Consumer safeguards mysteriously disappear—Commissioner Chong prime suspect

A set of vital safeguards protecting consumers from marketing abuses by AT&T recently disappeared under mysterious circumstances.

For Immediate Release From The Utility Reform Network

The safeguards were created by the California Public Utilities Commission (CPUC) in response to widespread customer deception and abuse by AT&T. Their disappearance was the result of last minute changes to a CPUC decision penned by Commissioner Rachelle Chong, changes other Commissioners say occurred outside of the normal legal process.

Recidivism Sparks Action by CPUC

In 2001, the Commission found that AT&T (then SBC) had defrauded customers by failing to inform them of their service options and, as a result, deprived customers of their choices. The company had engaged in aggressive and misleading marketing of several optional services including Caller ID, inside wire maintenance, and bundled service packages in a manner that the Commission described as "unfair, misleading and predatory." In light of the fact that many of the abuses found by the Commission were similar to those at issue in a 1986 marketing abuse case, the Commission treated the company as a repeat offender, fined it $25.55 million dollars and required it to make major changes to the way it markets and sells optional services. In particular, the Commission ordered AT&T to revise its tariffs to "create a clear distinction between customer service and sales or marketing efforts"

These changes required AT&T’s customer service agents to:

Stop offering only "bundles" in response to customer requests for a single service, and disclose the individual price for each service in a bundle, so that customers can determine if the package is truly the "best deal" for their needs and are aware that the services can be purchased individually;

Stop "low-balling" prices by failing to include the applicable recurring and nonrecurring charge, including low income discounted services;

Stop steering customers toward higher-priced service options by failing to provide information on the lowest priced service options that would meet the customer’s needs, and

Stop the hard sell of service to customers who had called to disconnect services, limiting the number of pitches to one and, if the customer declines, prohibiting further attempts.

On the Books One Day, Gone the Next

These protections continued in effect as part of AT&T’s tariffs until recently. On September 11, 2006, AT&T filed an advice letter at the CPUC claiming that the Commission’s decision in the URF or Uniform Regulatory Framework case, which involved deregulation of phone service, allowed elimination of the rules prohibiting aggressive and misleading marketing tactics. AT&T cited Ordering Paragraph (OP) 21 of the URF decision as authority. Protests filed by consumers challenged AT&T’s actions as exceeding the intent of the URF decision and noted that there has been no change in circumstance that would render the protections unnecessary

In Resolution L-339, issued in late November, Commissioner Chong approved AT&T’s request as consistent with OP 21, and denied the protests. Chong’s decision, effective September 12, dismantled in one day one of most important and far-reaching consumer protection initiatives in recent memory. Two weeks later, the Commission granted rehearing of the URF decision and agreed to suspend and reconsider OP 21, but prospectively only. Therefore the tariffs that are in effect today do not include rules preventing the "unfair, misleading and predatory" marketing that characterized the company formerly know as PacBell for over a decade.

Inadvertent or In AT&T’s Pocket?

In a scathing dissent to the CPUC’s approval of AT&T’s advice letter, Commissioners Brown and Grueneich accused the majority of a "clandestine repeal" of the consumer protections in blatant disregard of notice and due process requirements. According to Brown and Grueneich, the language in OP 21 used by AT&T as justification for dropping the protections was added to the URF decision "in a way that could not be better designed to escape notice" and "no individuals other than those associated with [Commissioner Chong’s] office" were aware of the significance of the "change." The dissenting Commissioners say the process was reminiscent of a previous scandal in which the CPUC voted on a decision that Pacific Bell itself had penned major revisions to at the last minute.

Commissioner Chong’s staff has defended against these allegations in the press with seemingly contradictory statements. Tim Sullivan, Chong’s telecommunications specialist, told Capitol Weekly that the language was prepared well in advance, and that he included a memo to the Commissioners that said, in effect, "There were extensive changes throughout this document, and you should pay attention." Sullivan suggested that any Commissioner who failed to do so was lazy. But according to Lynn Carew, Commissioner Chong’s Chief of Staff, Chong herself didn’t know what she was doing. Carew told the Los Angeles Times that Chong had no idea that elimination of the consumer protections would be one of the effects of her last minute additions to the URF decision. "We were as surprised as anyone else," she said.

Many consumer groups have written letters opposing Chong’s nomination, including:

The Utility Reform Network (TURN)

Utility Consumers’ Action Network (UCAN)

Disability Rights Advocates

Consumer Federation of California (CFC)

California Alliance of Retired Americans