Pacific Bell Cleans Up Its Sales Practices

Pacific Bell conceded to the Public Utilities Commission Friday that its salespeople have charged phone company customers for services they never ordered, misrepresented or failed to make low-income families aware of the cut-rate “lifeline” service, and otherwise violated PUC tariff regulations.

But the company maintained at a special hearing that it never condoned those actions, has already ended any sales quotas or incentives encouraging such sales practices, and has mounted a retraining campaign to ensure that similar violations do not happen again.

The commission is considering issuing a “cease-and-desist” order against Pacific Bell, which the utility argued is unwarranted in light of corrective measures already taken or about to be implemented.

At the conclusion of the daylong hearing, Administrative Law Judge Lynn Renfrew said she would confer with the commissioners and announce her decision on the order Monday.

In addition, the PUC’s public staff, which uncovered Pacific Bell’s abusive sales practices, has recommended penalizing the company $49.5 million--an amount based on the compensation of Pacific Bell’s sales force and tripled for punitive purposes. The commission said it will study possible penalties at a future proceeding.

PUC President Donald Vial acknowledged that Pacific Bell must now compete for sales of certain “enhanced” telephone services. But, he warned, as a monopoly with “captive customers” in its local calling areas, it is in a special position.

“Services must take priority over sales where monopoly customers are concerned,” Vial said, adding, however:

“We are not here for a lynching. We’re here to solve some very practical problems in an industry that’s going through some very profound changes.”

Investigation’s Findings

Karen L. Miller of the PUC’s public staff division outlined findings of the Pacific Bell investigation, which included having members of the commission staff pose as applicants for service:

- Sales representatives required deposits from first-time customers who met state criteria excluding them from that requirement.

- Sales personnel failed to identify basic service offerings by their authorized titles--flat rate, which offers unlimited local calling; measured rate, providing for charges based on actually calling, and subsidized lifeline service for low-income households.

- Salespeople “bundled” these service choices with so-called enhanced services, such as “call waiting” and “call forwarding,” sometimes in such a way that the options were depicted as integral parts of the service.

Cite Pressure

Miller and Vial said employees had told the commission that they were under management pressure to sell services in “packages,” and that this was the only way possible to meet sales quotas. “The service representatives I talked with,” Miller said, “do not enjoy selling in this manner. They feel they are misleading their customers.”

Pacific Bell’s vice president for consumer marketing, Rae S. Haight, conceded the existence of such practices, but maintained in her testimony that they were not sanctioned by management.

“Pacific Bell’s sales policy is simply to provide service by offering customers choices and assisting customers to determine what services best match their needs,” she said. “Our objective is to get the right product to the right customer, at the right time, in the right way.”

But she confirmed that a system of sales quotas and incentives induced some employees to misrepresent services in order to amass greater sales.

Moratorium on Quotas

Haight said Pacific had this week imposed a four-month moratorium on sales quotas, pending design of another system to measure sales performance. The company also has begun mailing out confirmation letters to customers ordering service or changing services, giving them an opportunity to adjust them before billing, Haight said.

In addition, the company proposes sending notices to all customers who have begun service or changed services since January, 1985, itemizing their services and their costs and requesting confirmation that they both ordered and desire these.

She said the company will accept the customer’s word in making an adjustment.

The San Francisco-based consumer group TURN (Toward Utility Rate Normalization) urged the commission to require the company to make full refunds of connection charges and wrongly collected deposits, plus refunds of up to three months’ billings of charges for unwanted services.