To: Editors, News Directors	Date: October 20, 2004
For: Immediate Release

Commissioners Approve Official Draft of
Privacy Protection Rules

Rules Forwarded to Secretary of State

PHOENIX – The advent of new computer technologies that offer different ways to capture, analyze and track consumer habits has opened the door for telecommunications companies to unfairly profit by marketing this data, Commissioners say.  The Commissioners voted unanimously to approve an official draft of important new rules aimed at protecting consumers.  The draft rules will now be published for public comment.  The rules will require phone companies to notify customers of their rights and obtain permission from the customer in some cases before Customer Proprietary Network Information (CPNI) could be shared.

Currently, the Federal Communications Commission (FCC) has rules in place that provide some protections for consumers.  The rules approved by the Arizona Corporation Commission would include important safeguards that go beyond the FCC rules to ensure that customers are routinely informed of their rights and to ensure that the decision to release CPNI is both knowing and informed.

If approved as currently drafted, phone companies would be barred from sharing information with third-parties and affiliates that provide services unrelated to telecommunications, unless the customer has given permission for his or her data to be shared.  This is a process called “opt-in.”

Because consumers are increasingly choosing bundled services from separate affiliates or partners, the rules would allow phone companies to share information with affiliates, agents, joint ventures or independent contractors only when the information is used to market specific communications-related services.  Recognizing that consumers still need to be in control of their proprietary information, the rules give the customer the right to “opt-out” if he or she does not want his or her proprietary information shared with these entities.  The rules require the communications companies to have a verification process in place to ensure that the customer’s choice is both knowing and informed and that the customer understands the process.

Telecommunications providers would be required to issue an annual “privacy rights notice” to inform customers about their ability to control the use of CPNI.

What is Customer Proprietary Network Information?

Customer Proprietary Network Information (“private information”) is defined as:

a. information about the quantity, technical configuration, type, destination, and amount of use of a telecommunications service subscribed to by any customer of a telecommunications carrier, and that is made available to the carrier by the customer solely by virtue of the carrier-customer relationship; and

b. information contained in the bills pertaining to telephone exchange service or telephone toll service received by a customer of a carrier.

How did CPNI become an issue?

In its December 2001 bills, Qwest Corporation ("Qwest") included an insert to its Arizona customers' bills notifying them that Qwest would be disseminating individual private information to its affiliates unless the customer contacted Qwest within 30 days and informed Qwest that he or she did not want private information shared with other Qwest affiliates. This is referred to as an “opt out” policy because customers have to call Qwest to “opt out” of having their private information released.

On January 16, 2002, the Commission held a Special Open Meeting in response to an overwhelming number of calls from consumers expressing confusion over Qwest's notice and its implementation of an “opt-out” policy.

Customers also expressed a lot of frustration because they could not reach Qwest to “opt-out” of having their private information released because the toll-free number provided by Qwest was frequently busy and they could not get through to a Qwest representative.  In addition, concern was expressed that an “opt-out” policy, especially as implemented by Qwest, was misleading and insufficient to protect the privacy rights of Arizona consumers.

What should customers do if they do not want to have their information sold or shared with affiliates?

Customers can notify their telecommunications provider to state that they do not want their information sold or shared with affiliates.

The Commission then began the process of drafting rules and requirements for customer notice, verification and other private information dissemination requirements.

Would these rules apply to all telecommunications providers that do business in Arizona?

The rules would apply to wireless and traditional wireline communications providers.  The only group currently exempted from these rules would be providers of Voice over Internet Protocol (VoIP). Until the FCC clarifies important jurisdictional issues about the regulation of VoIP, this new and emerging form of telephone service is largely unregulated.  Consumers should be aware that VoIP providers are not currently held to the same regulatory, customer service and consumer protection standards as the more traditional telecommunications firms.

What is the current schedule for the private information proceeding?

On March 31, 2004, the Commissioners instructed the Utilities Division to forward to interested parties three sets of proposed CPNI rules.  These proposed CPNI rules were mailed April 5, 2004.  The Utilities Division Staff sought comment from all interested parties before May 17, 2004.  A second draft of the rules was published on August 13, 2004.  Parties were again asked to submit comment on the second draft of the rules.  A workshop was held on September 2, 2004.  The Utilities Division presented its final proposed set of rules at an October Open Meeting and the Commissioners voted to send the rules to the Secretary of State to be published.

Did telecommunications companies have input into the rulemaking process?

Yes, along with the staff of the Commission and several consumer groups.  Both wireless and wireline telephone companies participated in the process of drafting these rules.  They include: Qwest Corporation, Cox Communications, AT&T, Nextel, Midvale Telephone, Frontier Communications, MCI, T-Mobile, Cricket, XO Communications and others.  The Residential Utility Consumer Office also participated, along with other consumer groups. 

Where can I view the rules package?

On the CPNI Frequently Asked Questions page of the Commission’s website at http://www.cc.state.az.us/utility/telecom/cpni-faqs.htm, you will see a link to the rules package.

What happens next and when might these rules take effect?

The rulemaking process is complex but it is designed to ensure that agencies do not enact unlawful rules or policies.  The comprehensive rules package has been transmitted to the Secretary of State to be published in the Administrative Register.  The steps that remain include:

· A Commission administrative law judge will schedule a comment period and a formal hearing on the proposed rules.

· The administrative law judge will draft a recommended opinion and order on the rules.

· The Commissioners will meet again to vote on the recommended opinion and order.

· The final rules will be submitted to the Attorney General’s office for certification.

· The final rules will be transmitted to the Secretary of State’s office to be published as final rules.  The rules would take effect 60 days after transmittal to the Secretary of State.

· This process could take six months to a year to complete.

What are the Commissioners saying about the CPNI rules?

Chairman Marc Spitzer:  “It disturbs me that some company might take the fact that I regularly call my mother, who lives in Philadelphia, and market that information so I could get inundated with solicitations for rental car and hotel deals in the Philadelphia area.  The people I talk to don’t want that level of intrusion in their lives.  These rules will protect against such nuisances.”

Commissioner Bill Mundell:  “We live in the information age but the fact that information is available should not mean that it is for sale to the highest bidder.  By approving these rules, we’ve given the control back to the customer – where it belongs.  The customer should be allowed to choose how his or her information is used.”

Commissioner Jeff Hatch-Miller:  “The purpose of the Commission’s telephone privacy protection [CPNI] rules is to bar telecom providers from selling – or giving their partners – highly personal and sensitive information about who you call, when you call or where your call originates.  I will never let any company we regulate violate your trust by making a profit off information you would want to be confidential.  They can ask us for permission – that is the only fair approach.”

Commissioner Mike Gleason:  “Once these rules go into effect, the Commission would be able to sanction a company for violating these rules, up to and including the ability to revoke its permission to operate in Arizona.  We had extensive discussions about prescribing specific fines or sanctions but ultimately decided that a specific fine could limit the Commission’s ability to address the seriousness or magnitude of the violations.”

Commissioner Kristin Mayes:  “I look at this as a Bill of Rights for the telephone subscriber.  Most of us would find it hard to live without telephone service but nearly all of us would appreciate the chance to limit unwelcome solicitations and sales pitches.  I hope telecommunications providers recognize that consumers are demanding these protections and, most importantly, consumers deserve to have their private information protected.”