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CONSUMER REPORT

FCC Acts to Curb Telephone Abuses

June 18, 1989|JACK ADLER | Adler is a Los Angeles free-lance writer

The chances of getting a hotel telephone bill with charges from a company you've never heard of have diminished, thanks to new rules imposed by the Federal Communications Commission.

Alternative operator service companies offer leased lines from other companies, then make separate contracts with hotels for operator service.

This type of company, also called a "reseller," has grown substantially since the FCC's 1984 decision to allow long-distance phone competition in the pay-telephone industry.

The root of the problem, some believe, is that AOS companies market their services to owners of hotel and airport phones, rather than to the consumer. Problems arose, however, when consumers complained about these companies charging excessive rates. In addition, the consumers were not aware that they were dealing with an alternate service. The FCC estimated that some of these firms were charging as much as 10 times more than what AT&T would levy for the same call.

Various Complaints

Two other consumer complaints concerned "blocking," a practice that stopped the caller from reaching a different phone company, and that callers were being charged for calls that only received a busy signal.

The FCC then decided that some provision should be made for notifying consumers. Although the FCC asked resellers to turn over billing and operational procedures, the federal agency said it doesn't regulate such firms on the same basis as AT&T and other major phone companies.

As "non-dominant" companies in the industry, the AOS firms don't have to file rates or get FCC authority to operate, the FCC said.

However, under the FCC's new guidelines, alternate operator service companies have to place notices near telephones stipulating that they are the long-distance company at that location. Companies also must provide a customer service/information number that consumers can use to find out what the company's charges are.

Also, the AOS firm has to identify itself before processing a call. "This is called 'branding,' " said Howard Wilchins, acting chief of the FCC's enforcement division. "The company must give its name before your call goes through. Some people might not notice a sticker or tent card."

Blocking access to a long-distance company of your choice was declared illegal.

Rates Still High

Critics, however, say that these new guidelines do little to change excessive rates.

The root of the problem, some observers believe, is that AOS companies market their services to the owners of phones at hotels and airports, rather than to the consumer.

Specific rates charged for room-made long-distance calls, for example, can be a matter of negotiation between the property and the AOS firm.

According to one estimate, about 15% of U.S. hotels and motels with 100 or more rooms use AOS firms.

"Rates charged by the alternative operator services have gone down in the last year and a half," Wilchins said. But such rates may still be higher than AT&T, he said.

Concern over the issue, and how the FCC has handled it, has led to a bill--the Telephone Operator Service Consumer Protection Act of 1989--which has been introduced in the House of Representatives. The bill would give more authority to the FCC over AOS companies.

If passed, AOS firms would have to provide rate information to the FCC. If the FCC would find these rates unreasonable, it could require the AOS company to demonstrate that its charges are justified.

New Guidelines

The bill also seeks to make AOS firms identify themselves to the consumer before the caller incurs any charges. Firms also must post notices that give the name, address and toll-free number of their company.

AOS providers also would have to tell the consumer, upon request, what its rate will be for the call, as well as company billing methods and complaint procedures.

To combat complaints, the resellers created their own trade association, the Operator Service Providers of America. It has 40 members.

"While we don't want to be under regulation by the government, we do welcome the FCC and Congress looking more deeply into what is a new industry that only really began in 1985," said OSPA President Paul Gamberg.

For consumers to win any points, they must ask for the pertinent information.

They should listen for the name of the phone company when they lift the receiver to make a call. If they don't hear or recognize the company's name, they should ask for this identification and what the rates will be.

Time and inclination permitting, consumers always can call AT&T or another phone company to find out what rates will be and then can compare them with AOS. If another company is preferred, consumers may ask the AOS operator to switch the call.

"The gougers are mostly gone, and there aren't any more horror stories," Gamberg said.

Not so, says the Telecommunications Research & Action Center in Washington, D.C.. "Rates have come down for some companies but not others," said David Wagenhauser, staff attorney for the nonprofit organization.

"The rates are still extremely high, and they can be camouflaged. For example, the AOS operators may allow hotels to add a $1 surcharge to calls on top of the rate, with this amount not separately listed when you get your phone bill."

TRAC is offering a one-page sheet with comparison rates between key AOS operators and other phone companies for various calling cards, and station-to-station and person-to-person calls.

The newsletter also contains background information on AOS operations, along with instructions on how to file a complaint and seek a refund. To get a copy, send $3 to TRAC, Box 12038, Washington, D.C. 20005.

Any complaints about the system should be sent to the Federal Communications Commission, Informal Complaints Branch, Common Carrier Bureau, 2025 M St. N.W., Washington, D.C. 20554.

OSPA is at 15718 Stagg St., Van Nuys 91406, (818) 786-6772, until the end of July, when it moves to 1776 K St. N.W., Suite 900, Washington, D.C. 20006, (202) 429-7338.

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