Verizon Broke No Number-Porting Rules, FCC Says

The commission has 45 days from last Friday to act on the recommendations if there are no oppositions, an FCC spokesman said. If there is opposition, the agency has 70 days to act, he said.

Telecom and cable lawyers expected the FCC to find Verizon broke the law with its use of customer information from Bright House, Comcast and Time Warner Cable (CD April 7 p5). The cable operators argued that Verizon broke FCC rules on porting, a process in which companies exchange information so consumers can keep their phone numbers when they change carriers. The bureau disagreed with the cable operators’ reading of section 222(a) as preventing companies from using subscriber information for any purpose other than switching accounts.

The bureau agreed with Verizon that the FCC should read the section as preventing carriers only from sharing such customer information with other companies. “The more natural reading of section 222(a) is that the ‘duty to protect’ the confidentiality of proprietary information creates only a duty not to disclose it to any third party,” it said. The bureau also agreed with Verizon that the FCC should interpret section 222(b) as applying only when a carrier gets another’s proprietary information so the first company can provide a telecom service. “Verizon’s role in the number porting process does not constitute the provision of a ’telecommunications service’ within the meaning of the Act,” it said. “Complainants have not cited a single commission order that has construed section 222(b) to mean that the submitting carrier is the one who is” providing any telecom service. The bureau described as “cursory” cable operators’ argument that Verizon customer retention efforts ran afoul of section 201(b).

If a forthcoming rulemaking addresses general questions on 201(b), the Enforcement Bureau won’t issue a separate recommended conclusion on whether Verizon broke those rules, the FCC spokesman said.

The FCC lacks “consistent policy” on retention marketing, the bureau said. It recommended that commissioners approve a notice seeking comment on rules to apply in all circumstances, regardless of service. The bureau said it’s unclear whether efforts to lure back departing subscribers violate section 222. “This type of aggressive competition to win and to keep customers can result in lower prices for consumers, the introduction of new services and technologies and improved quality of service,” it said. Verizon offered discounts and American Express reward cards, it said.

Verizon seemed to win bureau support for the position that the commission can require cable operators to accept pay-TV cut-off requests transmitted by an exiting subscriber’s new provider. FCC porting rules cover only voice service, a stance that cable executives trace to the fact that cable customers can ask directly that their provider cancel TV service, an option denied phone customers. A cable operator can persuade customers not to defect “if it requires the customer to call personally to cancel service, to stay home to wait for a technician to arrive to disconnect service or if it requires that the customer personally return equipment to the cable provider’s offices,” the bureau said. The FCC has authority over unfair cable practices under section 628(b), and the Supreme Court has ruled that the agency can regulate broadband and other information services, it said. “The bureau recommends that the commission seek comment on whether it should require (as it already does in the voice context) that any service provider accept a cancellation request from a customer’s authorized agent.”

Verizon and NCTA disagreed on whether the bureau ruling bodes well for consumers. The recommendations were “completely inconsistent with previous FCC action to facilitate a competitive marketplace,” NCTA said. “It’s astonishing that the commission is affirming such anti-competitive practices, which deny consumers the benefits of lower prices and better service.” Verizon said cable operators complicate video customers’ efforts to switch providers. “The cable industry’s effort in this complaint to suppress communications would reduce consumer choice, and the bureau’s recommendation to reject it is legally correct and good policy,” the Bell said. Bright House is “very disappointed,” said a spokeswoman, adding that the Florida Public Service Commission is reviewing porting practices. “As Verizon controls the change of service processes, it seems like a skewed result to inhibit developing competition to their phone monopoly,” she said. Comcast is considering its “legal options at the federal level” and pursuing complaints with state public utility commissions, a company spokeswoman said. Time Warner Cable said it’s “disappointed” by the recommendation but hopes commissioners “will recognize the existing rules regarding fair competition.”

Phone competitors decried the order. CompTel is “extremely disappointed,” said Assistant General Counsel Mary Albert in a written statement. The FCC “has long held that Section 222 outlaws the use of such carrier proprietary information for marketing purposes… We are hopeful that the commissioners will reject the bureau’s recommendation.” Competitive local exchange carriers fear an order approving the bureau’s recommendations would license Verizon to expand the marketing practice to all departing customers, not just the ones moving to cable, a CLEC source had said.

The recommendations drew cheers from USTelecom, whose ranks include Verizon and AT&T. The bureau “recognizes that consumers are the winners when service providers compete for their business,” said a USTelecom spokeswoman. “USTelecom looks forward to working with the commission as it develops clear rules in order to promote head-to-head competition between service providers to the ultimate benefit of consumers.” An AT&T spokesman concurred. The Bell supports FCC “efforts to establish a level playing field so that consumers can choose competing video providers just as easily as they can choose competing voice providers,” he said.