When a Town Is ‘Slammed,’ People Notice
Two of every three people who call the tiny Washington town of Colville home woke up several weeks ago to find that their long-distance telephone company had been switched overnight without their permission.
In one of the largest “slamming” incidents ever, a Sprint reseller asked US West to switch about 4,800 Colville residents--70% of the town’s population--from their chosen long-distance carrier to the reseller’s service.
The incident, together with another switch of 4,000 US West customers in Minneapolis by the same reseller, led US West President and Chief Executive Solomon D. Trujillo to comment last month that “the problem of long-distance slamming has gotten totally out of control.”
Trujillo is not alone in voicing frustration with the escalation in slamming--or the switching of customers’ long-distance service provider without their consent--which was the No. 1 telecommunications-related complaint received by the Federal Communications Commission last year. Industry executives, federal regulators and politicians have all recently weighed in on the issue.
Although not a new problem, slamming affected more than a million U.S. consumers last year, according to the National Assn. of State Utility Consumer Advocates. AT&T; lost 475,000 customers to slamming in 1997 alone.
Slamming began after the 1984 divestiture of AT&T;, which created competition for the first time in the nation’s long-distance market. The problem escalated after the landmark deregulation of the telecommunications industry two years ago. Today there are more than 500 companies offering long-distance service. A small percentage of these are rogue operators out to make a quick buck, often charging consumers outrageous fees.
The current debate centers on who is responsible for prosecuting slammers and what is the best way to go about deterring them. Up until now, piecemeal regulatory efforts by the FCC, the industry and state regulators have failed to provide much relief for consumers.
“The FCC, state regulatory agencies and the telecommunications industry each rely on the others to be the main forces against intentional slamming,” says a General Accounting Office report on slamming commissioned by the Senate’s permanent subcommittee on investigations. “However, with regard to the FCC, its anti-slamming measures effectively do little to protect consumers.”
Sen. Susan Collins (R-Maine), chairwoman of the subcommittee, said it wasn’t until the FCC heard about the committee’s investigation that it decided to take decisive action against one well-known slammer.
On April 21, the FCC fined Daniel Fletcher, whom it dubbed the “King of the Slammers,” a record $5.7 million and revoked his operating licenses for allegedly bilking consumers out of $20 million through eight fraudulent companies.
Federal regulators hoped the fine would send a strong message that they would not put up with slamming. They also hoped it would help them track down Fletcher--who hasn’t been heard from since 1996.
FCC Chairman William Kennard disputes the GAO assertion that his agency is not forceful enough with slammers.
“They said the FCC should use the tariff to screen [for slammers]. They have a fundamental misunderstanding of what tariffs are for,” Kennard said in a phone interview. “They are to give consumers information about rates and services, not to screen companies.”
Although Kennard says federal and state regulators should work together to stop slammers, a recent court ruling in Minnesota could sharply curtail state regulators’ ability to pursue slammers operating in their jurisdiction.
In a case involving a New Jersey-based long-distance company accused of violating Minnesota’s laws against fraud and slamming, Minnesota District Judge Michael Fetsch ruled that the federal Telecommunications Act of 1996 preempts state regulation of slamming.
California regulators say U.S. District Judge Marilyn Hall Patel in San Francisco has yet to rule on a similar case that may affect an 18-month-old California anti-slamming initiative that requires a third party to verify a consumer’s decision to switch long-distance companies.
The case is an appeal by a carrier that was fined $3.9 million by the PUC and ordered to pay $2 million in restitution to consumers. The San Diego-based carrier, Communications Telesystems International, known as WorldxChange, argues in its appeal that the PUC does not have jurisdiction in a federal matter.
But regardless of who prosecutes slammers, industry watchers agree that regulators must devise tougher policies to curtail the practice.
“What we have to do is take the incentive away from a company that slams. Up until now what we’ve done is slap them on the wrist but pay them anyway,” said Jeffrey Kagan, an Atlanta-based telecommunications consultant.
Kennard says he will propose rules designed to take the profit out of slamming by allowing someone who is slammed not to pay the bill. The rules would also make local phone companies who process changes for long-distance companies more vigilant in catching slammers, Kennard says.
The problem with this proposal is that many consumers don’t read their monthly phone bills and may not discover they’ve been slammed until they’ve already paid a slammer hundreds of dollars.
Politicians are also anxious to beef up the FCC’s anti-slamming rules. Collins has introduced a bill that would increase civil penalties and establish new criminal penalties for slamming.
Sen. John McCain (R-Ariz.) has introduced similar legislation with stiff penalties for slammers; it would also require a phone company to send consumers a note informing them of their changed service.
Instead of waiting for regulators to enact tougher laws, Pacific Bell’s regulatory manager, Sandy McGreevy, suggests that consumers call their local phone service provider and ask it to freeze their long-distance provider.
After that, written permission from the consumer is required to change the provider. Telecom industry executives dislike such protections, which impede their telemarketing efforts by requiring them to send the consumer a letter to sign after he or she agrees to switch long-distance service, Kagan said.
“The last thing they want is for customers to take the local phone company up on the offer to freeze their account,” Kagan said. “It throws ice water on their ability to compete.”
Times staff writer Jennifer Oldham can be reached via e-mail at jennifer.oldham@latimes.com
