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Bell overcharging for party-line rental phone sets – PIAC Reply to Bell’s Comments

Ms. Diane Rheaume
Secretary-General
Canadian Radio-Television and
Telecommunications Commission
Ottawa, ON
K1A 0N2

BY FAX AND EMAIL

Dear Ms. Rheaume:

Re: Bell Canada – unauthorized rate increases to party line rental sets;

PIAC Reply Comments

We are in receipt of Bell Canada’s Answer to our Part VII Application on the above-noted issue, which Answer is dated September 9, 2002. The following is PIAC’s Reply.

Tone of Application and Answer

1. As a preliminary matter, PIAC wishes to express its surprise not only at the content of Bell’s Answer, but of its tone. Instead of simply addressing the facts and law in issue, Bell resorts to what amount to ad hominem arguments. These arguments (e.g., that “PIAC’s innuendos of negligence and stalling tactics” are “particularly unacceptable”, that “the tone of PIAC’s allegations” is troublesome, and that “such veiled accusations are totally inappropriate”) do not correspond with the straightforward presentation of facts and law provided by PIAC in its application. PIAC’s application clearly alleges negligence by Bell Canada. It does so in a factual, forthright manner, not by way of “innuendo”.

2. To the extent that there is inappropriate innuendo in this proceeding, it is provided in Bell Canada’s Answer, not in PIAC’s Application. PIAC requests that the Commission focus on the facts and law in this case, judge the tone of PIAC’s application for itself, and not be swayed by Bell’s unnecessarily adversarial arguments.

Failure to Comply with CRTC Tariff

3. There is no dispute that Bell Canada violated a CRTC tariff and overcharged almost 30,000 of its customers, beginning in August 1999. Bell explains in para.6 that in 1999, “a number of party-line customers were inadvertently overlooked and remained on the unregulated rate”. At a minimum, then, Bell implicitly admits its negligence in making this self-described “error”.

4. PIAC has no evidence to suggest that the initial error was intentional, nor does it mean to suggest that Bell consciously violated this tariff. Rather, PIAC points out that Bell was, by definition, negligent in allowing this error to occur in the first place.

Failure to Detect Error in a Timely Way

5. Bell further admits to continuing to overcharge these customers over a three year period, beginning August 1999. During this three year period, Bell imposed four separate illegal rate increases on these customers, ranging from 30 cents to 90 cents per month. Bell attempts to justify its negligence in failing to detect the error for 2½ years by arguing that “the problem created by this oversight was not immediately apparent”, that subsequent increases drew “little attention from customers who were being incorrectly charged”, and that there is “limited interaction between party-line customers and Company representatives”. Even if all of these statements are true, they do not constitute justification for overcharging. Bell, not its customers, is responsible for complying with CRTC tariffs. Moreover, Bell does not assert that it received no customer complaints or inquiries about the wrongful increases, prior to January 2002. Rather, Bell states that the increases drew “little attention” from affected customers. This suggests that some affected customers did inquire about the increases during the 2½ year period after August 1999. In any case, it can be reasonably assumed that at least one of the 29,730 affected customers would have inquired about at least one of the three rate increases prior to January 2002. Even one customer inquiry, in PIAC’s submission, should have alerted Bell to the error and initiated a process of correction.

6. By definition, again, Bell’s failure to detect the error for 2½ years (if Bell’s version of events is accepted) constitutes negligence on the part of Bell.

7. However, Bell argues that “the initial error and the fact that it went undiscovered for over two years were not the result of a lack of reasonable diligence on the part of the Company” (para.34). In support of this argument, Bell states that “errors will inevitably occur”, possibly affecting large numbers of customers.

8. PIAC submits that the contention that “errors will inevitably occur”, even if true, does not remove these errors from the realm of negligence, especially where such errors involve ongoing overcharging of customers, and especially when they continue for three years despite customer inquiries and complaints.

Failure to Correct the Error in a Timely Way

9. To PIAC’s great surprise, Bell states that it detected the error in late January 2002. (At no time during PIAC’s investigation of the matter with Bell was this fact ever disclosed.) Bell states that it intends to inform and refund affected customers in September 2002, 7½ months after detection of the error.

10. Bell argues that this 7½ month delay in acknowledgement and correction of the error is reasonable, responsible and diligent (paras.13,14, and 35).

11. PIAC disagrees. A 7½ month delay between detection and correction of a billing error is neither reasonable, responsible, nor diligent. Bell’s explanation in paras.9-14 of why it took this long to correct the error, while revealing, is unconvincing.

12. Having detected the overcharging error in late January 2002, it was incumbent upon Bell to correct the error immediately, so as to minimize the number of wrongly charged customers who subsequently disconnect and hence cannot easily be reimbursed. As Bell notes in para.17, there are about 3,450 such customers now in this situation. Had Bell acted more quickly and diligently to correct the error and provide refunds, many fewer customers would be in this situation.

13. Indeed, it can be argued that, given Bell’s awareness of the error as early as late January 2002, continued overcharging after that point constitutes “wilful negligence”. One or possibly two months of knowingly overcharging customers might be acceptable depending on the circumstances; 7½ months is surely not.

Failure to Acknowledge the Error upon request, once known

14. Having detected the error, Bell fails to explain why it continued to defend the validity of the wrongful charges when contacted by customers. It can be assumed from para.12 of Bell’s Answer that the company consciously chose not to inform its CSRs of the error until 7+ months after it had been detected. However, it is not clear why Bell took this course of action, given that it meant knowingly giving customers false information as to the correct rate over a significant period of time. Nor is it clear why Bell regulatory personnel failed to inform PIAC of the error and intended correction when asked by PIAC to explain the discrepancy between the tariffed and billed rates.

15. As PIAC states in para.4 of its Application, this whole process was initiated by a customer complaint to PIAC in March 2002, about the most recent increase to her rental set charge. As noted in PIAC’s Application, PIAC called Bell Canada on behalf of an affected customer two months after Bell had apparently detected the error, and was assured (wrongly) that the $5.30 charge was valid.

16. Having noticed the discrepancy between the 1996 tariffed rate and the billed rate in June 2002, PIAC’s first step was to contact Bell’s regulatory department in order to determine the cause of this discrepancy. The regulatory affairs official confirmed the current validity of the 1996 tariff, but was unable to explain the discrepancy between the tariffed rate and the billed rate. Contrary to Bell’s allegation in para.25, he did not offer to look into the matter, but rather advised PIAC’s researcher to pursue the issue regarding the specific account with Bell customer service. At no time did he or any other regulatory affairs personnel give any indication to PIAC that there was an error affecting more than one account, let alone that the error was being looked into, and that measures would be taken to correct it.

17. Acting on the advice of Bell Regulatory Affairs, PIAC made subsequent calls to Bell customer service inquiring about the validity of this charge, both in respect of the individual account and generally. Contrary to the information provided by Bell Regulatory Affairs, Bell customer service representatives informed us once again that the correct rate was $5.30. Every time that PIAC contacted Bell’s customer service about this issue, the customer service representative wrongly confirmed the validity of the $5.30 rate in the first instance (at which point customers would have had to accept Bell’s answer). Only by noting the discrepancy with the 1996 tariff was PIAC able finally to obtain confirmation from Bell that the $5.30 rate was in fact unauthorized.

18. Even then, Bell representatives often refused to answer questions about the applicable rate except in relation to a specific customer account, of which PIAC had only one. It was therefore difficult for PIAC to determine the extent to which this was a widespread case of overcharging (in which case, only those customers who complain would be entitled to a refund, under the Bell Terms of Service). Not once did any Bell representative disclose to PIAC that there had been a widespread billing error and that corrective action was being taken.

19. Furthermore, PIAC counsel raised the issue with senior Bell executives during a meeting on August 1, 2002. Once again, no indication was given that the error had been detected and was being corrected.

20. PIAC thus contacted numerous Bell Canada representatives, beginning with the regulatory department, in order to determine whether any overcharging had occurred, both for a specific customer and for party-line customers generally, and to find out what measures the company was taking to correct any such overcharging. At no time was PIAC informed by any of these company representatives that there was an error affecting more than one account, that the error was being looked into, and that measures would be taken to correct it.

21. In para.13 of its Answer, Bell asserts that “At no time did the Company fail to recognize its obligation to provide a refund”. In fact, at no time during PIAC’s investigation of this matter did Bell ever explicitly recognize the widespread error, let alone its obligation to provide refunds. It is cold comfort to affected customers that Bell internally recognizes its obligation to provide a refund to overcharged customers. The facts of this case show that Bell failed, in communications with affected customers and consumer advocates, to recognize its obligation to provide a refund. It is only now, after PIAC has filed a Part VII Application on the issue, that Bell assures us that it was intending all along to issue refunds to the affected customers.

PIAC’s Investigation and Application were Fully Justified and Appropriate

22. Bell argues that PIAC’s investigation and Part VII application were unnecessary, because the company had already identified the error and was working on correcting it. In reply, PIAC states that its investigation was reasonable and appropriate in the circumstances. This application was made necessary because of Bell’s failure to respond adequately to numerous inquiries by PIAC, beginning in March 2002 with a specific customer inquiry.

23. As noted above, this is the first time that PIAC has had any indication from Bell, despite inquiries to Bell regulatory affairs, customer service, and executive office, that the problem had been identified in January 2002 and was being worked on. It is inexplicable to PIAC why not one of these Bell representatives informed PIAC of the company’s awareness and actions regarding the overcharging, at the time that PIAC inquired about it.

24. Contrary to Bell’s implication in para.32, PIAC did specifically ask Bell regulatory personnel to explain the discrepancy between the tariffed rate and the billed rate. The response was unhelpful – PIAC was merely directed to follow up with Bell Customer Service in respect of a specific customer account. (This, and any other relevant facts presented in this Reply, can be confirmed by a supplementary Affidavit, should the Commission so desire.)

25. Ironically, in paragraph 23, Bell attempts to fault PIAC for inquiring only “about an individual account”. Were this true, PIAC have merely been doing as Bell instructed. However, it is not true. While Bell tried to limit PIAC’s inquiries to the specific account, PIAC continued to inquire about the general billed rate for party-line rental sets, as well as the specific account of which we were aware. At no time did Bell regulatory representatives inform PIAC that a widespread billing error had been detected and was being corrected.

26. In para.21, Bell asserts that “in all but one case, PIAC appears to have been given the correct answer to its inquiry”. In fact, PIAC’s inquiries to Bell customer service in March/April, July and August 2002 were all answered in the first instance with patently incorrect information (with the one exception described in Footnote 1 above). In addition, PIAC’s inquiries to Bell regulatory department and Executive Office about the discrepancy between the tariffed and billed rates were met with “I don’t know” responses. Finally, it was only upon persistent demands by PIAC that the matter be investigated that Bell agreed to do so and report back to PIAC.

27. In para.22, Bell states that “Based on PIAC’s supporting affidavit, PIAC personnel had three contacts with CSRs on the party-line terminal issue”. In fact, as a review of PIAC’s Application demonstrates, PIAC had at least eight such contacts, beginning in March or April 2002. (Note as well that the Application and Affidavit only set out those contacts which were fully documented.) In addition to Bell customer service, PIAC contacted Bell’s regulatory department, without success. Finally, while not documented in the Application, PIAC also raised the issue with senior Bell executives on August 1st, 2002. In sum, it cannot be said that PIAC did not pursue this issue diligently or appropriately in the circumstances.

28. In para.25, Bell accuses PIAC of failing to respond to an alleged offer by Bell regulatory personnel to investigate the possible overcharging of a specific account. In fact, as noted above, Bell regulatory personnel directed PIAC to follow up with Bell customer service in respect of the specific account, which PIAC did. At no time did Bell regulatory personnel offer to investigate the general matter of party line rental set rates (tariffed vs. billed).

29. Contrary to Bell’s statement in para.26, PIAC was not given “accurate and timely responses to its inquiries in almost all circumstances”. In most cases, PIAC was given either patently incorrect responses or was left without an answer as to the cause of the discrepancy. Bell investigated the matter only upon the insistence of PIAC; it did not volunteer to do so until PIAC made it clear that it would not drop the matter until it was resolved. The refund that was volunteered was for an individual customer only; Bell provided no indication that it would refund all affected customers.

30. In para.27, Bell accuses PIAC of not raising its concerns about the error nor asking about refunds for similarly affected customers. This ignores the fact that it was only on August 7th, after Bell finally admitted the error (by way of a voice mail message from a self-identified Bell Public Relations official) in respect of a specific account. Up until that point, PIAC had received conflicting messages from Bell representatives, and was therefore not sure whether the discrepancy between the tariff and the billed rate was due to an outdated tariff or to overcharging.

31. Moreover, Bell chose to respond only with respect to the specific account, despite PIAC’s more broad-based inquiry. PIAC was thus left without an answer as to the extent of the overcharging. As noted, PIAC did attempt to determine by way of follow-up calls whether other affected customers would be refunded, but Bell refused to provide any information except in relation to a specific account. (This is confirmed in para.22 of Bell’s Answer: “PIAC apparently refused to provide a number.”) As noted in the Affidavit of Michael Nesbitt (para.11), Bell representatives became aggressive as well as obstinate at this point, and it was clear that we were at a dead end.

32. Finally, PIAC was aware that Bell’s Terms of Service do not require it to refund overcharged amounts except upon request by individual customers. The only way for PIAC to ensure that Bell actually does refund all affected customers is therefore via a regulatory order. Moreover, PIAC was unaware of Bell’s alleged intention to refund all affected customers until now. Hence, the Part VII application was necessary, not only because of Bell’s failure to disclose its knowledge of the overcharging and its actions to correct such overcharging, but also because the current Terms of Service do not require that Bell refund all affected customers.

33. In para.28, Bell states that “it is unfortunate that PIAC was not more direct in its inquiries”. PIAC submits that the record shows clearly that it was direct in all of its inquiries to Bell, and that any indirectness was on the part of Bell itself, not PIAC.

34. In para.29, Bell states that when the error was found, “the Company sought to deal with it in an honest and fair manner by arranging to provide a full refund, with interest and an apology”. First, as noted above, despite the fact PIAC was inquiring about party-line customers generally, and despite the fact that Bell knew of the widespread billing error, Bell chose to respond only with respect to the individual account in question. Second, Bell arranged for this individual customer refund and apology only after sustained efforts by PIAC, and only after having dismissed this same customer complaint in March or April of 2002.

35. In para.32, Bell incorrectly states that “When PIAC brought forward an individual billing issue, it was promptly corrected and a refund given.” As noted above, the individual billing issue in question was raised with Bell in March or April 2002, at which time the customer was assured that the $5.30 rate was valid. During the summer of 2002, the same issue was raised again with Bell representatives, who again wrongly assured PIAC that the rate charged was valid. Only upon persistent inquiry by PIAC referring to the tariffed rate, was the error admitted and action taken by Bell to correct and refund.

36. Finally, PIAC notes with concern that Bell did not admit the widespread error, or offer to refund all affected customers, until after PIAC had uncovered the error and applied to the CRTC for enforcement and relief. If it is true that Bell would have offered refunds to all affected customers, it is strange that actions to correct and refund were not taken in a more timely way, and that Bell never informed PIAC of its intentions in this respect, despite numerous opportunities to do so, until after PIAC filed the Part VII Application.

Knowingly Overcharging and Misleading Customers

37. Bell argues that it did not engage in “wilful negligence” or “deliberate fraud”. While PIAC did not allege more than mere negligence in its Application, Bell’s admission in its Answer that it was aware of the billing error as early as late January 2002 itself raises the question of whether Bell’s failure to act more expeditiously to correct the error constitutes “wilful negligence”. Certainly, Bell was knowingly overcharging many of its customers for a protracted period of time.

38. In para.14 of its Answer, Bell states that “at no time did the Company attempt to cover up the error or deliberately mislead anyone as to its existence.” Given the preceding explanation in that same paragraph, this statement is hard to understand. The Company knew of the error many months ago. It deliberately chose a course of action that entailed denying the error for a protracted period of time. Regardless of how explicable this course of action was, it was clearly not “inadvertent”. If this does not constitute “deliberately misleading” customers, then PIAC wonders what does constitute deliberate misrepresentation.

39. One must wonder whether Bell would have taken this long to correct an overcharging error where affected customers complained in large numbers, or where customers were able to ascertain that the Company was in error. This was a case in which customers had to rely upon the company’s assurance that the rate increases were legitimate. Moreover, as Bell itself points out, this case involved customers who have ‘limited interaction” with the Company, and who, for the most part, did not complain about the increases. Hence, the Company was able to continue overcharging (and defending the wrongful charge) for a protracted period of time, until after it became clear that PIAC was pursuing the issue.

Ongoing Compliance Issues

40. In response to PIAC’s argument that a more effective incentive is needed to ensure that Bell complies with CRTC tariffs (specifically, one that offsets the financial advantage of non-compliance), Bell notes that the error in question was inadvertent. Indeed, Bell takes umbrage at what it perceives as a suggestion by PIAC “that the Company was either wilfully negligent or deliberately trying to defraud customers” (para.29).

41. Contrary to Bell’s interpretation of its Application, PIAC did not suggest in its Application that the error in question was attributable to anything more than negligence. Indeed, PIAC’s Application was premised on the assumption that the cause of the error was negligence, rather than intentional overcharging. It is only now, having learned of the Company’s awareness of the error as early as January 2002, and its deliberate decision to delay acknowledgement of the error, that PIAC questions whether this case is indeed merely about negligence. It is now also about deliberate company approaches to dealing with overcharging errors.

42. Even assuming, however, that this case is about mere negligence, PIAC reiterates that more effective measures are needed to prevent such overcharging in the first place, and to ensure prompt detection, correction and reimbursement of such overcharging when it occurs.

43. In addition, PIAC requests that the Commission revise ILEC Terms of Service so as to provide all overcharged customers, not just those who complain, with a right to a full refund. If the only penalty for overcharging is to reimburse those customers who complain (and if Applications such as this are considered “unnecessary and inappropriate”), then there is little incentive for companies to take effective measures to prevent such overcharging in the first place, to detect any overcharging at the earliest opportunity, and to correct the error forthwith.

44. In its application, PIAC submitted that more effective measures are needed (a) to ensure ongoing compliance with CRTC tariffs, and (b) to ensure that Bell’s customer service representatives can quickly and accurately answer straightforward questions about current tariffed services. Such measures are needed even assuming that the problem in this case was due to mere negligence (as opposed to wilful negligence or intentional overcharging).

45. Specifically, Bell needs at a minimum to improve its internal systems so as to

  1. provide customers with accurate information upon request,
  2. identify and act upon billing errors in a more timely way; and
  3. prevent such errors from happening in the first place.

46. Moreover, as Bell itself notes, protracted overcharging inevitably involves customers who subsequently disconnect and cannot be located in order to reimburse. Hence, whenever a billing error involves overcharging of customers, it is incumbent on the company to act quickly and diligently to identify and refund affected customers. Such was not the case here: of the 29,730 overcharged customers, 3,450 have since disconnected. Refunds are an ineffective remedy if the customer cannot be located in order to provide the refund. Clearly, Bell needs a greater incentive than refunds to deal more expeditiously and appropriately with billing errors.

Conclusion

47. Bell states, in para.35, that “what is important is that it take reasonable steps to detect errors and responds appropriately when they are found”. The record of this proceeding clearly shows that Bell failed to take reasonable steps to detect the error in a timely way, to correct it once detected, and to deal with complaints and inquiries about the wrongful charge in the interim.

48. The Company repeatedly provided inaccurate information to those inquiring about the correct rate, even after it knew of the error. It failed to act diligently in following up on PIAC’s requests for an explanation of the discrepancy between the tariffed and billed rate, and offered investigate the matter only in relation to a specific customer account. Throughout PIAC’s contacts with Bell personnel between March/April 2002 and August 2002, Bell never once mentioned that it was aware of the error and was working to correct it.

49. For all these reasons, PIAC reiterates its request that the Commission:

  1. confirm that Bell Canada increased the monthly charge for party-line rental sets above the tariffed rate without CRTC approval, and did so on more than one occasion;
  2. order Bell Canada to rebate affected customers all amounts improperly charged, with interest;
  3. order Bell Canada to pay PIAC’s costs of investigating and pursuing this matter; and
  4. grant any further relief as the Commission considers reasonable.

50. As part of the further relief mentioned above, the Commission should revise the Terms of Service (Article 19 of Bell’s Terms of Service) so as to give all overcharged customers, not just those who dispute the improper charge. Such a revision would reduce the need for Part VII Applications (such as this) in order to ensure that all overcharged customers are offered refunds.

51. Consideration should also be given to ways in which the 3.450 non-active customers can be refunded (e.g., advertisements in national newspapers). Alternatively (or additionally), any refunds and other compensation ordered that cannot be provided due to the company’s inability to locate the customer should be paid to PIAC, given PIAC’s role in representing the interests of these customers.

All of which is respectfully submitted,

original signed
Philippa Lawson
Senior Counsel

cc: Bell Canada

 

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