FTC Comment Before the Federal Communications Commission Concerning Consumer Information and Disclosure for Communication Services

Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of 	)
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Consumer Information and Disclosure
Truth-in-Billing and Billing Format
IP-Enabled Services
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)
)
)
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CG Docket No. 09-158
CC Docket No. 98-170
WC Docket No. 04-36
COMMENTS OF THE
FEDERAL TRADE COMMISSION
Introduction
The Federal Trade Commission (FTC) appreciates this opportunity to respond to
the Federal Communications Commission’s (FCC) Notice of Inquiry on how consumer-
friendly information policies can protect and empower consumers as they purchase and
use communications services.1
As explained in further detail below, the FTC maintains a database of consumer
complaints, including complaints about communications services. Analysis of recent
complaints shows that consumers are often confused about their purchases of
communications services and may not be getting the services they thought they had
purchased. Complaint data also indicate that consumers may fall prey to cramming of
unauthorized charges onto their telephone bills. Based on these data, as well as our
significant consumer protection and competition expertise, the FTC offers several
recommendations to provide consumers with accurate, meaningful, and timely
information about the communications services they purchase and use.
Section I of this comment recommends that price advertisements for
communications services reflect the price the consumer actually pays – including all
taxes, fees, and associated charges, which can increase the total price by over 20 percent.
This policy would facilitate competition by allowing consumers to compare directly the
prices of competing communications services (e.g., mobile versus wireline broadband)
that are subject to different levels of taxes, fees, and charges. Section I also recommends
that the FCC seriously consider whether standardized information disclosures would
facilitate consumer understanding of competing communications services offers. Section
II of the comment describes the FTC’s aggressive law enforcement actions to combat
1 	This comment refers to “communications services” broadly to mean fixed and mobile service,
including voice, data, cable, satellite programming, and broadband service. Some of these services are
classified as common carrier services over which the FTC does not have jurisdiction. 15 U.S.C. § 45(a)(2).

cramming. Section III recommends several policy changes that would empower and
protect consumers against cramming.
The FTC is an independent administrative agency charged with promoting
consumer protection, competition, and the efficient functioning of the marketplace. The
keystone of the FTC's law enforcement mission is Section 5 of the FTC Act, which
prohibits “unfair or deceptive acts or practices in or affecting commerce.”2 The scope of
Section 5 encompasses a wide range of business practices, including advertising,
marketing, billing, and collection. Section 5 also authorizes the FTC to challenge “unfair
methods of competition” as well as violations of other antitrust laws.
The recommendations in this comment are based, in part, on the substantial
number of complaints the FTC has amassed through its consumer complaint system,
Consumer Sentinel Network.3 During the twelve months ending in August 2009, the
FTC’s Consumer Sentinel received more than 37,000 complaints about communications
services in general. Approximately 28,000 of these complaints were about cable and
satellite services (including bundled services) and more than 9,000 complaints were
related to telephone services. By addressing the issues and recommendations identified
in this comment, the FCC can help promote a robust communications marketplace that
benefits consumers.
I. 	Advertising That Empowers Consumers to Comparison Shop Facilitates a
Robust and Competitive Marketplace.
Advertising serves the important function of informing the consumer about “who
is producing and selling what product, for what reason, and at what price.”4 By apprising
consumers of the “availability, nature, and prices of products and services,” advertising
“performs an indispensable role in the allocation of resources in a free enterprise
system.”5 Advertising can foster and sustain competition, facilitate consumers’ efforts to
identify the product or service provider of their choice, and lower entry barriers for new
2 	15 U.S.C. § 45(a).
3 	The FTC receives complaints directly from consumers; it collects those complaints in a database
that also houses complaints from other law enforcement agencies. This database, the Consumer Sentinel
Network (“Consumer Sentinel”), contains consumer complaint data from law enforcement agencies
including the U.S. Postal Inspection Service, as well as the Internet Crime Complaint Center, the National
Fraud Information Center, and most branches of the Better Business Bureaus
(http://www.ftc.gov/sentinel/). The FCC does not contribute complaints to this database at this time, nor do
state public utility commissions.
4 Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 765
(1976). See generally American Medical Association, 94 F.T.C. 701, 1005 (1979), aff'd as modified, 638
F.2d 443 (2d Cir. 1980), aff'd by an equally divided Court, 455 U.S. 676 (1982).
5 	Bates v. State Bar of Arizona, 433 U.S. 350, 364 (1977).
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competitors.6 Studies have demonstrated that price advertising tends to enhance
competition and lower prices.7
Before a consumer signs up for a particular communications service or plan,
advertising is an important source of information that guides the consumer’s purchase
decision. Numerous service providers promote their communications services through
national and regional television and radio advertising, as well as through print, online,
telemarketing, and direct mail advertising campaigns. Advertising of material terms
allows consumers to compare similar services offered by one or more providers, and also
to weigh the relative importance of different terms.8 Depending on the context and
usage, certain terms may be material, including, for example, contract duration, use
limitations, and geographic restrictions.
Because customers have different preferences and needs, advertising plays a
critical role in informing consumers about the variety of choices and plans. If consumers
lack the information they need to make informed decisions, their purchase decisions will
be distorted and competition on the merits will be harmed.
A. 	Price Advertising Should Empower Consumers to Make Fully
Informed Purchase Decisions.
In 2000, the FCC and FTC issued a Joint Policy Statement regarding Advertising
of Dial-Around and Other Long-Distance Services that is particularly relevant to price
advertising of communications services in general.9 The FCC-FTC Joint Policy
6 	See generally Robert E. McAuliffe, ADVERTISING , COMPETITION , AND P UBLIC P OLICY (1987);
Philip K. Nelson, Advertising as Information, 82 J. P OL. ECON. 729 (1974); James A. Langenfeld & John
Morris, Analyzing Agreements among Competitors, 1991 ANTITRUST BULL. 651, 667 & n.21; Carolyn Cox
& Susan Foster, The Costs and Benefits of Occupational Regulation 29-36 (Bureau of Economics: Federal
Trade Commission 1990).
7 	See, e.g., Cleveland Regional Office and the Bureau of Economics of the Federal Trade
Commission, Improving Consumer Access to Legal Services: The Case for Removing Restrictions on
Truthful Advertising, Federal Trade Commission Staff Report (1984); Lee Benham, The Effect of
Advertising on the Price of Eyeglasses, 15 J. L. & ECON. 337 (1972); John F. Cady, An Estimate of the
Price Effects of Restrictions on Drug Price Advertising, 14 ECON. I NQUIRY 493 (1976); John Kwoka,
Advertising and the Price and Quality of Optometric Services, 74 A M. ECON . REV. 211 (1984); John R.
Schroeter, Advertising and Competition in Routine Legal Services Markets: An Empirical Investigation, 36
J. I NDUS . ECON . 49 (1987).
8 	Under the FTC Act, advertisements must be truthful and not mislead consumers in ways that
affect consumers’ behavior or decisions about the product or service. An advertisement claim can be
misleading if it contains a misrepresentation, or omission, that is likely to mislead consumers acting
reasonably under the circumstances to their detriment. In addition, advertising claims must be
substantiated, especially when they concern performance attributes of the product or service. Cliffdale
Assocs., 103 F.T.C. 110, 175 (1984) (appending FTC Policy Statement on Deception).
9 	Federal Communications Commission & Federal Trade Commission, In the Matter of Joint
FCC/FTC Policy Statement For the Advertising of Dial-Around and Other Long-Distance Services to
Consumers (2000) (“FCC-FTC Joint Policy Statement”), available at
http://www.ftc.gov/os/2000/03/jpsada.pdf.
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Statement explained that in the context of dial-around long-distance calls, consumers care
not just about the per-minute or per-month rate, but rather how that rate, along with all
other additional fees and charges, will ultimately be reflected in the charges they see on
their monthly bills. Moreover, advertising is often the only source of information
available to consumers before incurring these charges. The FCC and FTC, therefore,
advised advertisers to exercise the greatest care in ensuring the accuracy of their claims
related to price, including the clear and conspicuous disclosure of information that
significantly affects the total price of a communications plan or service.
The volume of complaints identified by Consumer Sentinel about all
communications services suggests that consumers care about the total price they see on
their monthly bills. In the 28,000 complaints about cable and satellite service,
approximately 30 percent of the consumers complained that the total bill they were
required to pay was not as advertised or marketed. Similarly, a random sample of more
than 7,300 telephone-related complaints over the past 12 months indicated that
approximately 27 percent related to charges for rates and fees that were not what
consumers had understood or agreed to purchase.10
For example, consumers complained that providers had advertised an introductory
or teaser price but did not indicate the price the consumer would pay once the
introductory period ended. An introductory rate may expire after a three- or six-month
period, leading to substantially increased charges, without a consumer being aware of the
extent of the impending price increase at the time of purchase. In other instances,
associated charges or preconditions to obtain an advertised price were not specified. For
example, an advertisement for a video service may not indicate that a consumer must
have basic telephone service with that provider before obtaining the video services at the
advertised price. These types of complaints suggest that consumers believe that the
advertised monthly price is the actual price they will pay when the bill arrives.11
Given these complaints, the FTC recommends a consumer- and competition-
friendly consumer information policy: communications service price advertisements
should disclose the amount that the consumer actually will pay. For example, a wireless
provider in the District of Columbia currently advertises a monthly price of $39.99 for a
fixed number of wireless minutes. The advertised price does not state, and it would be
difficult for a consumer to determine, that an additional $7.55 (in surcharges, taxes, and
10 	The pool of 7,300 complaints for the random sample does not include more than 2,000 complaints
involving the unauthorized switching of carriers, Voice over Internet Protocol-related complaints, and the
marketing of prepaid phone cards. Altogether there were over 9,000 telephone-related complaints as
mentioned in the Introduction. More than 50 percent of the random sample related to unauthorized billing.
These complaints are discussed below in Section II. Finally, the complaints discussed in this comment do
not include separate complaints about potential violations of telemarketing restrictions related to the
National Do Not Call Registry.
11 	These complaints also suggest that, to the extent consumers sign service contracts (for example,
when they purchase a new mobile telephone along with a service plan), these contracts may not be written
in plain language that consumers can understand.
4

other fees) will be added to the monthly bill, leading to total monthly charges that are
more than eighteen percent higher than the advertised price.12
When price advertising fails to reveal what the consumer will actually pay, the
likely effect is not only consumer confusion, but also a distortion of competition. This is
especially true in situations where consumers are attempting to compare similar
functional services based on different technologies, such as landline versus wireless or
cable versus telephony.13 Different communications services are subject to varying
levels of fees, taxes, and other associated charges; unlike state sales taxes, these fees and
taxes are not uniform across types of providers and services. Consumers typically are not
well-versed in the different tax and fee regulations that apply to competing types of
services and providers. These disparities may make it difficult for consumers to compare
their out-of-pocket costs. For example, a landline provider may offer stand-alone high-
speed internet services for $40.95 per month, and a competing mobile broadband
provider may offer similar services for $40.00 per month. When the landline customer
receives a bill, charges include a $3.00 modem fee and $4.10 for fees and taxes, for a
total of $48.05. In contrast, the mobile customer’s bill includes $.57 in fees and taxes, for
a total of $40.57. Thus, what looked like a $.95 price differential is actually a differ
of $7.48 per month. As a result, competition on the merits may b
ence
e distorted.
Consumer confusion relating to inadequate price and fee information is likely to
arise more frequently as consumers increasingly shop among competing broadband
providers of substitutable services, including telephone service as well as satellite and
cable television programming. Consumers are no longer confined to obtaining voice
telephone service from one provider and cable television programming from another.
Advances in technology have broken down barriers and enabled some consumers to mix
and match these services to assemble their own communications bundles, which makes it
even more important that the various taxes and fees be adequately disclosed. In addition,
other consumers now choose to purchase a bundled set of services from a single provider
(such as a “triple play” of phone, internet, and television). Advertising of prices that do
not match what consumers are likely to pay may make it still more difficult for
consumers to compare their options to determine whether the bundled or non-bundled
12 	The FTC has challenged price claims that involve misrepresentations of the true price to the
consumers or hidden charges that were not disclosed to consumers until after purchase. See, e.g., General
Rent-A-Car, Inc., 54 Fed. Reg. 30,106 (July 18, 1989) (consent order); Alamo Rent-A-Car, Inc., 54 Fed.
Reg. 25,106 (June 13, 1989) (consent order). The complaints in both General Rent-A-Car and Alamo
Rent-A-Car alleged that the companies failed to disclose to consumers the existence and amount of airport
surcharges and mandatory fuel charges when consumers inquired about renting vehicles. See also FTC v.
World Travel Vacation Brokers, Inc., No. 87 C 8449 (N.D. Ill. Sept. 28, 1987) (temporary restraining
order) (complaint alleged that the company represented that the costs of its travel certificates would entitle
consumers to a round-trip airfare to Hawaii, when, in fact, the cost of the airfare was added to the actual
rates for accommodations); FTC. v. Amy Travel Services, Inc., No. 87 C 6776 (N.D. Ill. Aug. 3, 1987)
(temporary restraining order) (complaint alleged that company engaged in unfair and deceptive acts or
practices by misrepresenting and deceptively failing to disclose the true costs of the vacations they sold).
13 	This example is based on current communications providers’ offerings in the District of Columbia.
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services meets their needs, especially if the impact of taxes, fees, and other charges as
they relate to the bundled and non-bundled services are not readily apparent.
Ideally, the advertised price should be equal to the amount the consumer pays,
and consumers should be able to understand in advance the price they ultimately will pay.
It would be easier for consumers to compare prices between and among providers and
services if advertised prices included all regulatory fees, taxes, and associated charges
that are known ahead of time by the provider or apportioned by the provider.14 If the
taxes, fees, and charges are not included in the advertised price, the advertisement should
provide for consumers easily to obtain this information.15 Implementation of this
recommendation not only will facilitate vigorous competition, but also is likely to reduce
consumer confusion surrounding line-item charges on monthly bills because consumers
are concerned mostly about the monthly amount they will pay. A point-of-sale disclosure
(e.g., at the time the consumer accepts the contract) is inadequate because it comes too
late in the shopping process to allow meaningful price comparisons and thereby facilitate
robust competition.
We believe that this recommendation can be tailored to accommodate different
forms of advertising when, for example, taxes vary by state or local jurisdiction and the
provider has no discretion over the level or amount of the tax. For example, current
technology allows providers to quote online consumers the exact price they will pay;
when a consumer uses the internet to research or purchase communications services, the
provider typically asks the consumers to enter his or her zip code prior to listing available
services and associated prices. Based on location information, the provider knows the
specific taxes and surcharges imposed by state and local jurisdictions and therefore
should be able to provide consumers with the price they will actually pay, which will aid
in comparison shopping. The same level of detail regarding actual prices could be
provided in bill inserts that advertise new services and prices to existing customers,
because the provider already knows the consumer’s address and billing jurisdiction. At
every opportunity, providers should strive to provide consumers with the price they will
actually pay, utilizing current as well as innovative means.
B. 	Standardized Information Disclosures of the Terms of
Communications Services Offers Reduce Search Costs and
Facilitate Competition.
In competitive markets, consumers compare products and services among
providers and weigh the different terms being offered when making decisions about what
to purchase. Where search and other transaction costs (both in terms of time and money)
are relatively low, consumers are more likely to rely on these market processes to satisfy
14 	To the extent that regulatory fees vary monthly or quarterly, it may be desirable to develop
mechanisms to stabilize these fees for longer time periods, which will further enhance transparency in
determining typical monthly charges.
15 	See FCC-FTC Joint Policy Statement, supra note 9, at 9-16.
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their preferences. By contrast, where search and other transaction costs are relatively
high, the optimal functioning of the marketplace may be inhibited, making consumers
less likely to rely on it.16 Research suggests that when consumers find it less difficult to
obtain information, or perceive it to be less costly to gather data, they participate in the
market more, and the demand for products and services increases compared to when time
and money-related transaction costs are high.17
Recent FTC complaint evidence shows that consumers increasingly have found it
hard to understand key features and prices of communications services options. As noted
above, during the past 12 months the FTC received more than 37,000 complaints about
communications services and of these 28,000 related to cable and satellite services.
Approximately half of these complaints about cable and satellite services (including
bundled services) involved consumers complaining about not receiving what they thought
they had ordered (or that they were charged for services they had not ordered) or about
the existence and amount of termination fees.18
This evidence of consumer confusion suggests that the FCC should seriously
consider the possibility of requiring a standardized disclosure of key terms and features
of communications services. Any analysis of the benefits of standardized disclosures
should, of course, include consideration of whether these benefits would outweigh the
costs.
In other contexts, FTC and independent research has demonstrated that well-
designed standardized disclosures – ones that address the elements that matter most to
consumers – can improve consumer understanding and facilitate greater competition on
the merits. For example, standardized disclosures for mortgage products, student loans,
health insurance policies, and school choice have been shown to facilitate consumer
choice and permit consumers to select products and services that meet their preferences.19
16 	See generally Dennis W. Carlton & Jeffrey M. Perloff, MODERN I NDUSTRIAL O RGANIZATION 471-
96 (4 th ed. 2005).
17 	Susan Marquis, Consumer Decision Making in the Individual Health Insurance Market, H EALTH
A FF . (May 2006), available at http://content.healthaffairs.org/cgi/content/full/hlthaff.25.w226v1/DC1.
18 	This analysis of the cable and satellite services complaints is based on a random sampling of the
complaints. The 50 percent figure noted in the text includes the 30 percent of complaints mentioned above
regarding advertising and marketing. The remaining 50 percent of cable and satellite complaints dealt with
issues such as debt collection, technical problems, and the failure to rebate the consumer’s money.
19 	James M. Lacko & Janis K. Pappalardo, Federal Trade Commission, Bureau of Economics Staff
Report, I MPROVING CONSUMER MORTGAGE D ISCLOSURES : A N EMPIRICAL A SSESSMENT OF CURRENT AND
P ROTOTYPE D ISCLOSURE F ORMS (June 2007), available at
http://www.ftc.gov/os/2007/06/P025505mortgagedisclosurereport.pdf (“Improving Mortgage
Disclosures”); Consumers Union, H ELPING F AMILIES F INANCE COLLEGE : I MPROVED S TUDENT LOAN
D ISCLOSURES AND C OUNSELING (July 2007), available at http://www.consumersunion.org/pdf/CU-
College.pdf; Michael Wroblewski, Uniform Health Insurance Information Can Help Consumers Make
Informed Purchase Decisions, 26 J. I NS . 21 (2007) (private health insurance); Justine Hastings et al., Nat’l
Bureau of Economic Research, Preferences, Information, and Parental Choice Behavior in Public School
Choice (2007) (NBER Working Paper 12995).
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By contrast, when consumers do not understand the costs and terms of their mortgages,
“they may pay more for their mortgage than necessary, obtain inappropriate loan terms,
fall prey to deceptive lending practices, and experience unpleasant surprises and financial
difficulties during the course of their loans.”20 Needless to say, similar harms can occur
with respect to complex and multi-dimensional products or services found in the
communications sector.21
At the same time, the research also demonstrates that disclosures must be
developed carefully, because even well-intentioned disclosures can actually harm
consumers by creating a misleading or erroneous impression. To be most effective,
uniform disclosures should be developed (and updated) based on controlled, quantitative,
objective tests of consumer understanding.22
The timing of a disclosure, in addition to its terms, is critical for the disclosure to
have a pro-competitive and pro-consumer impact. For example, in the context of private
student loans, Congress recently required lenders to provide borrowers with a uniform
disclosure once they were approved for the loan and to keep the offer open for 30 days.23
Previously, the borrower did not receive the necessary disclosure until he or she
consummated the loan. By that time, it was too late for the consumer to comparison-
shop, so the disclosure did little to facilitate consumer choice and foster market
competition.
Similarly, if uniform disclosures are considered in the communications services
context, it may make sense to require them at the time an offer for services is made. It is
too late in the shopping process to provide meaningful disclosure only at the point of sale,
by which point consumers can no longer be expected to comparison shop; these late
disclosures would do nothing to facilitate robust market competition.
20 	Improving Mortgage Disclosures, supra note 19, at ES-12.
21 	Standardized privacy disclosures also have been found to assist consumer understanding of a
company’s privacy policy. See F INANCIAL P RIVACY R ULE : I NTERAGENCY N OTICE RESEARCH P ROJECT,
reports and data, available at http://www.ftc.gov/privacy/privacyinitiatives/financial_rule_inrp.html.
22 	See James M. Lacko & Janis K. Pappalardo, Federal Trade Commission, Bureau of Economics
Staff Report, THE EFFECT OF MORTGAGE BROKER C OMPENSATION D ISCLOSURES ON CONSUMERS AND
COMPETITION: A CONTROLLED EXPERIMENT (Feb. 2004), available at
http://www.ftc.gov/os/2004/01/030123mortgagefullrpt.pdf; LACKO & P APPALARDO , I MPROVING
MORTGAGE D ISCLOSURES , supra note 19, at ES-13.
23 	S. REP . N O. 110-327, at 2 (2008) (Private Student Loan Transparency and Improvement Act of
2008).
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II. 	The Federal Trade Commission Has Substantial Law Enforcement
Experience in Stopping Unauthorized Billing.
The FCC has asked specifically if there are lessons to be learned from consumer
protection efforts of other government agencies combating the placement of unauthorized
charges on telephone bills, a practice known as cramming. The FTC has much
experience, both in policy work and law enforcement action, tackling the practice of
placing unauthorized charges on telephone bills. For many years, FTC has investigated
suspect charges and taken law enforcement actions in courts across the nation to shut
down fraudulent businesses and to return money to defrauded consumers
Cramming is a significant area of increasing consumer complaint. More than
3,000 complaints received by Consumer Sentinel during the past 12 months relate to what
consumers describe as unauthorized charges on telephone bills (including landline,
mobile wireless, and Voice over Internet protocol (VoIP) services).24
The FTC treats cramming as both “deceptive” and “unfair” conduct, under the
FTC Act.25 Practices characterized as “deceptive” under the FTC Act involve a
representation, whether it is a misrepresentation or an omission; a representation is likely
to mislead consumers acting reasonably under the circumstances; and a representation
that is likely to affect a consumer's choice of or conduct regarding a product or service
and thus be material.26 When a company places a charge on a consumer’s telephone bill,
it represents to that consumer that the charge is valid and that the consumer is obligated
to pay for that item. Where the charge has been “crammed” onto a consumer’s bill, those
representations are not just likely to be misleading; they are false. Under such
circumstances, the FTC has taken enforcement action against unauthorized billing as a
deceptive practice under the FTC Act.27
Cramming also has been challenged as “unfair.” The FTC considers practices
“unfair” if they result, or are likely to result, in substantial injury to consumers; cause
injury that consumers cannot reasonably avoid; and the injury is not outweighed by
countervailing benefits to consumers or to competition.28 Placing fraudulent charges on
24 	This number does not include complaints received during that period alleging unauthorized
switching of service providers.
25 	15 U.S.C. § 45(a).
26 	For a detailed explanation of the FTC’s “deception” standard, see FTC Policy Statement on
Deception (Oct. 1983), available at http://www.ftc.gov/bcp/policystmt/ad-decept.htm.
27 	See, e.g., FTC v. Nationwide Connections, Civil Action, No. 06-80180 (S.D. Fla. filed 2006); see
also FTC v. Cyberspace.com, 2003-1 Trade Cas. (CCH) ¶73,960, aff’d 453 F.3d 1196 (9 th Cir. 2006)
(consumers signed check which defendants argued unsuccessfully was agreement to be charged on their
telephone bill).
28 	For a detailed analysis of the FTC’s “unfairness” standard, consult the FTC Policy Statement on
Unfairness (Dec. 1980), available at http://www.ftc.gov/bcp/policystmt/ad-unfair.htm.
9

telephone bills is likely to injure consumers because they are likely to pay the charges,
simply because they appear on their telephone bill. Even if each consumer loses only a
small dollar amount, the total injury to consumers across the country from cramming can
still be substantial. Consumers cannot reasonably avoid having fake items placed on their
telephone bills. The cramming of unauthorized charges onto consumers’ telephone bills
provides no benefit to consumers or competition.29 Courts repeatedly have held such
unauthorized billing to be an unfair act or practice.30
The FTC has focused on two types of companies that place charges on consumers’
telephone bills. First are the “vendors” that originate some of the line item charges that
consumers may find on their bills for products or services. Second are “billing
aggregators” that interface between the vendor and a telephone company. Although
some vendors submit charges directly to telephone companies for placement on their
subscribers’ telephone bills, most vendors contract with one of several large billing
aggregators. The billing aggregators supply information to the telephone companies
about the vendors’ businesses, submit the charges to the telephone companies on behalf
of the vendors, and often field complaints and inquiries from consumers. The charges
may appear on a billing aggregator’s separate section of a bill, or as a line item billed by
the billing aggregator on behalf of the vendor. The FTC, which has limited jurisdiction
over common carriers, has primarily targeted such vendors and billing aggregators, as
well as individuals associated with those companies, in law enforcement actions to stop
cramming.31
III. 	Several Policy Adjustments Can Help Eliminate Cramming.
As discussed above, effective and meaningful disclosures can help consumers
understand their communications bills. This information can create an environment in
29 	See In re: Orkin Exterminating Co., Inc., 849 F.2d at 1354, 1365 (11th Cir. 1988), aff'd sub. nom.,
Orkin Exterminating Co. v. FTC, 849 F.2d 1354, 1365 (11th Cir. 1988) (noting that increase in fees without
corresponding increase in services results in no consumer benefit, and efficient operation of the
marketplace presumes informed consumer choices).
30 	See, e.g., FTC v. Crescent Publ’g Group, Inc., 129 F. Supp. 2d 311, 322 (S.D.N.Y. 2001)
(unauthorized billing of credit and debit cards); FTC v. J.K. Publ’ns, 99 F. Supp. 2d 1176, 1202–3 (C.D.
Cal. 2000) (unauthorized billing of credit and debit cards); FTC v. Windward Mktg, Ltd., No. 1:96-CV-
615F, 1997 WL 33642380 (N.D. Ga. 1997) (unauthorized bank drafts); FTC v. Neovi, Inc, 06CV 1952-
WQH-JMA (S.D. Cal. 2009) (fraudulent checks); Memorandum Opinion and Order, FTC v. Kennedy, No.
4:06-cv-01980, (S.D. Tex. 2008) (web-related charges on a telephone bill).
31 	See, e.g., FTC v. Lubell, No. 3-96-CV-80200 (S.D. Iowa filed Oct. 17, 1996); FTC v. Int’l
Telemedia Assocs., Inc., No. 1-98-CV-1925 (N.D. Ga. filed 1998); FTC v. Hold Billing Servs., Ltd., No.
SA-98-CA-0629FB (W.D. Tex. filed July 19, 1998); FTC v. American Telnet, Inc., No. 94-2551 CIV-
Nesbitt (S.D. Fla. filed 1999); FTC v. Shared Network Services, LLC, No. CIV. S-99-1087 WBS JFM
(E.D. Cal. filed 2000); FTC v. Mercury Marketing of Delaware, Inc., No. 00-CV-3281 (E.D. Pa. filed
2000); FTC v. Enhanced Services Billing, Inc., No. 1:01-CV-1660 (D.D.C. filed 2001); FTC v. Access
Resource Services, Inc., No. 02-CIV-60336-GOLD/SIMONTON (S.D. Fla. filed 2002); FTC v. 800
Connect, Inc., No. 03-CIV-60150-MARRA (S.D. Fla. filed 2003); FTC v. Websource Media, LLC., No. H-
06-1980 (S.D. Tex. filed 2006).
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which consumers can more readily notice small fake charges on their telephone bills.
These changes alone, however, are unlikely to remove opportunities for cramming.
Discussed below are five policy changes that would transform the environment in which
fraudulent entities have operated, and would empower consumers to protect themselves.
They also would allow for improved enforcement actions by the FCC and FTC, and for
the communications industry itself.
These recommendations apply not only to the traditional landline telephone
billing platform, but also to new billing platforms as well. Advances in technology are
moving consumers into a world where services such as Internet access and mobile phone
calling can be billed via a variety of digital communication services platforms. For
example, in many countries, mobile payment mechanisms already make mobile phones
function like electronic wallets.32 Thus, the comments below should be read in the
context not only of existing billing platforms, but new ones as well.
A. 	Prevent Fraudulent Companies from Obtaining Access to the Billing
Platform.
First, the FCC should consider adopting more stringent measures to prevent
fraudulent companies from obtaining access to the billing platform. In our experience,
fly-by-night companies are able to submit charges and move on before the volume of
consumer complaints rises to a level that gets a provider’s attention. The individuals
behind these companies change the organization’s name, products, or services until they
get caught. Many times, these companies had no legitimate claim to put any charges onto
consumers’ bills in the first place.
For example, in the case of FTC v. Nationwide Connections, Inc., the FTC sued a
company that was not a communications carrier of any type, but nonetheless was able to
use billing aggregators to place more than $30 million worth of fabricated collect-call
charges on the phone bills of millions of consumers.33 One of the principals of the scam
conducted the business from a cell in the Palm Beach County Jail. The FTC also sued the
billing aggregators that placed charges on telephone bills on behalf of that vendor.
As a consequence of the FTC’s law enforcement action, the billing aggregators
involved are now required to take specific steps to ensure that any new vendor billing for
telecommunications services is a legitimate entity. For example, they must make
diligent, good faith efforts to verify: the accuracy of new vendors’ names and the names
of the company principals; that the phone companies have not stopped that vendor or key
individuals associated with it from billing; that the vendor is not subject to law
32 	See, e.g., Pay on the Go: Consumers & Contactless Payment, FTC Town Hall (July 2008)
(transcript and video archive available at http://www.ftc.gov/bcp/workshops/payonthego/index.shtml).
33 	FTC v. Nationwide Connections, Inc., No. 06-80180.
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enforcement action for unfair billing; and that the physical location of the company
exists.34
The FTC believes measures such as these can help reduce opportunities for
cramming. Because of limitations on the FTC’s authority, the FTC does not have the
ability to put into place similar restrictions on certain communications service providers.
Therefore, the FTC encourages the FCC to explore adopting additional controls to ensure
that all communications service providers and the aggregators involved in their billing
processes undertake due diligence of vendors before permitting a vendor to use the
billing platform to place charges on consumers’ bills.
B. 	Provide for Greater Coordination among and With Law
Enforcement Entities.
Greater coordination among law enforcement entities can help combat cramming
scams. There is much consumer confusion about which government agency to contact to
complain about different types of cramming.35 How can a consumer know to alert the
FCC or a state utility commission when questioning some fees and rates, but to alert the
FTC or state attorney general’s office about completely fabricated long distance charges,
or to complain to any of the above entities if the charge involves VoIP? One part of the
solution is for government agencies to share those complaints with each other and have a
process to handle them, rather than redirecting consumers to other agencies to complain
yet again. As noted above, Consumer Sentinel provides a secure vehicle where
complaints can be shared among law enforcement entities regardless of which agency
received the consumer complaint in the first instance.
In addition, industry can play a larger role in alerting the government about
frauds. For example, the FTC has invited the wireless industry -- through discussions
with CTIA –The Wireless Association and the Mobile Marketing Association -- to refer
information about scams, including unauthorized billing, to law enforcement. Internet
and telephone service companies can voluntarily report complaints to the FTC with
limited liability.36 We are ready to work with the FCC and industry to quickly stamp out
cramming when it emerges.
34 	Stipulated Final J. and Order for Permanent Inj. and Consumer Redress as to Def.’s Billing
Concepts, Inc., ACI Billing Serv., Inc., d/b/a OAN, and BSG Clearing Solutions North America, LLC, FTC
v. Nationwide Connections, Inc., No. 06-80180 (Apr. 11, 2008) (“Nationwide Aggregator Order”); see also
Press Release, Federal Trade Commission, Nation’s Largest Telephone Bill Aggregators Will Pay $1.9
Million and Stop ‘Cramming’ to Settle FTC Charges (May 18, 2008), available at
www2.ftc.gov/os/caselist/0523141/0523141.shtm.
35 	Id. at 33 (discussing the finding and evaluating of complaints).
36 	15 U.S.C. § 57b, as amended by U.S. SAFE WEB Act of 2006 (including clarification that the
exemption from liability applies to Internet and telephone service providers normally subject to the
Electronic Communications Privacy Act, 18 U.S.C. § 2701 et seq.).
12

C. 	Provide Consumers with Information They Need to Detect
Cramming.
Consumers should have easy-to-understand monthly bills as well as a reliable way
to get more information about specific charges on their bills, so they can detect cramming
more easily. In the FTC’s law enforcement experience, a key problem in cramming is
that consumers do not recognize the name of the product, service, or company listed next
to a charge on their bill. Telephone bills that better describe the services and charges
appearing on them would enable consumers to avoid falling prey to unscrupulous service
providers which hide or mislabel unauthorized charges on consumers' telephone bills.
There are many ways to better identify the source of line items on bills. For
example, concerns about unclear identification have been raised in the context of
electronic debits. In response, the main industry association, NACHA -- The Electronic
Payments Association -- has required companies to identify themselves by the name that
is known and readily recognized by the consumer.37 Also, consumer testing of sample
billing descriptions and charges is likely to help ensure consumers understand the
information on their bills. For example, if a purchase is made through a website, the
name of website should be identified in the billing description if it is not otherwise clear
in the item description.
The FCC has asked whether it should adopt requirements about which party is
identified as the consumer contact for each charge on the bill. In our law enforcement
experience, no particular party is better suited than another party to provide information
about the nature of a charge. However, we believe that a consumer should not have to
make multiple calls to learn more about a charge, or to dispute it.
Currently, consumer complaints about a charge often are directed to a number of
parties – the telephone company, the billing aggregator, and the vendor. In the FTC’s
law enforcement experience, consumers tend to complain to their own communications
provider first even if the vendor or billing aggregator is listed on the bill next to the
charge. If the consumer contacts the vendor identified on the bill and it is a fraudulent
vendor, our experience is that those vendors often do not answer the phone or provide
accurate information. Furthermore, if the contact information on the bill is for a billing
aggregator, that aggregator often just redirects consumers to the vendor, rather than
resolve the dispute itself. The FCC should consider adopting specific measures to require
one or all of these parties, depending upon the context, to take responsibility for
answering consumer inquiries and resolving disputes about charges in a timely manner.38
37 	Press Release, NACHA —The Electronic Payments Association (Feb. 11, 2008), available at
www.nacha.org/News/news/pressreleases/2008/2008/Pr021108/Pr021108.htm.
38 	As part of a settlement with vendors and billing aggregators, the FTC has required entities subject
to its jurisdiction to be more responsive to consumer inquiries about cramming. See, e.g., Stipulated Final
Judgment and Order for Permanent Injunction, FTC v. Hold Billing Servs., Ltd., No. SA-98-CA-0629FB,
(Oct. 1999) (prohibiting aggregator from failing: (1) to respond to consumer inquiries and complaints in a
timely manner, (2) to investigate billing disputes, and (3) to require vendors that provide their own
customer service to do the same).
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D. 	Require Communications Providers and Billing Aggregators to
Investigate and Detect Cramming.
The parties involved in the communications billing process should be required to
investigate and detect cramming in response to consumer complaints and inquiries.
Regardless of which entity – vendor, billing aggregator, or communications provider –
receives the initial consumer complaint, it ought to have processes in place to investigate.
The extent of any investigation should reflect the volume and nature of complaints.
In our law enforcement experience, we have seen too often that communications
providers and billing aggregators fail to conduct a reasonable investigation after
consumers’ allegations should have raised suspicions. In Nationwide Connections, for
example, consumers complained to their phone companies, the aggregators, and the
vendor about charges for collect calls, even though their phone lines led to fax machines
or computers and call logs showed that no calls were made.39 The telephone service
providers and billing aggregators continued to bill for such suspicious charges, without
conducting an appropriate investigation. Accordingly, the FCC should consider requiring
service providers, billing aggregators or vendors to take more steps to investigate the
validity of challenged charges.
In addition to responding appropriately to individual complaints, industry should
use aggregate complaint data to quickly detect fraudulent vendors. Complaint activity
often can signal potential cramming problems. Vendors often pay other parties such as
telephone service providers and billing aggregators to answer consumer calls. Through
these calls, providers and aggregators become aware not only of the volume, but also the
nature of complaints and inquiries. In addition, providers and billing aggregators should
monitor the “chargebacks” they process in cases where a charge is removed after it has
been billed.
Furthermore, vendors, billing aggregators, and communications providers should
share information with each other about the number of consumer inquiries and
complaints they each receive. This sharing of information would ensure industry rapidly
receives information about the true extent of consumer complaints and inquiries in
situations where consumer calls are divided among parties. The FCC should consider
measures to ensure that communications providers are alerted by billing aggregators
when there are a substantial number of complaints and inquiries about specific charges or
vendors and that all entities investigate cramming using the information available to
39 	Even if a vendor produces voice recordings purporting to show that a consumer agreed to accept a
charge, further investigation might also be appropriate. See, e.g., Memorandum Opinion and Order, FTC v.
Kennedy, No. 4:06-cv-01980 (Mar. 17, 2008) (web-related charges on a telephone bills of hundreds of
thousands of businesses and non-profits were unauthorized notwithstanding defendant’s purported
“verification recordings” that implied that a person agreed to be billed for an offer after a free trial, when
the person had not); Final Judgment and Order for Permanent Injunction, FTC v. City West Advantage, Inc.,
No. 2:08-CV-00609-BES-GWF (July 21, 2009) (D. Nev.) (voice recordings failed to accurately represent
the actual conversation with consumers).
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15
e
them. Industry as a whole should then make better use of this information by
investigating patterns of problematic charges and vendors to help eliminate sources of
fraudulent billing.40
E. 	Increase Consumer Control over Billing through New Technologies.
Finally, the FTC encourages the development of, and spread of information about,
technology that can give consumers more control of the charges that are placed on their
communication bills. In 1998, the FTC asked the FCC to consider having providers
include information on how consumers can block certain services in their monthly
telephone bills as a way of possibly avoiding unauthorized charges. Some consumers
may want to block long-distance or third-party calls, particularly if such options are
available in a way that allows consumers some ability to tailor their options. Similarly,
there appear to be some blocking options for wireless subscribers.41 When consumers
are provided only with “all-or-nothing” choices, such as eliminating all text messaging or
all third-party billing, however, it is unclear how many consumers benefit. We urge th
FCC to explore how technology has changed and to determine if technology can help
combat unauthorized billing.
IV. 	Conclusion
The FTC applauds the FCC’s effort to examine whether consumers have
sufficient access to relevant information about the communications services they
purchase and use. The FTC has identified several options to promote the provision of
accurate, meaningful, and timely information to consumers regarding the
communications services they purchase and use. It also has provided several policy
suggestions for reducing unauthorized billing on communications service bills. By
addressing significant consumer concerns, these recommendations can help promote a
robust communications marketplace that benefits consumers.
40 	The FTC has addressed this issue in a recent law enforcement settlement, where a billing
aggregator agreed to alert the service provider if complaints from consumers reach a certain level. See
Nationwide Aggregator Order, supra note 34.
41 	FTC Staff Report, BEYOND V OICE: MAPPING THE MOBILE MARKETPLACE , 24-27 (2009),
available at http://www.ftc.gov/reports/mobilemarketplace/mobilemktgfinal.pdf (discussing controls for
mobile devices).