The Questions

Written by Channel
February 28, 1998

Posted: 03/1998

By Larry Leikin

The California Public Utilities Commission (CPUC), in an attempt to solve the problem
of slamming, has ordered that every interexchange carrier (IXC), competitive local
exchange carrier (CLEC) and incumbent LEC (ILEC) respond to a 21-question survey of
verification procedures and primary interexchange carrier (PIC) dispute experience. All
carriers certified in California are required to respond by March 9, regardless of whether
third-party verification (TPV) requirements apply to them or not.

The Questions

Here are the important questions in the audit:

Does your firm solicit residential customers?
If yes, do you have an independent third-party verifier?
When did you implement third party verification?
What are the name, address, and telephone number of the verifier?
Is the verifier in any way affiliated with your firm?
Does the verifier operate from facilities physically separate from your firm?
Are the verification agents compensated by (a) hourly wage (b) salary (c) commission?
If the verification agents are compensated by commission, please state the basis of that
commission.
Please provide transcripts of the first five verifications obtained in August 1997.
Does your firm solicit customers by (a) door-to-door sales agents (b) telemarketers (c)
direct mail (d) general advertising?
If your firm has used different means of soliciting customers, what is your PIC dispute
rate for each type of solicitation?
Does your firm accept authorization to transfer from anyone other the subscriber?
How does your firm confirm that the subscriber is authorizing the change in service?
Does your firm solicit business customers?
Do you verify business customer transfers? If so, how?
What is your firm’s practice for handling a customer transfer that has been disputed by
the customer?
What was your average monthly PIC dispute rate for specific period 1/1/97 to 12/31/97?
What was your average monthly PIC dispute rate for 1/1/96 to 12/31/96?
What is your practice with regard to employees or sales agents that do not comply with
the rules for customer authorization? What information do you use to ascertain whether an
employee or sales agent is not in compliance?

The CPUC plans to do two things with the results of the audit: (1) it wants to
determine the level of compliance with the law that virtually every residential order be
verified through TPV; and (2) it is looking for data that can help gauge the effectiveness
of the TPV requirements and, possibly, lead to new ways to stop slamming.

Whether a company sells in California or not, this is an important development. It’s
the first time VoiceLog LLC knows of wherein a regulatory body is trying to gather a
comprehensive set of data on slamming. Also, since California has one of the higher
profiles among state regulators, it would not be surprising if other states borrowed from
this approach.

To clarify the questionnaire somewhat, VoiceLog interviewed some people at the CPUC and
got the inside scoop on the audit. Here are some of the high points:

If a company doesn’t sell residential business, it still needs to respond to the audit.
However, its answers can be brief and it needs only answer the questions that are
specifically relevant. The company can even answer together with other carriers, if all
the answers are the same.
A company doesn’t need to hire a lawyer or put together an elaborate response. We were
told that the "easiest, least expensive response that was clear and
understandable" would be sufficient.
At this point, the CPUC has no plans to verify the data that is provided. Companies
should be careful, however. The CPUC could easily develop plans to verify the data in a
number of different ways, and there are serious risks associated with a false report.
It’s a good idea for a company to explain its answers if it is concerned about
ambiguities. For example, question 9 asks about compensation for verification reps, but
only provides three choices: hourly wage, salary and commission. Since most verification
companies charge by the transaction or by the minute–and most clients don’t know how the
agents themselves are paid–we suggest that a company provides both how the company is
paid and how the agents are paid (if it knows).

The key to question 9, by the way, is not to pay on commission, whether it is
called a commission or not. Basically, the payment should not depend on whether the sale
was declared good or bad. Per transaction or per minute payments are OK–they just weren’t
included among the answers offered.

Questions 13, 19 and 20 all relate to PIC dispute rate, and the CPUC really wants those
questions answered. We were told that evasive answers would "raise eyebrows" and
result in "enhanced regulatory scrutiny." If a company doesn’t track dispute
rates itself, we were told that the data is available from the LECs, which measure
disputes as a percentage of customer transfers. If a company prefers, it can use a
different measure, but it should explain the type of measurement that it uses and keep it
internally consistent from question to question.

The point of questions 19 and 20, by the way, is to compare PIC disputes before the TPV
requirement and after that requirement. While we do not believe the CPUC will ignore
company-to-company dispute rate comparisons, this is not supposed to be the main point of
the questions. That’s why it is more important that the method be consistent from
year-to-year than from company-to-company.

If a company wants to earn some brownie points with the CPUC, it can make suggestions
about ways to reduce slamming. The people we talked to are especially concerned with
identifying new ways to eliminate slamming and indicated that they would be receptive to
any and all constructive ideas.

Companies needing more information can check out VoiceLog’s Internet site at
www.voicelog.com, which has the full survey as well as additional tips.

Larry Leikin is president of VoiceLog LLC, based in Charlotte, N.C., a major
provider of automated third-party verification services. He can be reached at (703)
356-1325.