STATUTORY OR OTHER AUTHORITY: The Washington Utilities and Transportation Commission (commission or WUTC) takes this action under Notice No. WSR 99-21-057, filed with the code reviser on October 19, 1999. This commission brings this proceeding pursuant to RCW 80.01.040(4); 80.04.160.

STATEMENT OF COMPLIANCE: This proceeding complies with the Open Public Meetings Act (chapter 42.30 RCW), the Administrative Procedure Act (chapter 34.05 RCW), the State Register Act (chapter 34.08 RCW), the State Environmental Policy Act of 1971 (chapter 34.21C RCW), and the Regulatory Fairness Act (chapter 19.85 RCW).

DATE OF ADOPTION: The commission adopts this rule with the filing of this order. The commission conducted a rule-making hearing pursuant to notice in WSR 99-21-057 on November 30, 1999.

CONCISE STATEMENT OF PURPOSE AND EFFECT OF THIS RULE: A change of a consumer's telecommunications carrier without the consumer's authorization is commonly known as "slamming." This rule describes the process each telecommunications carrier must follow in order to accept and verify a consumer's desire to change telecommunications carriers; the process telecommunications carriers must follow in order to affect the change in carriers. The rule also provides consumers with the opportunity to "freeze" their telecommunications carrier choice, so that no change may be made without direct written or verbal consent by the consumer.

REFERENCE TO AFFECTED RULES: This rule amends WAC 480-120-139 Changes in local exchange and intrastate toll services.

PREPROPOSAL STATEMENT OF INQUIRY AND ACTIONS THEREUNDER: The commission filed a preproposal statement of inquiry (CR-101) on July 16, 1998, at WSR 98-15-093.

ADDITIONAL NOTICE AND ACTIVITY PURSUANT TO PREPROPOSAL STATEMENT: The statement advised interested persons that the commission was considering entering a rule making relating to changes in local exchange and intrastate toll services. The commission also informed persons of the inquiry into this matter by providing notice of the subject and the CR-101 to all persons on the commission's list of persons requesting such information pursuant to RCW 34.05.320(3), by sending notice to all registered telecommunications companies, and by providing notice to the commission's list of telecommunications attorneys.

Pursuant to the notice, the commission held a workshop on August 14, 1998. The commission solicited and received written comments on August 14, 1998, as well. On June 21, 1999, the commission asked for additional comments based on commission staff discussion draft language. The commission received comments by the due date of July 15, 1999.

NOTICE OF PROPOSED RULE MAKING: The commission filed a notice of proposed rule making (CR-102) on October 19, 1999, at WSR 99-21-057. The commission scheduled this matter for a rule-making hearing under Notice No. WSR 99-21-057 at 9:30 a.m., Tuesday, November 30, 1999, in the Commission's Hearing Room, Second Floor, Chandler Plaza Building, 1300 South Evergreen Park Drive S.W., Olympia, WA. The notice also provided interested persons the opportunity to submit written comments to the commission.

COMMENTERS (WRITTEN COMMENTS): The commission received written comments from Robert S. Snyder on behalf of Whidbey Telephone Company (Whidbey); Ms. Yvette Melendez; GTE Northwest Inc. (GTE-NW); Sprint Corporation on behalf of Sprint Communications LP and United Telephone Company of the Northwest (Sprint); MCI WorldCom (MCI); AT&T; SBC National Inc. (SBC); Davis Wright Tremaine LLP on behalf of NEXTLINK Washington Inc. (Nextlink) and Advanced TelCom Group Inc. (ATG); Telecommunications Resellers Association (TRA); and the Public Counsel Section of the Washington Attorney General (Public Counsel).

Based on the comments received, commission staff suggested changes to the proposed rules without changing the intent of the rules.

RULE-MAKING HEARING: The rule changes were considered for adoption, pursuant to the notice, at a rule-making hearing scheduled during the commission's regularly scheduled open public meeting on October 28, 1998, before Chairwoman Marilyn Showalter and Commissioner William Gillis. The commission heard oral comments from Vicki Elliott, Glenn Blackmon, and Bob Wallis, of Commission Staff; Simon ffitch representing Public Counsel; Robert Snyder representing Whidbey; Greg Kopta, Davis Wright Tremaine LLP, on behalf of NEXTLINK Washington Inc. (Nextlink) and Advanced TelCom Group Inc. (ATG); Richard Finnegan, Attorney; and Terry Vann representing the Washington Independent Telephone Association.

SUGGESTIONS FOR CHANGE THAT ARE REJECTED: Although all participants worked diligently to achieve consensus, the participants and commission staff did not reach complete agreement in all areas. The two main areas where participants and staff did not reach agreement were the following.

1. The requirement that companies offer a preferred carrier freeze. Several participants commented that the requirement that companies offer a preferred carrier freeze unnecessarily goes beyond the rules adopted by the Federal Communications Commission (FCC). Commenters stated that this requirement would promote anti-competitive behavior; present a barrier to entry and effective competition; allow incumbent companies the opportunity to mislead customers; and impose a regulatory burden on competitive companies. The commission rejects these arguments. While the commission acknowledges that this requirement goes beyond the FCC rules, it believes there are compelling reasons to do so. A preferred carrier freeze is a valuable tool that consumers can use to protect themselves from carriers that slam. Commission data show that slamming is consistently one of the most frequent consumer complaints about their telephone service. In 1996, the commission received 186 complaints about slamming; in 1997, the number increased to 228; and in 1998, the number was 475 complaints. The commission will see an estimated 500 slamming complaints in 1999. The commission believes that any tool a consumer can use to protect her or himself should be made available.

2. The requirement that companies notify their customers about the option of a preferred carrier freeze. Again, participants commented that this requirement unnecessarily goes beyond the FCC rules, and that it presents an unnecessary burden for the companies. One commenter suggested companies should notify customers only if the customer experienced a slam. The commission believes that the availability of a carrier freeze is not an effective consumer protection tool if consumers are not aware that it exists. The commission believes that if the only consumers who find out about this option are customers who have already been slammed, the value is diminished considerably, since damage has already been done. Further, the commission believes the purpose of a carrier freeze is to allow consumers the choice of protecting themselves from slamming before it occurs.

3. Suggestions made orally at the open meeting. Robert Snyder, representing Whidbey, suggested several changes to the proposed language at the open meeting. His changes were not intended to change the meaning of the language but to clarify the proposed language. After consideration and discussion of Mr. Snyder's suggestions, the commission concluded that the proposed language was sufficient, and that none of Mr. Snyder's suggested revisions need be made.

Mr. Snyder also suggested that WAC 480-120-139(5) pertaining to the requirement that a carrier offer a preferred carrier freeze, and WAC 480-120-139 (5)(a) pertaining to the requirement that companies notify their customers about the option of a preferred carrier freeze, be delayed until March 1, 2000, in order to give companies time to implement these requirements. After consideration and discussion, the commission agreed to delay the effective date as requested for these specific requirements to allow companies time to comply.

STATEMENT OF ACTION: In reviewing the entire record, the commission determined that WAC 480-120-139 should be amended as proposed by staff, with the following changes:

1. Minor grammatical changes. The commission determined that several minor grammatical changes should be made to correct the proposed rules. These changes do not alter the substance of the proposed rules.

2. Change the use of the term "subscriber" to the term "customer," to be consistent with other sections in chapter 480-120 WAC. Again, this change does not alter the substance of the proposed rules.

The proposed rules, as revised, are shown below as Appendix A.

STATEMENT OF EFFECTIVE DATE: The proposed rule will become effective pursuant to RCW 34.05.380(2) on the thirty-first day after filing with the code reviser, except that WAC 480-120-139 (5) and (5)(a) shall become effective on March 1, 2000.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 1, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0.

1. WAC 480-120-139 is amended and adopted to read as set forth in Appendix A, as a rule of the Washington Utilities and Transportation Commission, to take effect on March 1, 2000.

2. This order and the rule set out below, after being recorded in the register of the Washington Utilities and Transportation Commission, shall be forwarded to the code reviser for filing pursuant to chapters 80.01 and 34.05 RCW and chapter 1-21 WAC.

3. The commission adopts the commission staff memoranda,

presented when the commission considered filing a preproposal statement of inquiry, when it considered filing the formal notice of proposed rule making, and when it considered adoption of this proposal, in conjunction with the text of this order, as its concise explanatory statement of the reasons for adoption as required by RCW 34.05.025.

DATED at Olympia, Washington, this 13th day of January, 2000.

WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION

MARILYN SHOWALTER, Chairwoman

RICHARD HEMSTAD, Commissioner

OTS-3506.3

AMENDATORY SECTION(Amending Order R-463, Docket No. UT-971514, filed 5/18/99, effective 6/18/99)

WAC 480-120-139
Changes in local exchange and intrastate toll services.

(1) Verification of orders.      A local exchange or intrastate toll carrier ((to whom service is being changed ("new telecommunications company"))) that requests on behalf of a customer that the customer's telecommunications carrier be changed, and that seeks to provide retail services to the customer ("submitting carrier") may not submit a change order for local exchange or intrastate toll service until the order is confirmed in accordance with one of the following procedures:

(a) The telecommunications company has obtained the customer's written authorization to submit the order ((which includes)) (letter of agency). The letter of agency must be a separate document (or easily separable document) containing only the authorizing language described in (a)(i) through (vii) of this subsection, having the sole purpose of authorizing a telecommunications carrier to initiate a preferred carrier change. The letter of agency must be signed and dated by the customer to the telephone line(s) requesting the preferred carrier change. The letter of agency shall not be combined on the same document with inducements of any kind; however, it may be combined with checks that contain only the required letter of agency language as prescribed in (a)(i) through (vii) of this subsection, and the necessary information to make the check a negotiable instrument. The check may not contain any promotional language or material. It must contain, in easily readable, bold-face type on the front of the check, a notice that the customer is authorizing a preferred carrier change in the customer's preferred carrier by signing the check. Letter-of-agency language must be placed near the signature line on the back of the check. Any carrier designated in a letter of agency as a preferred carrier must be the carrier directly setting the rates for the customer. Letters of agency must not suggest or require that a customer take some action in order to retain the customer's current telecommunications carrier. If any portion of a letter of agency is translated into another language, then all portions must be translated into that language, as well as any promotional materials, oral descriptions or instructions provided with the letter of agency. The letter of agency must confirm the following information from the customer:

(i)The customer billing name, billing telephone number and billing address and each telephone number to be covered by the change order;

(ii) The decision to change; ((and))

(iii) The customer's understanding of the change fee;

(iv) That the customer designates (name of carrier) to act as the customer's agent for the preferred carrier change; and

(v) That the customer understands that only one telecommunications carrier may be designated as the customer's interstate preferred carrier; that only one telecommunications carrier may be designated as the customer's intraLATA preferred carrier; and that only one telecommunications carrier may be designated as the customer's local exchange provider, for any one telephone number. The letter of agency must contain a separate statement regarding the customer's choice for each preferred carrier, although a separate letter of agency for each choice is not necessary; and

(vi) Letters of agency may not suggest or require that a customer take some action in order to retain the current preferred carrier.

(b) The ((new telecommunications company)) submitting carrier has obtained the customer's authorization, as described in (a) of this subsection, electronically, by use of an automated, electronic telephone menu system. This authorization must be placed from the telephone number(s) for which the preferred carrier is to be changed and must confirm the information required in (a)(i) through (vi) of this subsection.

Telecommunications companies electing to confirm sales electronically ((shall)) must establish one or more toll free telephone numbers exclusively for that purpose.

Calls to the number(s) ((shall)) must connect a customer to a voice response unit, or similar device, that records the required information regarding the change, including automatically recording the originating automatic number identification (ANI).

(c) An appropriately qualified and independent third party operating in a location physically separate from the telemarketing representative has obtained the customer's oral authorization to submit the change order that confirms and includes appropriate verification data ((in (a) of this subsection)) (e.g., the customer's date of birth). The independent third party must not be owned, managed, controlled or directed by the carrier or the carrier's marketing agent; and must not have any financial incentive to confirm preferred carrier change orders for the carrier or the carrier's marketing agent. The content of the verification must include clear and conspicuous confirmation that the customer has authorized a preferred carrier change.

(2) Where a telecommunications carrier is selling more than one type of telecommunications service (e.g., local exchange, intraLATA/intrastate toll, interLATA/interstate toll and international toll), that carrier must obtain separate authorization, and separate verification, from the customer for each service sold, although the authorizations may be made within the same solicitation.

(3) The documentation regarding a customer's authorization for a preferred carrier change must be retained by the submitting carrier, at a minimum, for two years to serve as verification of the customer's authorization to change his or her telecommunications company. The documentation must be made available to the customer and to the commission upon request. Documentation includes, but is not limited to, all entire third-party-verification conversations and, for written verifications, the entire verification document.

(((2))) (4) Implementing order changes. An executing carrier may not verify the submission of a change in a customer's selection of a provider received from a submitting carrier. The executing carrier must comply with a requested change promptly, without any unreasonable delay. An executing carrier is any telecommunications carrier that effects a request that a customer's carrier be changed.

This section does not prohibit any company from investigating and responding to any customer initiated inquiry or complaint.

(((a) Telemarketing orders.      Within three business days of any telemarketing order for a change, the new telecommunications company must send each new customer an information package by first class mail containing at least the following information concerning the requested change:

(i) The information is being sent to confirm a telemarketing order placed by the customer.

(ii) The name of the customer's current telecommunications company.

(iii) A description of any terms, conditions or charges that will be incurred.

(iv) The name of the newly requested telecommunications company.

(v) The name of the person ordering the change.

(vi) The name, address and telephone number of both the customer and the soliciting telecommunications company.

(vii) A postpaid postcard which the customer can use to deny, cancel or confirm a service order.

(viii) A clear statement that if the customer does not return the postcard, the customer's service will be switched fourteen days after the date the information package was mailed.      If customers have cancelled their orders during the waiting period, the new telecommunications company cannot submit the customer's order.

(ix) The name, address and telephone number of a contact point at the commission for consumer complaints.

(x) The requirements in (a)(vii) and (viii) of this subsection do not apply if authorization is obtained pursuant to subsection (1) of this section.

(b) The documentation of the order shall be retained by the new telecommunications company, at a minimum, for twelve months to serve as verification of the customer's authorization to change telecommunications company.      The documentation will be made available to the customer and to the commission upon request.

(3) Customer initiated orders.      The new telecommunications company receiving the customer initiated request for a change of local exchange and/or intrastate toll shall keep an internal memorandum or record generated at the time of the request.      Such internal record shall be maintained by the telecommunications company for a minimum of twelve months to serve as verification of the customer's authorization to change telecommunications company.      The internal record will be made available to the customer and to the commission upon request.      Within three business days of the order, the telecommunications company must send each new customer an information package by first class mail containing at least the following information concerning the request to change as defined in subsection (2)(a)(ii), (iii), (iv), (v) of this section.

(4))) (5) Preferred carrier freezes. A preferred carrier freeze prevents a change in a customer's preferred carrier selection unless the customer gives the carrier from whom the freeze was requested express consent. Express consent means direct, written or oral direction by the customer. All local exchange companies must offer preferred carrier freezes. Such freezes must be offered on a nondiscriminatory basis to all customers. Offers or solicitations for such freezes must clearly distinguish among telecommunications services subject to a freeze (e.g., local exchange, intraLATA/intrastate toll, interLATA/interstate toll and international toll). The carrier offering the freeze must obtain separate authorization for each service for which a preferred carrier freeze is requested. Separate authorizations may be contained within a single document.

(a) All local exchange companies must notify all customers of the availability of a preferred carrier freeze, no later than the customer's first telephone bill, and once per year must notify all local exchange service customers of such availability on an individual customer basis (e.g., bill insert, bill message, or direct mailing).

(b) All carrier-provided solicitation and other materials regarding freezes must include an explanation, in clear and neutral language, of what a preferred carrier freeze is, and what services may be subject to a freeze; a description of the specific procedures to lift a preferred carrier freeze; an explanation that the customer will be unable to make a change in carrier selection unless he or she lifts the freeze; and an explanation of any charges incurred for implementing or lifting a preferred carrier freeze.

(c) No local exchange carrier may implement a preferred carrier freeze unless the customer's request to impose a freeze has first been confirmed in accordance with the procedures outlined for confirming a change in preferred carrier, as described in subsections (1) and (2) of this section.

(d) All local exchange carriers must offer customers, at a minimum, the following procedures for lifting a preferred carrier freeze:

(i) A customer's written and signed authorization stating his or her intent to lift the freeze;

(ii) A customer's oral authorization to lift the freeze. This option must include a mechanism that allows a submitting carrier to conduct a three-way conference call with the executing carrier and the customer in order to lift the freeze. When engaged in oral authorization to lift a freeze, the executing carrier must confirm appropriate verification data (e.g., the customer's date of birth), and the customer's intent to lift the freeze.

(e) A local exchange company may not change a customer's preferred carrier if the customer has a freeze in place, unless the customer has lifted the freeze in accordance with this subsection (5).

(6) Remedies.      In addition to any other penalties provided by law, ((a telecommunications company initiating an unauthorized change order)) a submitting carrier that requests a change in a customer's carrier without proper verification as described in this rule shall receive no payment for service provided as a result of the unauthorized change and shall promptly refund any amounts collected as a result of the unauthorized change.      The ((subscriber)) customer may be charged, after receipt of the refund, for such service at a rate no greater than what would have been charged by its authorized telecommunications company, and any such payment shall be remitted to the customer's authorized telecommunications company.

[Statutory Authority: RCW 80.01.040.      99-11-070 (Order R-463, Docket No. UT-971514), § 480-120-139, filed 5/18/99, effective 6/18/99; 97-18-056 and 97-20-095 (Order R-442 and Order R-443, Docket No. UT-960942), § 480-120-139, filed 8/29/97 and 9/29/97, effective 9/29/97 and 10/30/97.]

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