[Federal Register Volume 62, Number 48 (Wednesday, March 12, 1997)]
[Proposed Rules]
[Pages 11750-11756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6299]



[[Page 11749]]

_______________________________________________________________________

Part XI





Federal Trade Commission





_______________________________________________________________________



16 CFR Part 308



_______________________________________________________________________



Telecommunications Act of 1996; 900-Number Rule Review; Request for 
Comment Regarding Possible Modification of Definition of ``Pay-Per-Call 
Services''; Proposed Rule

Federal Register / Vol. 62, No. 48 / Wednesday, March 12, 1997 / 
Proposed Rules

[[Page 11750]]



FEDERAL TRADE COMMISSION

16 CFR Part 308


900-Number Rule Review; Request For Comment Regarding Possible 
Modification of Definition of ``Pay-Per-Call Services'' Pursuant to the 
Telecommunications Act of 1996

AGENCY: Federal Trade Commission.

ACTION: Rule review and request for public comments.

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SUMMARY: The Federal Trade Commission (``the Commission'' or ``FTC'') 
is requesting public comment on the Commission's Trade Regulation Rule 
Pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992 
(``the 900-Number Rule''). The 900-Number Rule governs the advertising 
and operation of pay-per-call services, and establishes billing dispute 
procedures for such services. The 900-Number Rule requires that the 
Commission initiate a rulemaking review proceeding to evaluate the 
Rule's operation no later than four years after its effective date of 
November 1, 1993. Pursuant to this mandatory rule review requirement, 
the Commission seeks comment about the overall costs and benefits of 
the 900-Number Rule and its overall regulatory and economic impact.
    In addition, the Telecommunications Act of 1996 <SUP>1 granted the 
Commission authority to expand the scope of the 900-Number Rule by 
broadening the definition of pay-per-call services. Therefore, the 
Commission is also seeking public comment on whether it should expand 
the scope of its 900-Number Rule to ``audio information or audio 
entertainment'' services provided through dialing patterns other than 
900 numbers. These questions are published in a Request for Comment 
which follows the rule review portion of this notice.
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     <SUP>1  Pub. L. 104, Sec. 701, 110 Stat. 56 (1996) (codified at 
47 U.S.C. Sec. 228).
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    This document invites written comments and sets forth a list of 
specific questions and issues upon which the Commission particularly 
desires additional information. This document also contains an 
invitation to participate in a public workshop-conference, to be held 
following the close of the comment period, to afford Commission staff 
and interested parties an opportunity to explore and discuss issues 
raised during the comment period.

DATES: Written comments will be accepted until May 12, 1997. 
Notification of interest in participating in the public workshop-
conference also must be submitted on or before May 12, 1997. The public 
workshop-conference will be held on June 19 and 20, 1997, from 9:00 
a.m. until 5:00 p.m.

ADDRESSES: Five paper copies of each written comment should be 
submitted to the Office of the Secretary, Room 159, Federal Trade 
Commission, Sixth Street and Pennsylvania Avenue, N.W., Washington, 
D.C. 20580. To encourage prompt and efficient review and dissemination 
of the comments to the public, all comments should also be submitted, 
if possible, in electronic form, on either a 5\1/4\ or a 3\1/2\ inch 
computer disk, with a label on the disk stating the name of the 
commenter and the name and version of the word processing program used 
to create the document. (Programs based on DOS are preferred. Files 
from other operating systems should be submitted in ASCII text format 
to be accepted.) Individual members of the public filing comments need 
not submit multiple copies or comments in electronic form. Comments 
should be identified as ``900-Number Rule Review--Comment. FTC File No. 
R611016.''
    Notification of interest in participating in the public workshop-
conference should be submitted in writing to Marianne Kastriner 
Schwanke, Division of Marketing Practices, Federal Trade Commission, 
Sixth and Pennsylvania Ave., N.W., Washington, D.C. 20580. The public 
workshop-conference will be held at the Federal Trade Commission, 6th 
Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: Marianne Kastriner Schwanke, (202) 
326-3165, Adam Cohn, (202) 326-3411, or Carole Danielson, (202) 326-
3115, Division of Marketing Practices, Bureau of Consumer Protection, 
Federal Trade Commission, Washington, D.C. 20580.

SUPPLEMENTARY INFORMATION: The Commission has determined, as part of 
its oversight responsibilities, to review rules and guides periodically 
in order to obtain information about the costs and benefits of its 
rules and guides, as well as their regulatory and economic impact. The 
information the Commission obtains assists it in identifying rules and 
guides that warrant modification or rescission. In accord with the 
Commission's general policy to review periodically all of its rules and 
guides, when the Commission adopted the 900-Number Rule, it included 
Section 308.9, which imposes a requirement to undertake a review of the 
Rule no later than four years after its effective date of November 1, 
1993. Therefore, at this time, pursuant to Section 308.9 of the Rule, 
the Commission is initiating this mandatory rule review, and hereby 
solicits written public comments concerning the operation of the 900-
Number Rule.
    Simultaneous with the Rule review, the Commission also is seeking 
public comment on whether it should expand the scope of its 900-Number 
Rule to information or entertainment services provided through dialing 
patterns other than 900 numbers, as authorized by the 
Telecommunications Act of 1996.

Section A. Background

Telephone Disclosure and Dispute Resolution Act of 1992

    Congress enacted the Telephone Disclosure and Dispute Resolution 
Act of 1992 (``TDDRA''), 15 U.S.C. Sec. 5701 et seq., to curtail 
certain unfair and deceptive practices perpetrated by some pay-per-call 
businesses, and to encourage the growth of the legitimate pay-per-call 
industry.<SUP>2 Titles II and III of TDDRA required the FTC to 
prescribe regulations governing pay-per-call services.<SUP>3 TDDRA 
directed the Commission to enact regulations governing the advertising 
and operation of pay-per-call services. Among other things, TDDRA 
required that certain disclosures appear in all advertising for pay-
per-call programs and in introductory messages (``preambles'') at the 
start of the pay-per-call programs, prohibited pay-per-call providers 
from engaging in certain practices (such as directing their services to 
children under 12 years of age), and required that the FTC's 
regulations establish procedures for correcting billing errors in 
connection with pay-per-call services. TDDRA granted the FTC limited 
jurisdiction over common carriers for purposes of the 900-Number Rule.
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     <SUP>2 This statement summarizes Congress' findings regarding 
the 900-number industry at the time it passed the legislation. For 
greater detail concerning the problems Congress found to be 
associated with 900-number services, see 15 U.S.C. Sec. 5701(b).
     <SUP>3 Title I of TDDRA directed the Federal Communications 
Commission (FCC) to adopt regulations defining the obligations of 
common carriers with respect to the provision of pay-per-call 
services. The FCC published its Notice of Proposed Rulemaking and 
Notice of Inquiry at 58 FR 14,371 (March 17, 1993). The FCC's Rules 
are at 47 CFR 64.228.
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900-Number Rule

    Pursuant to TDDRA, the FTC adopted its 900-Number Rule, 16 CFR Part 
308, on July 26, 1993, and it became effective November 1, 1993.<SUP>4 
The Rule requires

[[Page 11751]]

that advertisements for 900 numbers contain certain disclosures, 
including information about the cost of the call. This information must 
also be included in an introductory message (preamble) at the beginning 
of any 900-number program where the cost of the call could exceed two 
dollars. The Rule requires that anyone who calls a 900-number service 
must be given the opportunity to hang up, at the conclusion of the 
preamble, without incurring any charge for the call. In addition, the 
Rule requires that all preambles to 900-number services state that 
individuals under the age of 18 must have the permission of a parent or 
guardian to complete the call.
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     <SUP>4 The Statement of Basis and Purpose and Final Rule was 
published at 58 FR 42364 (August 9, 1993).
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    The 900-Number Rule also establishes procedures for resolving 
billing disputes for 900-number calls. 16 CFR 308.7. The Rule imposes 
certain obligations on entities that bill and collect for 900-number 
services, such as investigating reports by consumers of ``billing 
errors,'' a defined term in the Rule.<SUP>5
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     5  Other protections were established by the Federal 
Communications Commission (FCC) in their rules set out at 47 CFR 
64.228. Under those rules, a consumer's telephone service cannot be 
disconnected for failure to pay charges for a 900 number call, and 
900 number blocking must be made available to consumers who do not 
wish to have access to 900 number service from their telephone 
lines.
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Initiation of Rule Review

    Section 308.9 of the 900-Number Rule, 16 CFR 308.9, requires that 
the Commission initiate a rulemaking review proceeding to evaluate the 
Rule's operation no later than four years after its effective date of 
November 1, 1993. Although the Rule review is not required until 
November 1997, the Commission has determined that it would be more 
efficient to conduct the evaluation at this time in conjunction with 
its issuance of a Request for Comment regarding the possible expanded 
definition of ``pay-per-call services'' as provided by the 
Telecommunications Act of 1996.

Telecommunications Act of 1996 Authority to Expand the Definition of 
Pay-Per-Call Services

    On February 8, 1996, the President signed into law the 
Telecommunications Act of 1996 to provide a regulatory framework for 
telecommunications and information technologies and services. Section 
701(b) of the Telecommunications Act provides that:

    Section 204 of [TDDRA] (15 U.S.C. Sec. 5714(1)) <SUP>6 is 
amended to read as follows:
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    \6\ ``The term `pay-per-call services' has the meaning provided 
in section 228 of Title 47.'' 15 U.S.C. Sec. 5714(1).
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    ``(1) The term `pay-per-call services' has the meaning provided 
in section 228(i) of the Communications Act of 1934,<SUP>7 except 
that the Commission by rule may, notwithstanding subparagraphs (B) 
and (C) of Section 228(i)(1) of such Act, extend such definition to 
other similar services providing audio information or audio 
entertainment if the [Federal Trade] Commission determines that such 
services are susceptible to the unfair and deceptive practices that 
are prohibited by the rules prescribed pursuant to section 201(a) 
[of TDDRA].'' (Emphasis supplied.)

    \7\ Section 228(i)(1) of the Communications Act of 1934, 47 
U.S.C. Sec. 228(i)(1) provides that:
    The term `pay-per-call services' means any service--
    (A) in which any person provides or purports to provide--
    (i) audio information or audio entertainment produced or 
packaged by such person;
    (ii) access to simultaneous voice conversation service; or
    (iii) any service, including the provision of a product, the 
charges for which are assessed on the basis of completion of the 
call;
    (B) for which the caller pays a per-call or per-time-interval 
charge that is greater than, or in addition to, the charge for 
transmission of the call; and
    (C) which is accessed through use of a 900 telephone number or 
other prefix or area code designated by the [Federal Communications] 
Commission in accordance with subsection (b)(5) [47 
U.S.C.Sec. 228(b)(5)].''
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Thus, Section 701(b) of the Telecommunications Act authorizes the FTC, 
for purposes of its 900-Number Rule, to extend the definition of the 
term ``pay-per-call services''--and, in effect, the scope of coverage 
of the Rule--without regard to whether a caller to the service in 
question ``pays a per-call or per-time-interval charge that is greater 
than, or in addition to, the charge for transmission of the call,'' and 
without regard to whether a call to such service is ``accessed through 
use of a 900 telephone number or other prefix or area code designated 
by the FCC'' under 47 U.S.C.Sec. 228(b)(5) if the FTC determines that 
such services ``are susceptible to the unfair and deceptive practices 
that are prohibited by the rules prescribed pursuant to section 
201(a)'' of TDDRA.
    Therefore, at this time the Commission is publishing a Request for 
Comment to determine whether audiotext services <SUP>8 that fall 
outside the definition of ``pay-per-call'' in the original rule are 
susceptible to the same unfair and deceptive practices that prompted 
passage of TDDRA. In other words, the Commission seeks to determine 
whether the definition of ``pay-per-call services'' should be extended 
to other services similar to those presently covered by the Rule and, 
if so, what such an expanded definition should be.
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    \8\ The term ``audiotext services'' describes audio information 
and entertainment services offered through any dialing pattern, 
including services accessed via 900-number, as well as international 
and other non-900-number, dialing patterns. In this notice, where 
the Commission seeks comment on the effect of the 900-Number Rule on 
the industry, we use the phrase ``900-number services'' to describe 
those services currently covered by the Rule. Where we ask questions 
regarding the larger universe of information and entertainment 
services offered through the telephone, we use the term ``audiotext 
services.''
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    Section 701 of the Telecommunications Act also modified some 
additional provisions in Section 228 of title 47, mandating that the 
Federal Communications Commission amend its regulations regarding pay-
per-call services. The FCC took action to implement this statutory 
mandate in July 1996.<SUP>9 In that proceeding, the FCC also proposed 
certain other modifications to its rules not expressly mandated by 
statute to help reduce fraudulent practices in the pay-per-call 
industry. The Federal Trade Commission thus seeks to determine whether 
its rules should be changed to take account of these recent changes and 
proposed changes in FCC rules regarding pay-per-call services. As noted 
above, the Request for Comment follows the rule review portion of this 
notice.
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    \9\  Policies and Rules Governing Interstate Pay-Per-Call and 
Other Information Services Pursuant to the Telecommunications Act of 
1996, Order and Notice of Proposed Rulemaking, CC Docket No. 96-146, 
11 FCC Rcd 14,738 (1996) (``FCC Pay-Per-Call Order and Notice'').
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Section B. Invitation to Comment

    All persons are hereby given notice of the opportunity to submit 
written data, views, facts, and arguments concerning the Commission's 
900-Number Rule. The Commission invites written comments to assist it 
in ascertaining the facts necessary to reach a determination as to the 
costs and benefits of the Rule and its overall regulatory and economic 
impact, and on whether to engage in a rulemaking to amend the 900-
Number Rule. Written comments must be submitted to the Office of the 
Secretary, Room 159, Federal Trade Commission, Sixth Street and 
Pennsylvania Avenue, N.W. Washington, DC 20580, on or before May 12, 
1997. Comments submitted will be available for public inspection in 
accordance with the Freedom of Information Act (5 U.S.C. Sec. 552) and 
Commission Rules of Practice, on normal business days between the hours 
of 8:30 a.m. and 5 p.m. at the Public Reference Section, Room 130, 
Federal Trade Commission, Sixth Street and Pennsylvania Avenue, N.W., 
Washington, D.C. 20580.

[[Page 11752]]

Section C. Public Workshop-Conference

    The FTC staff will conduct a public workshop-conference to discuss 
the written comments received in response to the Federal Register 
notice. The purpose of the workshop-conference is to afford Commission 
staff and interested parties a further opportunity to openly discuss 
and explore issues raised in the notice and in the comments, and, in 
particular, to examine publicly any areas of significant controversy or 
divergent opinions that are raised in the written comments. The 
conference is not intended to achieve a consensus among participants or 
between participants and Commission staff with respect to any issue 
raised in the comments. Commission staff will consider the views and 
suggestions made during the conference, in conjunction with the written 
comments, in formulating its final recommendation to the Commission 
concerning what action, if any, to take in regard to amending the 900-
Number Rule.
    Commission staff will select a limited number of parties, from 
among those who submit written comments, to represent the significant 
interests affected by the issues raised in the notice. These parties 
will participate in an open discussion of the issues, including asking 
and answering questions based on their respective comments. In 
addition, the workshop will be open to the general public. The 
discussion will be transcribed and the transcription placed on the 
public record.
    To the extent possible, Commission staff will select parties to 
represent the following interests: advertisers, third-party billing and 
collection services, pay-per-call information providers, service 
bureaus, local exchange carriers, long distance carriers, consumer 
groups, federal and state law enforcement and regulatory authorities; 
and any other interests that Commission staff may identify and deem 
appropriate for representation.
    Parties who represent the above-referenced interests will be 
selected on the basis of the following criteria:
    1. The party submits a written comment during the 60-day comment 
period.
    2. During the 60-day comment period the party notifies Commission 
staff of its interest in participating in the workshop.
    3. The party's participation would promote a balance of interests 
being represented at the workshop-conference.
    4. The party's participation would promote the consideration and 
discussion of a variety of issues raised in this notice.
    5. The party has expertise in activities affected by the issues 
raised in this notice.
    6. The number of parties selected will not be so large as to 
inhibit effective discussion among them.
    The workshop-conference will be held on June 19 and 20, 1997. Prior 
to the workshop-conference, parties selected will be provided with 
copies of the comments from all participants received in response to 
this notice.

Section D. Regulatory Flexibility Act

    The Regulatory Flexibility Act provides for an initial and final 
regulatory analysis of the potential impact on small businesses of 
Rules proposed by federal agencies. (5 U.S.C. Secs. 603, 604) The 
Commission conducted such an analysis when the 900-Number Rule was 
promulgated in 1993. In publishing the proposed regulations, the 
Commission certified, subject to public comment, that the proposed 
regulations would not have a significant economic impact on a 
substantial number of small entities and, therefore, that the 
provisions of the Regulatory Flexibility Act, 5 U.S.C. 605(b), 
requiring the initial regulatory analysis, did not apply.<SUP>10 The 
Commission noted that any economic costs imposed on small entities 
were, in many instances, specifically imposed by statute. Where they 
were not, efforts had been made to minimize any unforeseen burdens on 
small entities by making the proposed rule's requirements flexible. The 
public comments and information received by the Commission did not 
alter that conclusion.<SUP>11
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    \10\ 58 FR 13379.
    \11\ 58 FR 42399.
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    No analysis is required in connection with this document because no 
new rule or amendments are being proposed. Nonetheless, the Commission 
wishes to ensure that no substantial economic impact is being 
overlooked that would warrant an initial and final regulatory 
flexibility analysis. Therefore, this review of the 900-Number Rule 
also requests public comment regarding the effect of the Rule on the 
costs to, profitability and competitiveness of, and employment in small 
entities. The Commission will revisit this issue in connection with any 
Notice of Proposed Rulemaking that may result from this request for 
comments.

Section E. Paperwork Reduction Act

    In the 1993 Notice of Proposed Rulemaking on the 900-Number Rule, 
the Commission solicited comments on the need for and scope of possible 
record keeping requirements in provisions governing Commission access 
to information and billing and collection for pay-per-call 
services.<SUP>12 Those requirements, had they been adopted, would have 
constituted ``collections of information'' as defined under the 
Paperwork Reduction Act, 44 U.S.C. 3501-3520. See 44 U.S.C. 3502 and 5 
CFR 1320.7. However, the Commission determined not to include such 
requirements in its final Rule.<SUP>13 Accordingly, the requirements of 
the Paperwork Reduction Act were not applicable to the final Rule. 
Similarly, the requirements are not applicable to this document because 
no collections of information are required. The Commission will revisit 
this issue in connection with the publication of any subsequent Notice 
of Proposed Rulemaking that might result from this request for 
comments.
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    \12\ 58 FR 13384.
    \13\ 58 FR 42399.
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Section F. Questions and Issues for Comment Pursuant to Regulatory 
Review of the Rule

    The Commission is seeking comment on various aspects of the 900-
Number Rule, in conjunction with its Rule review. Without limiting the 
scope of issues it is seeking comment on, the Commission is 
particularly interested in receiving comments on the questions that 
follow. Where commenters advocate changes to the Rule, please be 
specific in describing suggested changes. With respect to suggested 
changes to the Rule, please describe any potential costs and benefits 
such changes might have on industry and consumers. The Commission would 
also be interested in commenters providing any data that exist on 
issues raised in the questions.

I. General Issues for Comment

    1. Is there a continuing need for the 900-Number Rule?
    (a) Since the Rule was issued, have changes in technology, industry 
structure, or economic conditions affected the need for or 
effectiveness of the Rule?
    (b) Does the Rule include provisions that are unnecessary?
    (c) What are the aggregate costs and benefits of the Rule?
    (d) Have the costs or benefits of the Rule dissipated over time?
    (e) Does the Rule contain provisions that have imposed costs not 
outweighed by benefits?
    2. What effect, if any, has the Rule had on consumers?

[[Page 11753]]

    (a) What economic or other costs has the Rule imposed on consumers?
    (b) What benefits has the Rule provided to consumers?
    (c) What changes, if any, should be made to the Rule to increase 
the benefits to consumers?
    (d) How would these changes affect the compliance costs the Rule 
imposes on industry?
    3. What impact, if any, has the Rule had on firms that must comply 
with it?
    (a) What economic or other costs has the Rule imposed on industry 
or individual firms?
    (b) What benefits has the Rule provided to the industry or to 
individual firms?
    (c) What changes, if any, should be made to the Rule to minimize 
any burden or cost imposed on industry or individual firms?
    (d) How would the changes affect the benefits provided by the Rule 
to consumers or industry?
    4. How has the Rule affected small business entities with respect 
to costs, profitability, competitiveness, and employment? What would be 
the economic impact on small businesses if the Rule is left unchanged?
    5. Are there regulatory alternatives that might reduce any adverse 
economic effect of the 900-Number Rule, yet comply with the mandate of 
TDDRA to curtail certain unfair and deceptive practices by some 900-
number providers, yet encourage the growth of the legitimate 900-number 
industry?
    6. Are there additional advertising, operating, or other standards 
for the audiotext industry not included in the Rule that might now be 
desirable or necessary to prevent deception or other abuses, or to 
prevent evasion of the Rule's requirements and prohibitions?
    7. The FCC and FTC share regulatory authority over the audiotext 
industry.
    (a) Are there any unnecessary regulatory burdens created by 
overlapping jurisdiction? What can be done to ease these burdens?
    (b) Are there gaps where neither agency has addressed a particular 
abuse? For example, does such a regulatory gap exist where a entity 
claims status as a ``common carrier'' for purposes of FTC regulation, 
but claims that its actions are not those of a common carrier for 
purposes of FCC regulation?
    (c) Does the Rule overlap or conflict with other federal, state, or 
local government laws or regulations?
    8. How does Section 701 of the Telecommunications Act of 1996 
concerning the FCC's regulation of the pay-per-call industry, or the 
FCC's recently adopted and proposed regulatory changes <SUP>14 under 
that section, affect the FTC's Rule, if at all? How should the FTC's 
Rule be amended to harmonize with these changes and proposed changes in 
the FCC regulatory approach?
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    \14\ FCC Pay-Per-Call Order and Notice, see supra note 9.
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    9. What categories of audiotext services (e.g., sports, psychic, 
chat, adult) are provided through 900 numbers?
    (a) What percentage does each type constitute of all audiotext 
services accessed through 900 numbers?
    (b) How much gross sales revenue has each category generated in 
each year since 1993?
    (c) Have the gross sales revenues and/or profits of information 
providers using 900 numbers changed since the Rule was promulgated? 
What impact, if any, has the 900-Number Rule had on the level of gross 
sales revenues and/or profits?

II. Definitions

    10. Are the definitions set forth in section 308.2 of the Rule 
effective for the purpose of curbing unfair and deceptive practices 
targeted by the Rule?
    (a) If not, how have the definitions been inadequate?
    (b) Are there additional definitions that should be added to the 
Rule? Explain.
    11. The current definition of ``service bureau'' states that the 
term includes any person other than a common carrier.
    (a) Is it appropriate to exclude common carriers, regardless of 
activities, from the definition?
    (b) Should entities engaging in service bureau functions be covered 
by the Rule, even if they also engage in ``common carrier'' functions 
at other times?
    12. Has the Rule's definition of ``presubscription agreement'' 
affected the market for 900-number services? If so, in what way?
    (a) Who uses presubscription agreements, and for what purpose?
    (b) What opportunities for unfair and deceptive practices exist 
under the current definition of ``presubscription agreement''?
    (c) How might the definition be changed to diminish or eliminate 
these opportunities?
    (d) Should the definition of ``presubscription agreement'' be 
modified to harmonize with changes in FCC rules made pursuant to the 
Telecommunications Act of 1996, or to harmonize with proposed changes 
made by the FCC to the definition of ``presubscription agreement''? 
<SUP>15
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     15  FCC Pay-Per-Call Order and Notice, see supra note 9.
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    (e) Would any changes in the definition of ``presubscription 
agreement'' be appropriate in light of Section 701 of the 
Telecommunications Act of 1996? For example, should the Rule require 
that a presubscription agreement be in writing?

III. Advertising

    13. Are the advertising disclosure provisions in the Rule adequate 
for regulating advertising on the Internet or on commercial online 
services?
    (a) Should the Rule be more precise regarding the definition of 
``clear and conspicuous'' in the context of advertising on the Internet 
or on commercial online services?
    (b) Are there other forms of advertising in other media for which 
the Rule should provide specific advertising disclosure requirements? 
Explain.
    14. Does the Rule provide adequately for disclosing the cost to 
consumers prior to making a call to a 900-number service?
    (a) Do the current size requirements ensure that the cost 
disclosure is ``clear and conspicuous'?
    (b) Are there other more effective means for ensuring that the 
advertisements provide adequate cost disclosures to consumers?
    15. Are the required disclosures for 900-number services that 
advertise sweepstakes sufficient to ensure that consumers are informed 
of all material information necessary to dispel deception? Have there 
been abuses associated with sweepstakes advertised and offered through 
the use of a 900 number that make it necessary to require additional 
protections for consumers who respond to such sweepstakes offers?
    16. Is the requirement governing ``telephone solicitations'' in 
section 308.3(h) clear, meaningful, and effective?
    (a) Is there additional information that such a solicitation should 
include to ensure that consumers have sufficient information prior to 
calling a 900-number service advertised in this manner?
    (b) Is the Rule clear that it applies to messages left on telephone 
answering machines or telephone numbers left on pagers?
    (c) What about audio and non-audio messages received on computers? 
Should these or other message delivery systems be explicitly included 
within this provision?

[[Page 11754]]

    (d) Should ``telephone message'' as used within section 308.3(h) be 
defined and if so, how?

IV. Operation & Standards

    17. In the Statement of Basis and Purpose describing the Rule, 
<SUP>16 the Commission recognized that at the time the Rule was 
promulgated, time-sensitive billing involved in 900-number services was 
``accomplished in one-minute increments, and that any portion of a 
minute will be billed as full time.''
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    \16\ 58 FR 42387 (August 1993).
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    (a) Has the technology for calculating usage time for billing 
purposes changed since the implementation of the Rule? If so, how?
    (b) Is it possible using current technology to stop the assessment 
of time-based charges immediately upon disconnection by the caller, and 
therefore, bill consumers for fractions of minutes?
    18. How have technological changes affected the way information 
providers can and do set their rates?
    (a) Is it now technologically possible to suspend charges during a 
program, to provide a period (or periods) of programming free to the 
caller? Explain.
    (b) Is it now technologically possible to alter the rate at which a 
caller is charged during a program, to provide a period (or periods) of 
programming charged to the caller at reduced rates or at higher rates 
than other portions of the call? Explain.
    (c) Is it now technologically possible to have a free introductory 
message longer than 18 seconds, which was the standard at the time the 
Rule was adopted? Explain.
    19. How has the requirement of a preamble affected the 900 number 
industry?
    (a) Have preambles conferred benefits on consumers who make 900-
number calls?
    (b) How might the preamble requirements be changed to make the 
preambles more useful or informative to the consumer? What costs would 
likely arise from such changes?
    (c) How might the preamble requirements be changed to make 
compliance easier for information providers? Would such changes 
diminish benefits to consumers and if so, how?
    20. Are preambles effective in reducing unauthorized use of 900-
number services by minors or others? How is this properly measured?
    (a) How might preamble requirements be changed to be made more 
effective in addressing the problem of unauthorized calls?
    (b) What further actions might be taken by industry or by the FTC 
to reduce unauthorized calls to 900 number and other audiotext 
services?
    21. Section 308.5(a)(3) requires that the preamble state ``that 
charges for the call begin, and that to avoid charges the call must be 
terminated, three seconds after a clearly discernible signal or tone.'' 
If an information provider were to provide, for example, the first two 
minutes of an audiotext call free, what should the preamble disclose to 
inform callers when charges for the call begin?
    (a) In the example above, should the information provider be 
required to inform the caller, through a tone or other signal, when the 
free time has expired?
    (b) In the example above, at what point(s), if any, during the call 
should the disclosures be made? At what point(s), if any, during the 
call should a signal or tone occur?
    (c) In the example above, would a single signal following the 
preamble but immediately preceding the free time provide sufficient 
information to enable consumers to avoid all or most charges from 
remaining on the line after close of the free time?
    22. Section 308.5(a)(2)(iii) requires that ``if the call is billed 
on a variable rate basis, the preamble shall state * * * the cost of 
the initial portion of the call, any minimum charges, and the range of 
rates that may be charged depending on the options chosen by the 
caller.'' Should this provision be construed to cover situations where 
pay-per-call services charge different rates for different time periods 
within a single call (e.g., no charge for the first two minutes after 
the end of the preamble, $3.00 per minute for the third through the 
eighth minutes, and $1 per minute for every minute thereafter)?
    (a) Assume for purposes of questions 22(a) and (b) that calls to 
such services described above are ``calls billed on a variable rate 
basis'' covered by Section 308.5(a)(2)(iii). Should that Section be 
modified to require something other than preamble disclosures of ``the 
cost of the initial portion of the call, any minimum charges, and the 
range of rates that may be charged depending on the options chosen by 
the caller?'
    (b) For example, in the scenario described above, should Section 
308.5(a)(2)(iii) explicitly require a clearly discernible signal or 
tone to mark the end of the free two-minute period? Should it 
explicitly require a clearly discernible signal or tone to mark the end 
of the six-minute period during which charges are $3.00 per minute?
    23. What percentage of 900-number services fall into the category 
of ``nominal cost calls'' as described in section 308.5(c) of the Rule?
    (a) Do the data suggest that $2.00 is an appropriate threshold for 
designation of ``nominal cost calls'' for which no preamble is 
necessary? If not, what ``nominal cost'' threshold do the data support?
    (b) Should the ``nominal cost'' figure be adjusted for inflation? 
Explain.
    24. What percentage of callers to 900-number services hang up the 
telephone before the charges begin and how is this ascertained?
    (a) Of these, what percentage are first time callers?
    (b) Does this percentage correlate to the cost of the call? To the 
nature of the service?
    25. What impact, if any, has the 900-Number Rule had on the number 
of complaints about, or requests for credits or refunds for, calls to 
900-number services that allegedly were not authorized by the 
subscriber of the telephone line from which the calls were placed?
    (a) Has the percentage of such complaints or requests increased, 
decreased, or remained the same since the Rule went into effect?
    (b) What percentage of all requests for credits or refunds of 
charges for 900-number services involve calls allegedly unauthorized by 
the telephone subscriber?
    (c) What percentage of these requests are due to allegedly 
unauthorized calls placed by minors?
    26. What, if any, procedures are used by industry to ensure that 
calls to audiotext services are authorized by the subscriber of the 
telephone line from which the calls are placed?
    (a) What, if any, procedures are used by industry to minimize or 
eliminate unauthorized calls placed by minors to audiotext services?
    (b) How effective have these procedures been in reducing the number 
of complaints or the number of requests for credits or refunds 
regarding allegedly unauthorized calls to audiotext services?
    27. What percentage of telephone subscribers have chosen to block 
access to 900 numbers from their telephone lines?
    (a) Of those choosing to block access to 900 numbers, what 
percentage choose to do so when initiating phone service?
    (b) What percentage do so after phone service has been initiated?
    (c) Of the latter, what percentage have done so after complaining 
about charges to audiotext services?
    (d) What percentage of consumers who complain about charges for

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audiotext services choose to block 900 numbers?
    (e) To what extent, if any, has blocking been effective in reducing 
complaints involving 900-number services?
    (f) What, if any, are the costs to consumers or industry of 
receiving or providing 900 number blocking services?

V. Billing and Collection

    28. What services are provided to the audiotext industry by billing 
entities other than the telephone companies (or ``alternative billing 
entities'')?
    (a) Do the types of services vary for different types of audiotext 
services? Explain.
    (b) What percentage of audiotext services are billed through 
billing entities other than the telephone companies? Explain.
    (c) Have the types or number of these alternative billing entities 
changed since the Rule went into effect in 1993? What impact, if any, 
has the Rule had on the nature of these billing entities?
    (d) What are the terms and conditions of the arrangements between 
the alternative billing entities and other players in the audiotext 
industry?
    (e) What is the role of a ``billing aggregator''? What services 
does a billing aggregator provide to members of the audiotext industry?
    29. Does the definition of ``billing error'' in section 308.7 of 
the Rule adequately reflect the range of billing errors occurring in 
the 900-number marketplace? If not, how might the definition be 
changed?
    30. Is there any evidence suggesting that some (adult) consumers 
are refusing to pay for audiotext calls or 900-number calls which they 
purchased after hearing a preamble containing the disclosure of 
material information currently required by the Rule?
    (a) If such a problem exists, to what extent is it affected by the 
dispute resolution provisions of the 900-Number Rule?
    (b) If such a problem exists, to what extent is it affected by the 
billing notice requirements set forth in section 308.7(n)?
    (c) What steps, if any, could the Commission take to reduce the 
incidence of this practice without weakening protections afforded 
consumers by TDDRA and the 900-Number Rule?
    31. Distinguished from billing for unauthorized calls, the problem 
of ``phantom billing'' occurs when a telephone subscriber is billed for 
an audiotext call that the subscriber asserts was never placed from the 
subscriber's telephone.
    (a) How does phantom billing occur?
    (b) What procedures and safeguards currently exist or should exist 
to ensure that telephone subscribers are billed only for calls which 
were actually placed from that subscriber's phone?
    (c) How does a billing entity determine that billing tapes or other 
records of calls are genuine?
    (d) What percentage of consumers who complain about ``phantom 
billing'' of audiotext services choose to block access to 900 numbers?
    32. Section 308.7(i) places restrictions on the extent to which 
adverse credit information can be reported to any person.
    (a) How, if at all, has this restriction affected the creation of a 
shared database of ``problem callers'' for the purposes of blocking 
such persons from 900 or other audiotext transactions?
    (b) Would such a database be useful to industry?
    (c) Does allowing such a shared database adversely affect 
consumers? If so, how?
    33. How is ``chargeback'' defined by the industry?
    (a) Does the term include the situation where a consumer has 
refused to pay for an audiotext service? Does it include the situation 
where a consumer pays and then requests a refund?
    (b) Are there data on chargeback rates for the 900-number industry? 
For the audiotext industry as a whole? Do the data represent chargeback 
rates for all types of ``pay-per-call services'' or only for services 
provided through 900 numbers?
    (c) How do the chargeback rates for the pay-per-call industry 
compare with other collection and payment systems, such as the credit 
card collection and payment system?
    (d) What are the current and projected future trends regarding 
chargeback rates for the pay-per-call industry?
    34. Do chargeback rates vary according to the category of audiotext 
service?
    (a) Do the providers of some types of services experience a greater 
chargeback rate than other types of services? Are there data 
demonstrating these differences?
    (b) If certain kinds of audiotext services correlate with higher 
chargeback rates, what is the explanation for the correlation?
    (c) Are there data to show whether services that attract callers of 
certain age groups (e.g., minors) are more likely than others to result 
in chargebacks?
    (d) How do chargeback rates for non-900 audiotext services compare 
to rates for 900 number services?
    (e) How do chargeback rates for nominally priced calls (i.e., those 
exempted from the preamble requirement) compare to the chargeback rates 
for other calls?
    35. Do chargeback rates vary according to the payment method?
    (a) Do services that utilize a credit card billing system rather 
than an Automatic Number Identification (``ANI'') billing system 
experience fewer chargebacks?
    (b) What about services provided according to oral presubscription 
agreements?
    (c) What about those services provided according to written 
presubscription agreements?
    36. Has the advent of third party billers affected the chargeback 
rates in the audiotext industry? If so, how?
    (a) Is there any correlation between the type of billing entity 
(e.g., a local exchange carrier or a third party biller) and the rate 
of chargebacks? If so, why?
    (b) Are chargeback rates affected by the amount of time a billing 
entity gives to a consumer to complain about a bill? To what extent to 
different billing entities follow the Rule's time limits on initiation 
of billing review?

Section G. Request for Comment

    As discussed above, the Telecommunications Act of 1996 gives the 
Commission the authority to conduct a rulemaking on the issue of 
whether to ``extend'' the definition of ``pay-per-call services'' to 
cover other services not currently covered by the 900-Number Rule. 
Thus, the Commission currently seeks comment on whether any expansion 
should be made, and if so, how such an expansion should be implemented. 
Commenters should pay particular attention to the fact that the 
Commission's authority is to extend the 900-Number Rule to cover 
services which are ``susceptible to the unfair and deceptive trade 
practices that are prohibited by [TDDRA].'' Thus, commenters should not 
limit themselves to discussing services which are currently associated 
with unfair and deceptive practices; rather commenters should discuss 
the broader topic of services which are susceptible to becoming havens 
for unfair and deceptive practices addressed by TDDRA. Commenters 
should attempt to address the questions listed below:
    1. Are there ``audio information or audio entertainment'' 
(``audiotext'') services which are not currently covered by the 
definition of ``pay-per-call service,'' but which are susceptible to 
the same unfair and deceptive trade practices prohibited by the current 
Rule?

[[Page 11756]]

    (a) If so, should the Rule be amended to cover these services?
    (b) If so, how should the Rule be changed?
    (c) How would these changes affect consumers and businesses?
    (d) What characteristics of an audiotext service make it 
susceptible to the unfair and deceptive trade practices prohibited by 
the current Rule?
    2. How can a definition of ``pay-per-call service'' be crafted so 
that audiotext services which are susceptible to unfair and deceptive 
trade practices are covered by the Rule, but any services that are not 
susceptible to these practices are not swept into the Rule?
    3. Should the Rule be extended to cover any audiotext transaction 
where an information provider or service bureau receives a portion of 
the fees paid by a caller? Explain.
    4. Should the definition of ``pay-per-call service'' be extended to 
encompass international audiotext transactions where the information 
provider or service bureau receives a portion of the fees paid by the 
caller? Explain. If so, are there other modifications to the Rule that 
would be necessitated by such a change?
    5. Are there technological differences between 900-number and non-
900-number audiotext services that would make it difficult to implement 
the Rule in its current form with respect to non-900-number audiotext 
services? Explain.
    (a) For example, could free preambles (as required by section 
308.5) be provided at the beginning of non-900-number audiotext 
messages billed through arrangements with international long distance 
carriers? How could accurate cost disclosures as required by the Rule 
be made for these services?
    (b) Must any changes be made to the Rule to accommodate these 
differences?
    (c) How would these suggested changes affect audiotext services 
utilizing 900 numbers?
    6. In a Notice and Order <SUP>17, the Federal Communications 
Commission (FCC) stated that ``regardless of whether the FTC extends 
the scope of its pay-per-call regulations [pursuant to Sec. 701(b)(2) 
of the Telecommunications Act of 1996], our pay-per-call rules continue 
to be delineated by the statutory definition of pay-per-call services 
contained in Section 228(i) of the Communications Act.'' Thus, if the 
FTC extends the definition of ``pay-per-call services'' pursuant to its 
authority under the Telecommunications Act of 1996, then the two 
agencies would be regulating the audiotext services industry using two 
different definitions of ``pay-per-call services.''
---------------------------------------------------------------------------

    \17\ FCC Pay-Per-Call Order and Notice, see supra note 9.
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    (a) What impact, if any, would this result have on the audiotext 
industry?
    (b) What could be done to reduce any potential complications or 
conflicts? Explain.
    7. In light of the FCC's implementation of the Telecommunications 
Act of 1996 as it relates to the audiotext industry, are there 
additional changes the FTC should consider making to its own 900-Number 
Rule?
    8. Are there any audiotext services currently being provided over 
the Internet or commercial online services? If not, is it likely that 
these services will be available over the Internet or commercial online 
services in the near future? If yes, how do these services work?
    (a) Are there audiotext services provided over the Internet that 
are susceptible to the same unfair and deceptive practices prohibited 
by the current Rule? If so, should these services be encompassed within 
an expanded definition of ``pay-per-call services''?
    (b) What elements would a definition have to include to encompass 
such services?
    (c) What are the costs and benefits to including online services 
within the scope of the 900-Number Rule?
    (d) If such audiotext services provided over the Internet or 
commercial online services were included within an expanded definition 
of this term, what, if any, changes to the Rule's provisions would be 
necessary in order for the Rule appropriately and effectively to 
prevent unfair or deceptive practices in the advertising, sale, and 
operation of such services?
    (e) How would preamble and other Rule requirements be met for 
audiotext numbers which are used to connect a caller's computer to the 
Internet or to commercial online services?
    9. What steps can a consumer take to prevent his or her telephone 
line from being used for unauthorized non-900-number transactions such 
as international audiotext transactions?
    (a) Is call blocking of international audiotext calls possible 
without requiring the consumer to block access to all international 
numbers?
    (b) If not, what, if any, technology is under development that 
would permit selective blocking of particular numbers, area codes or 
international country codes?
    10. What steps can a consumer take to obtain a credit or refund if 
he or she believes that there has been a billing error or an 
unauthorized use of his or her telephone for a non-900-number audiotext 
transaction? What happens if, for whatever reason, a consumer refuses 
to pay for a non-900-number audiotext call?
    11. What was the gross sales revenue generated in the non-900-
number audiotext industry for each year since the promulgation of the 
Rule in 1993?
    (a) What explains the emergence and growth of non-900-number 
audiotext services?
    (b) What, if any, benefits do audiotext services accessed through 
dialing patterns other than ``900'' confer on consumers or industry?
    (c) How has the 900-number industry been affected by audiotext 
services that are not currently covered by FTC or FCC regulations? 
Explain.
    12. What categories of audiotext services (e.g., sports, psychic, 
chat, adult) are provided through non-900 audiotext numbers?
    (a) What percentage does each type constitute of all pay-per-call 
information services accessed through dialing patterns other than 
``900''?
    (b) What was the gross sales revenue for each category in each year 
since 1993?
    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 97-6299 Filed 3-11-97; 8:45 am]
BILLING CODE 6750-01-P