NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES

Resolution 2008-04

Urging Congress to Preserve the Historical Police Powers of the States to Protect Consumers of All Modes of Telecommunications Services from Fraudulent, Deceptive, Abusive and Unfair Practices

WHEREAS, the nation has long recognized the rightful police powers of the states to protect consumers within their borders from fraudulent, deceptive, abusive and unfair practices;

[1] and

WHEREAS, the competitive telecommunications marketplace envisioned by federal law depends on, and creates a much larger role for, state contract and consumer protection laws, such that the availability of state law remedies is an essential part of the protection for consumers;[2] and

WHEREAS, although market forces in a market subject to effective competition may deliver low prices and good quality service for consumers and hence  replace economic regulation,[3] market forces, no matter how effective the competition, will not prevent and remedy fraudulent, deceptive, abusive and unfair practices;[4] and

WHEREAS, the states, as attested by both wireline[5] and wireless[6] experience, have historically identified offending practices and committed the necessary resources to ending them long before a national consensus has developed and been brought to fruition through effective law and policy at the national level; and

WHEREAS, federal laws and federal remedies historically have not provided the needed consumer protection;[7] and

WHEREAS, consumers have historically turned to their state governments when consumer protection issues have arisen; and

WHEREAS, sole reliance on federal laws and federal remedies for consumer protection would deprive consumers of the state laws and state remedies that have proven to be most in the forefront and most effective in stopping the offending practices; and

WHEREAS, preservation of the ability of the states to develop state laws and state remedies on an ongoing basis in response to new marketplace developments is particularly vital in an industry as dynamic as telecommunications; and

WHEREAS, wireline, wireless, voice-over-internet, satellite and potentially other modes of service are all part of the same industry, all inter-connect and inter-operate as parts of the same network, and many companies provide service in multiple modes; and

WHEREAS, experience, as evidenced by the examples given above, does not demonstrate an unworkable patchwork of state laws but instead demonstrates an effective policing of the offending practices by the states; and

WHEREAS, compliance with the laws of the several states “is precisely what every other company that competes in a free, competitive, and open market must do;”[8] and

WHEREAS, the industry argues that Congress should limit the states’ ability to police the offending practices to “laws of general applicability”; and

WHEREAS, the argument seeks to eliminate the specific laws and remedies that have often proven to be most effective, such as the slamming and cramming laws; and

WHEREAS, the argument, if accepted, would limit the effectiveness of state laws by unreasonably forcing the states to enact broad laws applicable to all industries in order to address specific abuses in one industry; and

WHEREAS, few state legislatures would be inclined to pass such laws; and

WHEREAS, the police powers of the states rightfully include a power in the states to decide for themselves whether their laws should be general or specific.

NOW THEREFORE, BE IT RESOLVED, that NASUCA urges Congress to preserve the historical police powers of the states to protect consumers of all modes of telecommunications services from fraudulent, deceptive, abusive and unfair practices.

BE IT FURTHER RESOLVED, that the NASUCA Telecommunications and Consumer Protection Committees, with the approval of the Executive Committee, are authorized to take all steps consistent with this resolution.

 

Approved by NASUCA:
New Orleans, LA
November 18, 2008


[1]Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 144 (1963); Cedar Rapids Cellular Telephone, L.P. v. Miller, 280 F.3d 874, 879-80 (8th Cir. 2002); Communications Telesystems Intern. v. California Pub.  Serv. Comm’n, 196 F.3d 1011, 1017 (9th Cir. 1999); Marcus v. AT&T Corp., 138 F.3d 46, 54 (2d Cir. 1998).

[2]Ting v. AT&T, 310 F.3d 1126, 1137, 1141-44 (9th Cir. 2003).

[3]See 47 U.S.C. § 332(c)(3)(A) (largely pre-empting the authority of the states over rates and entry of wireless carriers).  There is reason at times to be concerned about the premature deregulation of rates and quality and the shallow analysis that accompanies it.  See Arizona Public Service Co. v. United States, 742 F.2d 644 (D.C. Cir. 1984).  That is not the focus here.  The focus here, and the place where historical police powers of the states are most in need of preservation, is consumer protection.

[4]See 47 U.S.C. § 332(c)(3)(A); H.R. Rep. No. 103-111, 103rd Cong., 1st Sess. (1993) at 261 (preserving the authority of the states over “other terms and conditions” of wireless services, including “consumer protection”).

[5]From 1996 through 1998, in actions affecting nearly 400,000 consumers, state public utility commissions and state attorneys general ordered carriers to pay at least $13.4 million in customer restitution and at least $4.1 million in penalties and fines for slamming and cramming violations alone.  U.S. General Accounting Office (now Government Accountability Office), Telecommunications:  State and Federal Actions to Curb Slamming and Cramming, Report to the Chairman, Permanent Subcommittee on Investigations, Committee on Government Affairs, United States Senate (July 1999), p. 14.  In 2005-2006, state enforcement efforts, based on state standards and state remedies, played a leading role in stopping widespread “modem hijacking” practices, in which hackers would place telephone calls from a consumer’s computer, often to pornographic websites at remote locations on the globe, and then succeed in having the charges billed to the consumer’s local telephone account.  In 2006-07, only state enforcement efforts, based on state statutes and state remedies, effectively brought to an end the injurious practices of Buzz Telecom, a long distance company, which had plagued a distressing large number of consumers, frequently seniors, with reportedly fraudulent sales calls and unauthorized billings.  Most recently, in a private class action, the Washington Supreme Court invalidated as unconscionable the dispute resolution provisions of AT&T’s.  McKee v. AT&T, 191 P.3d 845 (Wash. 2008).  At issue in the case were billed charges for a city utility tax surcharge to consumers who lived outside the city.

[6]In 2002, long before the FCC came to appreciate the difficulties posed to consumers by wireless early termination fees, the Iowa Attorney General, following several bouts in federal court, secured a settlement compelling U.S. Cellular Corporation to limit the fees to $150, to reduce them in proportion to the time consumers had remaining on their contracts and to pay $400,000 to the state to be used for reimbursing consumers and for other consumer protection efforts.  In 2004, 33 state attorneys general compelled the three largest wireless carriers to enter into settlements addressing advertising and marketing practices, resulting in substantial changes to the carriers’ practices and requiring payment of $1.7 million by each carrier.  In 2004, the California Public Utilities Commission compelled a major reversal in Cingular’s marketing and related practices by fining the carrier $12 million and ordering it to issue refunds up to $18.5 million.

[7]Many slamming cases stem from the fact that “some telephone companies or their marketing agents have used deceptive . . . telemarketing to lure consumers into switching their service.”  GAO report, note 4 above, p. 3.  The federal slamming statute, however, has been held to require only a recorded verification of the consumer’s voiced consent to the switch “and nothing more.”  AT&T Corp. v. FCC, 323 F.3d 1081, 1087 (D.C. Cir. 2003).   As thus interpreted, the federal slamming statute prohibits only non-compliant verifications and does not prohibit slamming.  It does not reach this class of deceptive cases reported by the GAO.  Nor has the FCC effectively policed cramming.  See Truth-in-Billing and Billing Format, 20 F.C.C.R. 6448, 6499, 2005 WL 645905 (FCC 2005) (separate statement of Commissioner Michael J. Copps) (“In the six years since adoption of our truth-in-billing requirements, I cannot find a single Notice of Apparent Liability concerning the kind of misleading billing we are talking about today . . . .  Yet in the last year alone, the Commission received over 29,000 non-slamming consumer complaints about phone bills”).

[8]McKee v. AT&T Corp., 191 P.3d 845, 856 (Wash. 2008).