocking from the LEC. So, I went to the LEC and said, was your block broke? No, it was working, it was effective. So, I went to the underlying carrier, who happened to be MCI. Where's this call in your records? We have no record of this call. Even though the 900 number is on the bill, MCI had no record of transporting that call. It didn't stop the bill from coming in, even though the subscriber had 900 blocking.
So, I think there are problems. I think work needs to be done. I ask for your help in getting the work done. And in saying that I was here to help, I want to put forth some proposals. One matter that John didn't bring up is Florida's petition to the FCC to adopt some additional safeguards. I believe action on that is still pending. What we propose should be looked at is a billing block option. I know that, for instance, the information industry is working to put together a database of non-payers.
And so to the information industry, I as that if you're going to do that, you also make provisions for consumers to opt out. If someone complains to me that they don't want your services, I want to be able to call you and ask you to put them on the list that members of your industry will access and know not to bill unauthorized services to those subscribers.
To the local exchange companies, I guess I'm thinking about, what would you do if your children, for instance, could look in the phone book and see the first ten digits of your Master Card number, and call any service in the world and just use those ten digits and order whatever they want, and you'd be billed for it? You would probably be very alarmed, but I think that is happening with the phone bills. I would like to make the point that I don't think that anyone -- children, or otherwise, and hotels have the right to obligate the telephone subscriber for teleconferencing or messages services and so forth.
Since we can't block all of the service access codes that are going to be used to access these types of services, I don't understand why the LECs could not have a LEC billing block option for their subscribers. As I would envision it, it would be the ability of a subscriber such as myself to call the local telephone company and say, I enjoy your bill each month, but I only want to be billed by you and I don't want any other charges on my bill. Why shouldn't I have the right to do that?
Where can information about this block be maintained so that in all fairness, information providers have access to it? Well, it could be in the LIDB system. Information providers can be on notice, and if they have to obtain authorization for charges to these particular numbers. How could they do that? They would have to get the LEC specific pin number, along with, when they accept the calls -- and the EMI format, I suppose, would have to be amended to let the additional pin number flow through the message system -- that would serve as basically the necessary authorization of calls.
But, absent that primary pin number that you would obtain only from your local telephone company, the bill record would be stopped by the LEC. I don't see why that wouldn't work. I don't see why that's not fair. I would urge LECs to consider this in light of the abuses that we are seeing.
I don't know of any rule that requires people to pay for these information type calls or other services outside of toll calls. As a regulator, I realize that years ago we said the system would work best if everyone was obligated to pay no matter who made the call from the phone number, but that's about regulated charges.
Another problem that we're seeing, that we don't know what to do with, is the international toll charges, the offshore environment. In thinking about this, obviously the carriers involved have probably many considerations for why they go offshore. Maybe they really are getting access from England and China as well as the United States, but the idea that much of the information industry is moving offshore is a concern to me, and I begin to think about the tariffs and the purpose for tariffs.
I guess historically, tariffs have protected consumers. But in the offshore environment, I'm not sure tariffs are continuing to protect consumers. I guess I would urge the FCC -- I know you're trying to do away with tariffs for interstate calls, and you didn't get away with that -- but, maybe you could consider doing away with tariffs for international calls, now that the World Convention has agreed to allow competition to occur all over the world. Maybe we need to think about whether tariffs continue to be necessary, particularly those tariffs that, when enforced, result in you getting your service disconnected for nonpayment of something you don't know about.
That does happen. I know a case in Florida that I'm familiar with, a subscriber got a phone bill from
AT & T, and they were very alarmed because the phone calls were allegedly made from their vacation home. They immediately called the police, assuming their home had been broken into, and they drove to their home to meet the police. No sign of forced entry, but nevertheless a police report was filled out. However, AT & T said, the charges came from here and your phone is going to be cut off if you don't pay them.
Now, I know AT & T has forgiven other charges, but in this particular instance, I know that these folks paid several hundred dollars rather than lose their telephone service. The fact that that happens gives me concern. I would ask your consideration in addressing those issues.
Thank you.
MR. MULETA: Thank you very much, Alan.
Christine from GTE.
MS. VAN SKYHOCK: Good morning. I was unaware this conversation was going to be timed. I'm watching this lady over here. She's holding up 10 second cards. I'm hoping you won't have to do that with me. And for those of you who know me from my ordering and billing forum days, you'll know that I love the microphone. So hang in there.
MR. MULETA: Do you want to do the Oprah thing?
MS. VAN SKYHOCK: I didn't know that was an option. John asked me if I wanted to do the Oprah roving reporter thing.
(Laughter.)
As John said, I'm Christine Van Skyhock from GTE. I am in the wholesale markets organization, and I am a billing and collections Product Manager. One of the things that I would like you to take away from today's meeting, is the fact that GTE's primary concern is consumer satisfaction. Our billing and collection agreements are such that we require a B and C agreement from anybody who wants to have their charges appear on our bill.
We have approximately 70 B and C contracts today. Most of them are without the service that we all know and love in the industry as inquiry. We won't sign and B and C contract with just anybody. You have to be as dedicated and as committed to customer satisfaction as we are, or we won't sign with you. And you have to be able to prove that.
Our B and C contracts are specific to the type of data that we will, versus what we will not accept for billing. Our contracts literally contain language that will tell you, if you are going to sign a contract with us, what we will not accept from you. Those are as follows. We don't take any message traffic unless it has been authorized and documented in the B and C contract. For example, we have a separate B and C contract document, if you will, if you want to do pay per call traffic. If you want to send us pay per call charges, we require a separate contract for that. If you don't have a pay per call contract with GTE, we'll reject that traffic up front. We don't bill it.
We don't bill 800 pay per call charges. We do not allow traffic into our system where there is a pay per call blocking in effect. If you were trying to circumvent that, we'll catch it. We don't allow any charges that are alternately billed, unless they have been validated through a line information database or a bill verification database. We don't allow any charges for messages whose content is sexually explicit, indecent, obscene or profane, or were otherwise prohibited by whatever applicable law is in place in that state.
There are several safeguards in place, but probably among the most important, and I alluded to the OBF in my opening comment. GTE is an active participant in the ordering and billing forum. We have taken the exchange message interface guidelines and implemented them as our standard. GTE takes part and great pride in participating in the OBF, and in fact, I am at this present time, the exchange carrier co-leader of the Message Processing Committee. It is my committee, and I take personal ownership of that committee -- it's my committee that develops the EMI.
For the records that use text phrases as an example, the EMI-4250 and the 4150, and that's probably a little more technical than you guys need to know about, we require that those text phrases be reviewed and approved before they are submitted to our table building processes. I, as a product manager, have responsibility for approving those text phrases. They don't get past me.
We have system edits in place as well, and again, only the data that we receive from a contracted B and C customer, and then only for the specific charges for which they are contracted, will we accept for billing. We do cross-relational edits, for example on the pay per call, there is a specific record type that's used for pay per call traffic. We cross check the terminating number to the record ID, and if the two don't match, you're out of here. We don't bill it.
I think it's very important for everyone in this room to understand, if you think about LEC billing as a journey, and you're on a train, the bill is the last stop. We can only control what we get. Information that we get. If it is disguised, we have no way of knowing, oftentimes. When we can determine, we reject it. When we cannot, we have no way to know that it's been disguised. We have no choice but to bill it. We're contracted to do so.
It is also important to note, that in the message processing world, the messages are recorded, rated, and translated onto the industry standard records, and when we get those records, we bill them. Again, we're dependent upon the data that we receive from our customers, and unfortunately, whether we like to admit it or not, there are some unscrupulous customers out there, who will send us 900 pay per call that's disguised as something else. An 800 pay per call that's disguised as something else. We heard several instances of it earlier today, I don't probably need to go into any more detail on that.
Within our contracts, GTE is getting very tough. As I have already mentioned, we're very dedicated to consumer satisfaction, and that is and will continue to be our primary objective. The consumer is not only GTE's customer, but that of our B and C partners as well, and we take that partnership very seriously.
In our initiative toward customer satisfaction, GTE, as I said, is taking a much more aggressive approach. We have modified our B and C contract language to incorporate an excessive complaint surcharge. All customer complaints that are escalated, to whomever, FCC, Better Business Bureau, Attorney General, State PUC, or our action line, we investigate every single one of those. Where necessary, we get our security department involved, and you would be surprised. I could tell you tales that would curl your hair or turn it white, whichever the case is.
If these complaints are found to be excessive, and excessive is defined as an expanded number based upon the number of bills that you actually render through GTE, then we contact that customer and we make them aware of the issue. We give them time to resolve it. If the problem continues, we assess a surcharge amount to that B and C customer, and if the problem continues beyond that, we terminate that contract.
If, during our investigation, we find that the
B and C customer is already in breach of their contract, we terminate their contract right away. All new B and C contracts contain the language that I just told you about, and we are not renewing any pre-existing contracts unless the new language is there.
GTE has asked most of our current B and C customers to sign a modified contract in order to allow us to incorporate the excessive complaint surcharge language. Of those customers that we've asked, most of them have been ready to sign right up. They belly up to the bar and say yes, GTE, we're glad you're doing this. We want to be your partner. We're in the business together and we're here for the long haul.
There are some, unfortunately, who don't appear to be as dedicated to customer satisfaction as GTE, and t