Customers can voluntarily change their long-distance company—or Primary Interexchange Carrier (PIC)—by contacting, or submitting an “order” to, the local exchange carrier. The three types of long-distance providers are facility-based carriers such as AT&T, MCI, and Sprint; switching resellers; and switchless resellers. According to representatives of the FCC, numerous state regulatory agencies, and the industry, those who most frequently engage in intentional slamming are switchless resellers. In addition, the cost of filing the required tariff—or schedule of services, rates, and charges—with the FCC to initiate a business is inexpensive; and an unscrupulous individual can avoid that cost altogether. How Is Slamming Accomplished? As an FCC Commissioner stated before a U.S. Senate subcommittee, “slamming scenarios involve [, among other methods,] deceptive sweepstakes, misleading forms, forged signatures and telemarketers who do not understand the word no.”

	What Have the FCC, State Regulators, and the Industry Done to Curtail Slamming? Although the FCC, most states, and the telecommunications industry have some antislamming rules and practices in place, each relies on the others to be the main forces in the antislamming battle. And no FCC regulation discusses what preventive measures the FCC should take to ensure that long-distance-provider applicants have a satisfactory record of integrity and business ethics. According to representatives from state regulatory agencies, facility-based carriers, resellers of long-distance services, and others in the industry, they view an entity’s possession of an FCC tariff as a key credential for a long-distance provider. However, according to knowledgeable FCC officials, the FCC merely accepts a tariff filing and does not review a filed tariff’s information, including that regarding the applicant. For example, we easily filed a tariff with the FCC through deceptive means during our investigation when testing FCC’s oversight of the tariff-filing procedure. Thus, with a tariff on file, our fictitious company—PSI Communications—is able to do business and slam consumers as a switchless reseller with little chance of adverse consequences. The telecommunications industry also attempts to weed out companies involved in slamming. Conclusions

Neither the FCC, the states, nor the telecommunications industry have been effective in protecting the consumer from telephone slamming. Further, the industry approach to slamming appears to be largely market-driven rather than consumer-oriented. The most effective action that consumers can take to eliminate the chance of intentional slamming is to have their local exchange carrier freeze their choice of long-distance providers. On the basis of the 1996 suit in Pennsylvania, Atlas obtained a $10-million judgment against the Fletcher-controlled PCI because, according to the court, PCI fraudulently obtained customers to switch their long-distance telephone service to Atlas’ network; identified customers to Atlas, for Atlas’ placement on its network, in states within which PCI was not certificated as a long-distance service provider; failed to supply customer service to those customers it had caused Atlas to place on its network; and failed to supply customers, Atlas, or regulatory agencies with those customers’ LOAs upon request. A recorded menu will provide information on how to obtain these lists.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on: (1) which entities or companies engage in telephone slamming violations; (2) the process by which the providers defraud consumers; and (3) what the Federal Communications Commission (FCC), state regulatory entities, and the telecommunications industry has done to curtail slamming.

What GAO Found

GAO noted that: (1) all three types of long-distance providers--facility-based carriers, which have extensive physical equipment, switching resellers, which have one or more switching stations, and switchless resellers, having the least to lose and the most to gain, most frequently engage in intentional slamming, according to the FCC, state regulatory agencies, and the telecommunications industry; (2) intentional slamming is accomplished by deceptive practices; (3) these include falsifying documents that authorize a switch and misleading customers into signing such a document; (4) the FCC, state regulatory agencies, and the telecommunications industry rely on the others to be the main forces against intentional slamming; (5) however, with regard to the FCC, its antislamming measures effectively do little to protect consumers from slamming; (6) although representatives of state regulatory agencies and the industry view a provider's FCC tariff--a schedule of services, rates, and charges--as a key credential, the FCC places no significance on the tariffs that long-distance providers are required to file with it before providing service; (7) although the FCC in 1996 attempted to regulate tariffs out of existence, a circuit court stayed that FCC regulation in 1997 as a result of a lawsuit; (8) the FCC now accepts tariffs; however, it does not review the tariff information; (9) thus, having a tariff on file with the FCC is no guarantee of a long-distance provider's integrity or of FCC's ability to penalize a provider that slams consumers; (10) as part of GAO's investigation and using fictitious information, GAO easily filed a tariff with the FCC and could now, as a switchless reseller, slam consumers with little chance of being caught; (11) state regulatory measures that could preclude slamming range from none in a few states to extensive in others; (12) industry's antislamming measures appear to be more market-driven; and (13) however, a Primary Interexchange Carriers freeze--an action that consumers can take by contacting their local exchange carrier and freezing their choice of Primary Interexchange Carriers, or long distance providers--effectively reduces the chance of intentional slamming.