Pay-Per-Call Services Ringing Up Lots of Flak

TELECOMMUNICATIONS policy often ties American lawmakers in knots, but there's one area where virtually all of them can agree:Pay-per-call services - those "900" numbers you see advertised on TV - urgently need regulation. Congress is reeling from a storm of consumer protest. "This is the No. 1 consumer complaint in America," says Sen. Ernest Hollings (D) of South Carolina, who chairs the Senate Commerce, Science, and Transporta-tion committee, which oversees telecommunications policy. He expects the Senate to act by the Thanksgiving recess. "We'll get a bill this session," adds Rep. Michael Oxley (R) of Ohio, who sits on the House Energy and Commerce committee.

From sports to porn Pay-per-call services encourage consumers to dial a number with area code 900 to receive information or entertainment. The calls range from talk lines to sports information, job leads, credit card applications, and telephone sex services. Charges appear on customers' phone bills and range from under a dollar to $75 or more. The problem is that this very young industry, which started in the late 1980s, has also played host to a number of scams. "A number of the ... complaints are about unfair and deceptive trade practices," says Mary Beth Richards, chief of the enforcement division of the Federal Communications Commission (FCC). For the past year and a half, 900-number fraud and abuse has been either the No. 1 or No. 2 consumer complaint there. For example: * A South Carolina woman dialed up a service advertising a Visa card to people who called the 900 number. She was charged nearly $40 but, instead of getting a credit card, she got a book telling her how to apply for one. * A Wisconsin service promised to help people find $17-an-hour union jobs, but those who called were told merely how to fill out a job application. Other complaints involve such things as switching consumers from a toll-free 800 number to a pay-per-call 900 number without their knowledge. In one celebrated case, a television Santa Claus urged children to hold their phone receivers up to the TV, which emitted the dial tones to connect to a pay-per-call service. Congressmen and senators are still talking about that one. "It's happened once," concedes Peter Brennan, director of development at Tele-Publishing Inc., an audiotext service bureau in Boston. But "it won't happen again." Late last month, the FCC adopted stricter rules for the long-distance companies that carry pay-per-call services. As early as this week, the US Senate could pass a measure that would go even further. S1579, sponsored by Sen. Daniel Inouye (D) of Hawaii, calls for a preamble on 900 numbers, telling consumers what they can expect to pay for the call and allowing them to hang up before the charges begin. The FCC now requires special preambles on 900 services aimed at children under 18, and it bans the infamous "TV Santa" approach. The Senate bill bans outright 900 services aimed at children under 12, except bona fide educational programming. Like the new FCC rules, the legislation would offer consumers free blocking of 900 numbers and would not allow telephone companies to cut off service because a customer failed to pay a 900 bill. The backlash against 900 services has been so strong that the industry has decided to go along with the stricter regulation. "The industry does definitely want to correct the misperception that all 900 numbers are scams," says Wendy Saari, associate director of the Information Industry Association. "While we might feel that regulation is not the best way to handle an industry ... on the whole, it [S1579] is a very balanced approach." "I think it will have a mixed effect," Mr. Brennan says. He supports legislation that encourages public discussion about the ethics of information service. But "it's so early in the information age that you don't want to do anything that would prohibit or preempt any area of business." Sprint, a long-distance phone company and major carrier of 900 services, decided to disconnect from most of them last month after it became the target of a grand jury probe.

A few bad apples The information providers argue that their industry is getting a bad rap. The fraud is limited to a few bad apples, they say. Strategic Telemedia, a market research and consulting firm in New York, estimates dial-a-porn services account for only 4 percent of the industry. Teledating, personals, and talk-line services represent more than a fifth of the industry; sports lines another 15 percent, according to Strategic Telemedia. Mr. Brennan says the industry is actually shifting away from such entertainment lines to business-to-business and business-to-consumer services. Last month, the largest adult-services provider, Telesphere Communications Inc. in Chicago, filed for bankruptcy.