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Telecom Decision CRTC 2005-13
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Ottawa, 9 March 2005 |
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Union des consommateurs, Public Interest Advocacy Centre and Option
Consommateurs – Automatic dialers and modem hijacking
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Reference: 8665-U11-200407090 |
1. |
The Commission received an application from
Union des consommateurs, Public Interest Advocacy Centre and Option
Consommateurs (the Consumer Groups), dated 7 July 2004, filed pursuant
to Part VII of the CRTC Telecommunications Rules of Procedure,
seeking a variety of consumer protection measures and remedies to combat
modem hijacking caused by automatic dialers. This application was served
on, among other parties, Aliant Telecom Inc. (Aliant Telecom),
Bell Canada, MTS Allstream Inc. (MTS Allstream), Saskatchewan
Telecommunications (SaskTel), Société en commandite Télébec (Télébec)
and TELUS Communications Inc. (TCI) (collectively, the Respondents). |
2. |
Modem hijacking occurs when software
containing automatic dialers is downloaded, sometimes surreptitiously,
onto subscribers' computers through their Internet connection. The dialers
connect the subscribers' computer to a website through the subscribers'
modem, triggering long distance charges often to countries with high
long distance rates, without the subscribers' involvement. In the cases
where the subscriber intentionally downloads the automatic dialer
software, the long distance charges serve as a proxy for payment for
access to the content of the site. |
3. |
On 7 January 2005, when the ongoing negotiations
between the Consumer Groups and the Respondents proved unsuccessful,
the Commission advised the Consumer Groups and the Respondents that
it would adjudicate this matter on an expedited basis, in accordance
with the expedited process established in Expedited procedure
for resolving competitive issues, Telecom Circular CRTC 2004-2,
10 February 2004. |
4. |
The matter was heard by a panel of three
Commissioners on 25 February 2005. In addition to the oral component of
the proceeding and the 7 July 2004 application, the Commission
considered the Respondents' answers dated 15 November 2004, the Consumer
Groups' reply dated 10 December 2004, the Consumer Groups',
Aliant Telecom's, Bell Canada's, MTS Allstream's and TCI's arguments
dated 26 January 2005, Bell Canada's and Télébec's (jointly), and TCI's
rebuttals dated 26 January 2005, SaskTel's argument dated 27 January
2005, and the Consumer Groups' and Respondents' responses dated 28
January 2005 to Commission interrogatories. |
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Regulatory framework
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5. |
Sections 24, 27(1) and (2) and 31 of the
Telecommunications Act (the Act) state: |
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24. The offering and provision of any telecommunications service by
a Canadian carrier are subject to any conditions imposed by the
Commission or included in a tariff approved by the Commission.
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27. (1) Every rate charged by a Canadian carrier for a
telecommunications service shall be just and reasonable.
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(2) No Canadian carrier shall, in relation to the provision of a
telecommunications service or the charging of a rate for it, unjustly
discriminate or give an undue or unreasonable preference toward any
person, including itself, or subject any person to an undue or
unreasonable disadvantage.
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31. No limitation of a Canadian carrier's liability in respect of a
telecommunications service is effective unless it has been authorized
or prescribed by the Commission.
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6. |
The Respondents' Terms of Service state
that subscribers are responsible for calls placed from their telephone.
For example, article 9.1 of Bell Canada's Terms of Service states that: |
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9.1 Customers are responsible for paying for all calls originating
from, and charged calls accepted at, their telephones, regardless of
who made or accepted them.
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7. |
In Forbearance – Regulation of toll
services provided by incumbent telephone companies, Telecom Decision
CRTC 97-19, 18 December 1997 (Decision
97-19), the Commission determined
that there was sufficient competition to forbear from most of its
powers and duties regarding toll services. The Commission also determined
that: |
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- It was appropriate to retain section 24 powers to impose future
conditions upon the offering and provision of toll services, where
circumstances so warrant;
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- It would forbear from the exercise of its powers under subsection
27(2), except in limited circumstances; and
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- In view of the competitive nature of the market it would be
appropriate to forbear from exercising its powers to prescribe
limitations of liability with respect to section 31, with the
exception that its decisions with regard to limitations of liability
would continue to apply to provisions in existing contracts or
arrangements.
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8. |
In Terms of Service – Disconnection
for partial payment of charges, Telecom Decision CRTC 2004-31,
11 May 2004 (Decision 2004-31),
the Commission determined that, in accordance with the incumbent local
exchange carriers' (ILECs') approved Terms of Service, the ILECs were
not permitted to suspend or terminate (disconnect), or threaten to
disconnect, a customer's tariffed services if that customer had made
partial payments sufficient to cover that customer's outstanding arrears
for tariffed services, whether or not there remained outstanding arrears
for non-tariffed services. |
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Issue: Whether the Commission should impose consumer protection
measures and remedies on the Respondents to combat modem hijacking
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9. |
In order to combat modem hijacking, the
Consumer Groups requested that the Commission direct the Respondents to
implement a variety of consumer protection measures and remedies: |
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Measures to combat modem hijacking
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- Implement education and awareness campaigns, including providing
information to subscribers in the form of billing inserts and
information in the white pages;
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- Make changes to internal procedures with respect to customer
service training and the linking of rebates to other services;
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- Implement programs to track and report modem hijacking related
complaints on a quarterly basis; and
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- Implement technical solutions such as chargeback mechanisms and
the provision of security tools.
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Remedies |
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a) Subscriber liability |
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- Provide rebates to subscribers for some past and all future long
distance charges incurred as a result of modem hijacking.
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b) Unjust discrimination
and undue preference |
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- Require the Respondents to treat all fraudulent long distance
charges and all long distance customers in the same manner regardless
of the services they subscribe to.
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c) Collection notices |
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- Require the Respondents to modify their collection notices.
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Measures to combat modem hijacking
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10. |
The Consumer Groups submitted that the
Commission could not rely on the Respondents to take proactive measures
to combat modem hijacking, since any such measures were not in their
financial interest. In support, the Consumer Groups stated that, despite
the fact that the Respondents had been aware of modem hijacking for a
number of years, they only recently implemented measures to combat this
problem, largely as a result of this Part VII application. |
11. |
The Respondents submitted that they had
taken, and would continue to take when appropriate, a variety of
measures to respond to subscribers' concerns, including many of the
measures proposed by the Consumer Groups. The Respondents further
submitted that the steep reduction in complaints since these measures
had been implemented was evidence of the effectiveness of these
measures. Furthermore, the Respondents submitted that some of the
measures proposed by the Consumer Groups were difficult, expensive or
impractical to implement. The Respondents added that subscriber
awareness and vigilance in ensuring the security of their computers was
the best long-term solution. The Respondents therefore submitted that
there was no need for the Commission to impose additional measures to
combat modem hijacking. |
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Commission analysis and determination
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12. |
The Commission considers that the
Respondents have already undertaken many of the measures requested by
the Consumer Groups to combat modem hijacking. For example, the
Commission notes that each of the Respondents has implemented education
and awareness campaigns, implemented tracking reports and have
selectively blocked country codes to some countries such as Sao Tome and
Principe, Nauru and Cook Islands. Many of the Respondents have also sent
billing inserts or have included announcements on their bills advising
their subscribers of the practice of modem hijacking. |
13. |
The Commission notes that the number of
subscriber complaints received by the Commission and the Respondents
shows a marked reduction since the Respondents put in place their
programs. For example, the Commission received over 950 complaints
regarding modem hijacking in May 2004 and less than 50 complaints in
December 2004. |
14. |
Therefore, the Commission considers that
these measures have been effective and have had a significant impact in
reducing the number of complaints of modem hijacking. The Commission
further considers that the competitive nature of the long distance
market and the Respondents' own business interest to appropriately
respond to their subscribers' concerns, will help ensure that the
Respondents continue to address any future problems that may arise
because of modem hijacking. |
15. |
Accordingly, the Commission finds, at this
time, that the Consumer Groups have not demonstrated that the measures
taken by the Respondents are insufficient to address the public's
concerns arising from modem hijacking. |
16. |
The Commission notes, nevertheless, that,
while there has been a marked reduction in the number of complaints
regarding modem hijacking, the problem still exists and will likely
continue to exist. Consequently, it expects the Respondents to continue
their efforts to inform and educate subscribers, and to increase these
efforts as required. For example, the Commission expects the Respondents
to continue tracking complaints regarding modem hijacking and to make
them available to the Commission, upon request. The Commission also
expects the Respondents to continue monitoring long distance traffic,
blocking direct dial calls to countries where they deem it appropriate
or necessary, and implementing other technical solutions. The Commission
further expects the Respondents to continue to educate and inform
subscribers through billing inserts, public service announcements,
electronic mailings, Internet postings and other forms of communication.
The Commission notes that it is in the interest of all long distance
service providers to inform and educate their subscribers regarding
modem hijacking. |
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Subscriber liability
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17. |
The Consumer Groups submitted that the
Commission had retained jurisdiction over basic toll service and other
long distance services when bundled with another regulated service such
as local exchange service. They also submitted that the Commission had
not anticipated modem hijacking and dialer fraud when it forbore from
regulating liability for long distance services and submitted that
"fraud unravels everything". Therefore, the Commission had authority to
revisit its determination to forbear from regulating the long distance
market or to impose conditions pursuant to section 24 of the Act.
Further, based on their interpretation of the Respondents' Terms of
Service, the Consumer Groups submitted that subscribers were not liable
for the long distance charges since the dialers, not the subscribers,
placed the disputed long distance calls. |
18. |
The Consumer Groups added that holding the
Respondents wholly liable for subscriber long distance charges incurred
due to dialers, would provide an effective incentive to the Respondents
to take all appropriate measures to combat modem hijacking. |
19. |
The Respondents submitted that the
Commission had forborne from sections 27(1) and 31 of the Act with
regard to long distance service. Accordingly, the Commission had allowed
the Respondents and subscribers to determine how they would share the
responsibility for long distance charges and had allowed market forces
to ensure that rates were just and reasonable. The Respondents added
that the Commission could not require the Respondents to grant credits
or refunds to their subscribers without reversing its forbearance
decisions. The Respondents submitted that this would amount to
Commission intervention in the sharing of responsibility between the
Respondents and their subscribers, or the setting of rates, both of
which were forborne. However, the Respondents submitted that they each
offered varying forms and amounts of credit for disputed long distance
charges as a goodwill gesture. The Respondents further submitted that
the powers retained by the Commission under section 24 of the Act did
not give the Commission the authority to impose any relief
retroactively, as requested in the remedies. |
20. |
The Respondents submitted that, as stated
in their terms of service, their long distance subscribers were
responsible for all charges incurred via their telephone lines,
regardless of how the charges were incurred or who incurred them.
Further, the Respondents submitted that if subscribers were not held
responsible for calls made through dialers because a live person did not
place the call, then subscribers would also not be held responsible for
calls made via other automated dialing technology, including speed-dialers
and satellite set top boxes. The Respondents also submitted that, if
fraud existed, they were not party to it as they had no control over the
Internet sites their subscribers visited, the content downloaded and
whether or not the subscribers chose to install security software on
their computers. As such, the Respondents submitted that they could not,
and should not, be held responsible for subscribers' choices. |
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Commission analysis and determination
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21. |
The Commission considers that subscribers
are best positioned to have control over calls placed from, or accepted
over their telephone line, and to be aware of the use that can be made
of software installed on their computers. The Commission also considers
that, while the Respondents may find that it is in their interest to
inform and protect their subscribers against modem hijacking,
subscribers have the primary responsibility to control the security of
their computers. Furthermore, as noted above, the Commission expects
that the Respondents will continue to take appropriate measures to
combat modem hijacking. In light of the above, the Commission finds
that, in this case, there is insufficient evidence to relieve
subscribers of their liability for long distance calls placed from
dialers. |
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Unjust discrimination and undue preference
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22. |
The Consumer Groups submitted that the
Respondents discriminated against their subscribers who had incurred
long distance charges as a result of modem hijacking in violation of
section 27(2) of the Act. First, the Consumer Groups noted that these
subscribers were treated differently from subscribers who disputed other
long distance charges as a result of home invasions or calling card
fraud. In the latter cases, subscribers were offered full refunds,
did not receive billing and collection notices and were not threatened
with disconnection of their long distance service. Second, the Consumer
Groups submitted that the Respondents conferred an undue preference on
themselves by not absorbing all fraudulent long distance charges or, in
some cases, by offering larger rebates where subscribers purchased
certain services from the Respondents. |
23. |
The Respondents submitted that there was no
unjust discrimination. They also submitted that in like circumstances,
all subscribers disputing long distance charges due to dialers were
offered the same remedy and/or services. The Respondents further
submitted that they could not determine whether long distance calls
originated from a person or a dialer nor could they determine whether
calls were placed from voluntarily installed dialers, with the
subscriber's knowledge and participation or whether they were
surreptitiously installed without the subscriber's knowledge or
involvement. |
24. |
TCI submitted that it offered a first-time
100% refund to subscribers who already subscribed or chose to subscribe
to its Call Gate service, a long distance call management service. TCI
added that subscribers who did not subscribe to its Call Gate service or
chose not to subscribe to it received a 50% credit. TCI submitted that
subscribers were responsible to ensure that their computers were secure
and that it was reasonable to provide a greater discount to those
subscribers who took steps to protect themselves against unwanted long
distance charges. |
25. |
Aliant Telecom submitted that, in the long
run, refunds were an ineffective method of combating modem hijacking and
that it was therefore its intention to gradually phase out its refund
policy. Initially, Aliant Telecom offered a 100% first-time rebate to
any of its long distance subscribers. Subsequently, only subscribers of
Aliant Telecom's long distance service and Internet services would
receive a 100% first-time rebate and then, over time, the rebate would
be reduced from 100% to some lesser percentage to be determined.
Ultimately, Aliant Telecom would discontinue the rebate plan. |
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Commission analysis and determination
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26. |
The Commission considers that there are
differences between how long distance charges are incurred as a result
of home invasion or calling card fraud and how long distance charges are
incurred for calls placed from dialers. For example, the Commission
notes the degree of control that subscribers have over their computers
and the fact that some subscribers intentionally install the dialers. In
the Commission's view, these differences justify the Respondents
implementing different rebate policies. |
27. |
In the context of a highly competitive
service like long distance, the Commission considers that it is
appropriate for the Respondents to develop policies that respond to
their particular circumstances, to their markets and to their
subscribers' needs and concerns. Accordingly, the Commission finds that
the Respondents are not unjustly discriminating against subscribers that
incur long distance charges as a result of modem hijacking. The
Commission further finds that the Respondents have not conferred an
undue preference on themselves by not absorbing all fraudulent long
distance charges or, in some cases, by offering larger rebates where
subscribers purchased certain services from the Respondents. |
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Collection notices
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28. |
The Consumer Groups submitted that the
Respondents threatened to disconnect subscribers' local service for
disputed long distance charges in arrears, even though the payment for
local service was current. In support, the Consumer Groups provided an
example of a Bell Canada disconnection notice advising a subscriber that
Bell Canada may discontinue some or all its services to the subscriber
if payment or suitable arrangements were not made. The disconnection
notice also stated that, where service was disconnected, a reconnection
charge applied and a deposit or alternative could be required. |
29. |
Bell Canada submitted that the wording on
its collection notices was generic. These notices were meant to respond
to a variety of circumstances and were sufficiently clear, in its view,
to allow subscribers to conclude that their local service would not be
disconnected for non-payment of disputed long distance charges. |
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Commission analysis and determination
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30. |
The Commission notes that, pursuant to the
Respondents' Terms of Service and Decision 2004-31,
the Respondents are prohibited from disconnecting, or threatening
to disconnect, a tariff service, such as local service, where
a subscriber fails to pay non-tariff charges. |
31. |
The Commission considers that a subscriber
receiving Bell Canada's generic collection notice would reasonably
take that notice as a threat to disconnect his/her local service for
failure to pay the non-tariff charges. Accordingly, the Commission
considers that Bell Canada is in violation of Decision 2004-31
and its Terms of Service. |
32. |
The Commission, therefore, directs
Bell Canada to modify its collection notice to ensure that it
complies with Decision 2004-31
and related provisions of its Terms of Service. Bell Canada must
file with the Commission a copy of its revised collection notice,
in both official languages, within 30 days of the date of this decision. |
33. |
The Commission also directs the Respondents
to make any appropriate modifications, as required, to ensure that
their collection practices comply with Decision 2004-31
and related provisions of their Terms of Service. |
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Secretary General |
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This document is available in alternative
format upon request, and may also be examined in PDF
format or in HTML at the following Internet site: http://www.crtc.gc.ca
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