On April 27, 2012, the US Federal Communications Commission (FCC) released a Report & Order & Further Notice of Proposed Rulemaking (FCC 12-42) in which the FCC imposed new rules on wireline carriers and sought comment on a number of additional issues that impact both wireless and wireline service providers, including (1) whether to implement an "opt-in" system for third-party charges and (2) whether the FCC needed to act to address cramming in the wireless market.

Comments are due on the FNPRM 30 days after publication in the Federal Register; reply comments are due 45 days thereafter.

New Rules – Applicable to Wireline Carriers Only But Impact Wireless and VoIP Practices

The new rules require wireline carriers to clearly and conspicuously notify consumers of options for blocking the inclusion of third-party charges on their invoices. The rules also requires wireline carriers to make this information available:

  • at the point of sale;
  • on each bill; and
  • on the carrier's website.

The new rules require wireline carriers to place charges from third parties for non-telecommunications services in a separate section of the bill, distinct from charges for telecommunications services.

  • The payment potion of the bill must also clearly and conspicuously identify and disclose separate subtotals for charges from the carrier and charges form non-carrier third-parties.

While the new rules apply only to wireline carriers, wireless carriers should take the practices these rules mandate into account when developing their billing and disclosure practices.

Further Notice of Proposed Rulemaking – Requests Comment on Wireless Practices

The FCC seeks comment on whether a consumer should be required to "opt-in" to third-party billing before a carrier can place charges on that consumer's phone bill.

  • If adopted, should the opt-in requirement apply equally to telecommunications and non-telecommunications services?
  • Should the opt-in requirement apply to all third-party telecommunications services or only to certain types of telecommunications services?
  • How should consumer assent to such charges be determined? Is short code messaging (for CMRS providers) a valid method for demonstrating such assent?
  • What costs would carriers be required to bear in complying with the opt-in process?

The FCC also seeks comment on where and when a consumer should be made aware of the opportunity to opt-in and accept third-party billing charges.

  • Should notification of the possibility of third-party charges and the option to opt-in to those types of charges be required to appear in website, print, and/or in-store advertising?
  • Should the FCC require carriers to inform the consumer at the point of sale about third-party charge blocking and provide the consumer with the opportunity to opt-in to third-party charges?
  • Should existing consumers be informed of the possibility of third-party charges on their bill and provided instructions or information as to how to opt-in or decline those charges?
  • Once a consumer has opted-in to receive third-party charges on his or her bill, should the consumer's current opt-in status be disclosed on every bill so that he or she will know whether to be looking for such charges on that bill?

The FCC also seeks comment regarding the duration of each opt-in approval and what happens when a consumer decides to revoke a prior opt-in approval or to give new opt-in approval.

The FCC also expressed concern that wireless cramming is a growing problem, and seeks comment on:

  • steps the wireless industry has taken to date and what steps might it take in the future to protect CMRS consumers;
  • technological solutions that might help consumers, such as apps for mobile phones, that could help consumers avoid cramming; and
  • steps the FCC should consider to help CMRS consumers combat cramming.

Finally, to the extent that cramming is rapidly becoming associated with Internet and other non-telecommunications services, the FCC seeks comment on whether it has authority to require "opt-in" for wireline and wireless carriers under Section 201 and/or its ancillary authority under Title I of the Communications Act.

Background and History

Current Voluntary Industry Practices

In 1998, the nation's wireline local exchange carriers ("LECs") and providers of billing-and-collection services adopted a voluntary code of "best practices" designed to prevent cramming. According to these best practices:

  • bills should be comprehensible, complete, and include information the consumer may need to discuss, and if necessary, dispute billed charges with the carrier;
  • consumers should be provided with options to control whether a third party may include charges for its products and services on their telephone bills;
  • consumer authorization of services ordered should be appropriately verified;
  • LECs should screen products, services, and third-party service providers prior to allowing their charges on consumer's telephone bills;
  • clearinghouses that aggregate billing for third-party providers and submit that billing to LECs should ensure that only charges that have been authorized by the consumer are included;
  • LECs should continue to educate consumers as to their rights and the process for resolution of disputes; and
  • LECs should cooperate with each other, law enforcement, and regulatory agencies to assist in controlling carrier inclusion of unauthorized charges on a consumer's bill.

Truth-In-Billing Rules

In 1999 the FCC adopted, and in 2005 revised, its Truth-In-Billing Rules to address consumer confusion and increases in practices such as slamming and cramming.

  • In the Orders, the FCC determined that cramming is an unjust and unreasonable practice prohibited by section 201(b) of the Act and adopted the Truth-in-Billing rules in part to address cramming.
  • The majority of the Truth-In-Billing rules only apply to wireline LECs, and require that consumer bills:
    • be clearly organized, clearly identify the service provider, and highlight any new provider (i.e., one that did not bill the customer for service during the last billing cycle);
    • separate charges by service provider; and
    • contain clear and conspicuous disclosure of any information that the consumer may need to make inquiries about, or to contest charges on, the bill.
  • The rules also require both wireline and wireless carriers to ensure that their bills contain full and non-misleading descriptions of the charges that appear therein.