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California PUC Fines Qwest $20 Million Over Long-Distance Service

Oct 25, 2002 | AP

California regulators have fined phone giant Qwest Communications International Inc. and a subsidiary $20.3 million for switching the long-distance service of thousands of Californians without permission.

The five-member Public Utilities Commission on Thursday unanimously ruled Qwest and LCI International Communications' marketing activities during 1999 and 2000 violated the state's public utilities code.

"This company fixed the system only after regulators started investigating," PUC President Loretta Lynch said.

The PUC found that Denver-based Qwest "slammed" thousands of Californians by failing to adequately supervise sales agents. Also, third-party verification tapes and letters authorizing the switches were falsified, the PUC said.

The commission found Qwest also placed unauthorized charges on the phone bills of thousands of customers, mainly those who indicated Spanish or an Asian language as a preferred form of communication.

Under the order, Qwest must provide full refunds within 90 days and tell customers about their right to choose any long-distance they want.

In a written statement, Qwest spokesman Chris Hardman called the fine "grossly excessive" and unnecessary in light of Qwest's steps to correct the problem. The company has significantly reduced slamming complaints with a zero tolerance policy, and the customers who complained have been compensated, he said.

Hardman said Qwest was considering an appeal.

In a split decision Thursday, regulators chose to delay investigating whether roughly 3,000 expected layoffs statewide by SBC Communications, the parent company of California local phone giant SBC Pacific Bell, will jeopardize customer service.

Pacific Bell is required by state statute to maintain a consistent level of service to its millions of customers.

Lynch, PUC Commissioner Carl Wood and a stream of union leaders from the Communication Workers of America said Thursday the layoffs, part of 11,000 nationwide, will leave the state's largest local phone service provider shorthanded just as the busy winter storm season hits.

SBC chief executive Edward E. Whitacre Jr. has maintained the layoffs are a response to the slow economy and federal rules requiring regional phone companies to lease their networks to competitors at prices the company claims are below cost.

San Antonio-based SBC, the country's second-largest local phone company, reported third-quarter earnings Thursday that were down 15 percent, to $1.8 billion from $2.1 billion from the same period last year.


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