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State Fines Qwest

Oct 25, 2002 | San Francisco Chronicle

State regulators fined Qwest Communications $20.3 million on Thursday for misbilling and switching the long-distance service of thousands of California customers without their permission.

The fine, the latest effort by California regulators to crack down on telephone company abuses, is the largest penalty ever imposed on a long- distance provider.

"Overzealous, corrupt behavior should be deterred," said Geoffrey Brown, a member of the California Public Utilities Commission.

In some cases, the PUC said that Qwest could not produce any evidence that customers requested the service. In other instances, the agency said Qwest telemarketers forged customer letters or falsified audio tapes authorizing the change.

In one instance, Qwest responded to a customer's complaint by sending him a disk that purportedly contained a voice recording of his wife authorizing the switch.

"The file is in a language neither my wife or I speak and was very fast," the customer told the PUC. "It was obviously faked!"

Overall, the agency said it uncovered more than 70,000 complaints that customers were slammed or switched without permission including at least 3,500 that the PUC ruled were valid. Most of the complaints were logged in 1999 and 2000 and related to its LCI International Telecommunications subsidiary.

In addition, the PUC found that Qwest "crammed" unauthorized charges on the bills of thousands of other customers, mostly Spanish or Asian speakers.

California is just the latest state to sanction Qwest for putting unauthorized charges on consumers' bills, a practice known as slamming or cramming . At least a dozen other states have fined Qwest, one of the largest U.S. phone companies, for such violations.

In July, Qwest agreed to pay $3.25 million to settle slamming complaints in Florida. And two years ago, Qwest agreed to pay $1.5 million to settle slamming charges lodged by the Federal Communications Commission.

But California's fine stands out because of its size, eclipsing an $8.5 million settlement struck with WorldCom in March over slamming, cramming and deceptive marketing.

Qwest spokesman Chris Hardman called the $20 million fine "grossly excessive, unnecessary and harmful."

Hardman said the company has already provided refunds to customers and fired outside telemarketing firms found guilty of slamming or cramming.

"The fine," Hardman said, "is unnecessary in light of the extensive and effective measures Qwest has long since taken to virtually eliminate slamming and cramming."

The $20 million fine, earmarked for the state treasury, is actually less than the $38 million originally proposed last year by a PUC administrative law judge.

But it's more than the $11.4 million fine proposed by PUC Commissioner Henry Duque.

Duque argued that the $20.3 million fine is too high, given Qwest's efforts to reduce the complaints and its relatively small presence in the state.

Though Qwest, which bought US West, is the dominant local telephone company in many Western states, the Denver phone company likely has less than 1 percent of the state's long distance market.

In addition to the fine, the PUC ordered Qwest to give full refunds to customers within 90 days. (Despite Qwest's claim, the PUC said Qwest provided refunds only to some customers.)

Regulators also ordered Qwest to take additional steps to protect consumers,

such as providing closer supervision of outside telemarketers and providing more information in foreign languages.

Pacific Bell, California's largest telephone company, holds the record for a PUC fine. Pac Bell agreed to a $27 million fine in July for DSL billing snafus. And last year, the PUC fined Pac Bell more than $25 million for deceptive marketing practices.

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