A majority of the Federal Communications Commission—over the dissent of chairman Kevin Martin—on Monday ordered Verizon Communications to immediately stop using proprietary information to try to retain customers who are switching to cable phone service.
The FCC was acting on a complaint filed in February by Comcast, Time Warner Cable and Bright House Networks. The MSOs alleged that Verizon's practices violate a section of the Communications Act of 1934. That section prevents the use of information provided by one provider to another for a specific purpose, such as porting a telephone number, to be used for a different purpose, such as marketing.
Commissioner Robert McDowell, in a statement, said carriers are free to initiate customer-retention marketing campaigns before a consumer gives the order to switch phone service to a new provider as well as launch “win-back” campaigns after consumers have switched.
However, McDowell said, the law “clearly prohibits carriers from using confidential customer information for marketing efforts.”
“Today’s action underscores long-held commission policy that using proprietary customer information for marketing efforts cannot take place during the window of time when a customer’s phone number is being switched to a new provider,” McDowell said.
In a statement, Tom Tauke, Verizon executive vice president of public affairs, policy and communications, said: “FCC commissioners regularly champion consumer choice, transparency of information, and competition on a level playing field. But this decision creates less of each.”
Tauke continued, “This disappointing outcome takes a step back from the march toward full competition. It enables cable companies to lock in TV customers by forbidding Verizon from providing information about better voice services or prices. It is bad policy that will harm consumers.”
Cathy Avgiris, senior vice president and general manager of Comcast Voice Services, said in response to the ruling: "The FCC said to Verizon, 'No more games -- we're going to give consumers freedom of choice and real competition.'"
"Enforcement of these rules is essential to ensure that competition develops and that consumers who choose to leave their incumbent phone provider to take advantage of new competitive and innovative services from cable companies, that are saving consumers billions of dollars, will have their wishes respected," Avgiris said.
Martin, in a statement Monday, said the decision “created new law” by giving cable operators an advantage over traditional telephone companies.
“I am concerned that today’s decision promotes regulatory arbitrage and is outcome driven; it could thwart competition, harm rural America, and frustrate regulatory parity,” Martin said.
Martin called customer-retention marketing “a form of aggressive competition that has the potential to benefit consumers through lower prices and expanded service offerings. Moreover, the cable companies engage in such practices to keep their video customers from switching to other providers.”
Martin was referring to the fact that cable customers must contact their provider directly to cancel service, instead of allowing a competing video provider to initiate the disconnection on their behalf.
Verizon in March asked the FCC to require the cable industry to disconnect consumers who switch to a new video provider in the same way the agency requires phone providers to disconnect voice services.
The vote by the full commission came while Martin was in the midst of a two-week visit to Asia.