Attempting to end a bitter and expensive industry practice, American Telephone & Telegraph and MCI Communications on Wednesday announced that they settled a series of lawsuits over alleged theft of long-distance customers and false advertising.
Terms of the out-of-court settlement--covering an industry practice called “slamming” under which one firm’s telemarketers would try to steal other firms’ customers--were not disclosed as a condition of the agreement.
However, both sides said that as a part of the settlement they had agreed to propose to the Federal Communications Commission a set of industry standards of conduct designed to protect consumers from being switched to other long-distance companies without their knowledge or consent.
This practice of slamming, a term whose derivation remains a mystery, reached epidemic proportions this year as the big three international carriers, AT&T;, MCI and US Sprint, began feeling the pinch of slowing long-distance growth and fought to bolster their revenues by stealing each other’s customers.
Typically, the suits alleged, telemarketers preyed on the elderly, infirm and others with language disabilities. Last year alone, slamming complaints from customers exceeded 100,000, and industry sources said the figures for this year would be even higher.
As the customers are shifting among the carriers, the companies have started a simultaneous--and expensive--advertising battle in an attempt to counteract the effects of the telemarketing. By some accounts the top three carriers are spending a total of more than $2 million per day on their ad campaigns.
But at the same time, the growth of long-distance telephone usage--once thought to be virtually immune from the ravages of recession--has tapered off from a torrid 12% annual growth rate in the late 1980s to about 7% this year.
The proposed telemarketing standards endorsed by AT&T; and MCI would permit long-distance carriers to switch a customer’s service only by one of the following means:
* A customer-initiated call to an 800 number of the carrier to which the customer is switching.
* Independent third-party confirmation.
* Signed letter of authorization.
* A call placed by the customer to their local or long-distance telephone company.
US Sprint officials said Wednesday that they have proposed a similar set of guidelines to the FCC and have tightened their own telemarketing procedures.
MCI had sued AT&T; in federal court in Washington on Oct. 10, 1989, alleging false and deceptive advertising practices. AT&T; countersued on Oct. 26.
On Jan. 10 this year, AT&T; sued MCI and its telemarketing agent, alleging false and deceptive telemarketing practices.
Both sides denied any wrongdoing and no dollar amounts were specified in the suits.