FCC Won’t Stop Verizon Communications’ Retention-Marketing Efforts

Federal Communications Commission Enforcement Bureau Says Rules Are Unclear

By John Eggerton -- Broadcasting & Cable, 4/14/2008 11:02:00 AM

The Federal Communications Commission Friday said it would not step in to prevent Verizon Communications from using proprietary information to try to keep customers from switching to cable-phone service -- so-called retention-marketing efforts.

The commission’s Enforcement Bureau concluded that the rules were unclear, but it favored Verizon’s reading of them, which would allow the practice.

A group of cable operators including the two largest, Comcast and Time Warner Cable, asked the FCC to stop Verizon from using information gained from them -- such as who was switching and when -- to try to keep those customers from defecting to cable.

When a customer decides to switch from Verizon to, say, Comcast's phone service, Comcast sends a request to Verizon for the phone number to be moved to Comcast's service (the government requires that phone numbers be "portable" among services). That request includes whose number is being moved and when. Verizon then uses that information to contact the customer and offer them incentives not to move, such as price breaks or gift cards.

The cable companies said that violates a law that says, “[a] telecommunications carrier that receives or obtains proprietary information from another carrier for purposes of providing any telecommunications service shall use such information only for such purpose and shall not use such information for its own marketing efforts."

Verizon countered that since it is not receiving the information to provide a service, but rather to terminate one, that reading of the law is wrong.

The FCC's Enforcement Bureau said the rule was unclear and, for that reason, denied the cable companies' request that it stop Verizon. The bureau also said it favored Verizon's reading of the rule and proposed that the commission open a proceeding to clarify customer-retention-marketing practices.

"We will continue to create more competition and choice for phone consumers as an alternative to Verizon and other legacy incumbents that continue to control about 90% of the residential market," Comcast spokesperson Sen Fitzmaurice said. "We are evaluating our legal options at the federal level and will continue to pursue our complaints with state public utility commissions.”

Not surprisingly, Verizon was pleased by the decision. “The FCC is taking the opportunity presented by an industry dispute to initiate a constructive review of the practices of carriers that affect consumers’ ability to choose among competing services and to switch among providers," Verizon said in a statement late Friday.

"This decision is bad news for consumers and completely inconsistent with previous FCC action to facilitate a competitive marketplace,” National Cable & Telecommunications Association spokesman Brian Dietz said. “It's astonishing that the commission is affirming such anti-competitive practices, which deny consumers the benefits of lower prices and better service that are a result of real facilities-based telephone competition."