980427.docx

DECISION MEMORANDUM
TO:COMMISSIONER HANSEN
COMMISSIONER NELSON
COMMISSIONER SMITH
MYRNA WALTERS
TONYA CLARK
DON HOWELL
STEPHANIE MILLER
DAVE SCHUNKE
JOE CUSICK
BIRDELLE BROWN
BEV BARKER
CAROLEE HALL
DAVID SCOTT
WORKING FILE
FROM:WELDON STUTZMAN
DATE:APRIL 27, 1998
RE:INVESTIGATION OF BILLING PRACTICES OF MCI TELECOMMUNICA­TIONS, INC.
Recently several complaints have been brought to the Commission Staff regarding the appearance of line item charges appearing on MCI bills to Idaho customers. Customers have questions in regard to a federal access charge, a Federal Universal Fund charge, an Idaho TRS surcharge, the Idaho Universal Fund charge, and a state and local tax or surcharge.  
1. National Access Fee.  The “National Access Fee” was developed by MCI to recover the amounts assessed to it by incumbent local exchange carriers for the primary interexchange carrier charge (PICC).  MCI developed a formula to establish individual customer charges based on the customer’s total interstate and intrastate toll charges. For example, customers whose bills are between $0- $24.99 were charged 30%, customers with toll calls in excess of $250 were billed 13% for MCI’s National Access Fee.  According to Federal Communication Commission regulations, PICC charges are a per line charge rather than a usage based charge, and are not to exceed $.53 for primary residential and single line business customers, or $2.75 per line for multi-line business customers. MCI’s formula resulted in significant overcharges for some customers, particularly small business customers, which appeared on customers’ bills without notice.  MCI has assured Staff that,  effective April 1, 1998, the charge for its National Access Fee has been changed to reflect the FCC’s limitation on the charge to the prescribed line charge.
Despite MCI’s apparent correction of the charge to recover its PICC costs, Staff is not convinced that the issue is moot. First, the complaints received by Staff indicate that MCI’s billing formula resulted in charges of $1.07 per line for residential customers and $7.67 per line for small, multi-line businesses.   Second, Staff has learned that customers of local exchange carriers that did not assess a PICC charge to MCI were billed for MCI’s National Access Fee.  These are non-price cap LECS (all LECS in Idaho except US WEST, GTE and Citizens) that do not impose the PICC charge on interexchange carriers. One single line business customer of a non-price cap LEC complaining to the Commission was billed in excess of $25.00 for MCI’s National Access Fee.   Third, so far as Staff can determine, no notice was provided to customers of its National Access Fee.  Idaho Code § 62-606 requires a Title 62 telecommunications provider to file price lists or tariffs with the Commission, and additionally requires the carrier to “giv[e] public notice to affected customers” when making changes to tariffs. Although it may be argued that this statute does not apply to strictly interstate rates and charges, the fact that MCI’s fee calculation included intrastate usage may bring the fee within the requirements of the statute.   Intrastate calling customers apparently were given no notice of MCI’s adoption of a National Access Fee.
2. Idaho TRS surcharge.  Starting last September, the Commission began receiving questions regarding the appearance of an Idaho TRS surcharge on MCI customer bills.  The Commission has made it clear in the past that the TRS fees to telecommunications carriers are not to appear as line item charges on customer billings. See Order No. 26541.  MCI’s representative previously assured Staff that the TRS line item had been removed from customer bills, but Staff is aware that the charge appeared in bills as recently as February and March.  Staff is concerned that customers have been charged a fee that the Commission has made clear is not a customer charge but is a cost of doing business for a telecommunications provider.
In addition, the amount MCI charged customers apparently exceeds the TRS fee approved by the Commission as a charge to the telecommunication carriers. Staff has calculated the charge that MCI assessed at $.004 per minute, while the Commission approved TRS charge is $.0007 per minute of intrastate toll call. MCI apparently also applied the charge to interstate as well as intrastate minutes, which would increase the amount collected by MCI for TRS service.  
3. Idaho Universal Service Fund.  According to some of the customer bills that the Commission Staff has received, MCI apparently overcharged on occasion in regard to its Idaho Universal Service Fund obligation. The overcharge may have resulted from a misplaced decimal point, or by including interstate toll calls in the charges.  MCI should have charge $.0015/intraLATA minute or, as of January 1, 1998, $.0018 /intraLATA minute.  
4. State and Local Tax.  MCI has begun placing a “state and local tax” as well as a “state and local surcharges” items on some customer bills. The most recent explanation provided to Staff for these charges are that they are intended by MCI to recover for a tax imposed by the Idaho Tax Commission pursuant to Idaho law. As with the other charges, MCI apparently began charging this fee from Idaho customers without filing a price list with the Commission, or providing notice to affected customers.  In addition, Staff has no information regarding MCI’s calculation of the fees or surcharges to individual customers, or the total revenue required of MCI to pay the tax as determined by the Tax Commission.  
5. Application of “Random Rates”. Under certain circumstances, MCI apparently has  applied high retail rates, referred to as “random” rates, to a customer’s service, which results in charges to the customer different from those to which the customer agreed. These circumstances include the unauthorized switch of an MCI customer by another interexchange carrier, cancellation of or failure to properly establish a customer account, and problems associated with resellers of MCI’s service. If a customer has a billing dispute and withholds payment until it is resolved or simply is late in paying his bill, MCI apparently voids the customer’s selected rate plan rather than restrict access to its services. Some or all of these practices may violate provisions of the Commission’s Telephone Customer Relations Rules, IDAPA 31.41.01.
These issues raise considerable concerns for Staff regarding the billing practices of MCI.  At this point, Staff does not have sufficient information to enable it to determine the appropriateness of the individual charges imposed by MCI, or the need for specific corrective action.  Idaho Code § 62-616 authorizes the Commission to “investigate and resolve complaints made by subscribers to telecommunication services which are subject to the provisions of this chapter which concern the quality and availability of local exchange service, or whether price and conditions of service are in conformance with filed tariffs or price lists, deposit requirements for such service or disconnection of such service by telephone corporations subject to the provisions of this chapter.”    Staff  recommends that the Commission initiate a case to investigate the billing practices of MCI to Idaho customers. Such an investigation would enable Staff to obtain additional information from MCI to gauge the extent of the billing problems and recommend to the Commission what, if any, corrective action is appropriate.
Commission Decision
Should the Commission initiate a case to investigate the billing practices of MCI?
________________________
Weldon Stutzman
vld/M:MCI.ws