900 Numbers Should Answer to New Rules

The 900 telephone industry recently handed out "Golden Phone" awards to the best "information services" offered, for a price, through 900 numbers: Tele-Lawyer, JournalPhone, Phone Jeopardy!, Pigskin Playoff and a Gillette Right Guard promotion.

While the fledgling industry was praising itself, legislation was introduced in Congress to protect consumers from its "rip-off artists and high-tech hustlers," said the sponsor, Rep. Bart Gordon (D-Tenn.). Even the National Assn. of Information Services, which gave the awards, spends some time warning the public about its "few bad apples."

This is an industry still climbing out of its developmental ooze, usually described in terms of its "potential." But without some regulation soon, or some industrywide consumer safeguards, there will be a "backlash," says Ken McEldowney, executive director of Consumer Action in San Francisco, "and the potential of 900 services to provide useful and valuable information will be lost."

Up from almost nothing in 1987, there are now about 7,000 active 900 numbers, sponsored by about 1,000 "information providers," says Floyd O'Neil, chairman of the 100-member NAIS and marketing director of ACI, a Canoga Park provider. These numbers are pulling in an estimated $1 billion a year.

Content has not risen so rapidly. It is still heavy on "entertainment"--rock stars promoting themselves, Santa messages for kids, "chat" lines and pornography for the contemporary stay-at-home. There is also more "information," but the category is elastic, including sports and weather reports, horoscopes and product "backup" (explanations that should come free with the product).

Some of "the most frequent consumer complaints in 1990 were 900-number scams," reported the U.S. Office of Consumer Affairs. They promise jobs, loans or easy credit but provide only what the New York-based Direct Marketing Assn. calls "largely worthless generic information." They refer callers to publicly available lists and phone numbers or other 900 numbers. They keep callers on hold, drag out conversations, misrepresent the price of either the call or a "free gift."

The consumer has little defense, unable to investigate either the message or its vendor before buying. As a vendor, McEldowney says, "you don't have to convince consumers to call and give you a credit card; all you have to do is convince them to call."

Even after calling, consumers find it hard to investigate. Between them and the "information provider" is their local phone company, which (for a fee) bills the consumer on behalf of the long-distance carrier; that carrier, which (for a fee) bills and collects for the provider, and maybe a "service bureau," which (for a fee) represents the provider. In most cases, one must call the phone company for the carrier's number and the carrier for the provider's number. At that, it may not be readily provided.

If the consumer's complaint is that he did not know or understand the charges, local phone companies will generally offer a one-time reversal. For anything else--shoddy handling, deceptive promises--the consumer relies on the "discretion" of the local or interstate carrier (whichever will help), applied on a case-by-case basis, a Pacific Bell spokesman says.

Outside help is not guaranteed either. "This is a largely unregulated industry," warns the Federal Trade Commission. The Federal Communications Commission takes jurisdiction over the program's transmission but not its content. The FTC has filed complaints against providers for deceptive advertising. State laws--California's, for example--may require better price disclosure but cover only intrastate calls--a small piece of the market.

The industry is trying to self-regulate before it is regulated. The NAIS promises an 800 number for consumers to "register" complaints. MCI Communications requires its 900 providers to announce charges up-front.

Regulation may nevertheless be coming. Gordon's bill would give the FCC authority over 900 service in general, impose some standards on advertising and require disclosure of cost and content at the start of any call. Hardly comprehensive, it still acknowledges that 900 numbers have created a whole new payment system requiring some regulation.

If anyone is really interested in comprehensive protection, there is a good model available in our credit card systems. The bank card networks are similar to the 900 systems in the number of parties involved between consumer and vendor but are different in the amount of protection offered by those middlemen. The merchant's bank guarantees payment if his charge is valid; the consumer's card issuer gives him the chance to reject charges if the amounts are in error or there is some dispute about quality.

Why can't phone firms provide similar protection to customers?

The 900 industry may cry that telephone billings are not a credit system, that content is not their proper concern, that it is restrictive to set limits on a fledgling industry. But that's the point.

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