11 FCC Red No. 4 Federal Communications Commission Record DA 96-48 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of AT&T Corporation File No. ENF-96-06 NAIJAcct. No. 616EF006 Apparent Liability for Forfeiture NOTICE OF APPARENT LIABILITY FOR FORFEITURE Adopted: January 19, 1996; Released: January 23, 1996 By the Chief, Common Carrier Bureau: I. INTRODUCTION 1. By this Notice of Apparent Liability for Forfeiture ("NAL"), we initiate enforcement action against AT&T Corporation ("AT&T"). 1 For the reasons discussed below, we find that AT&T apparently willfully violated Commis­ sion rules and orders2 by changing the primary interexchange carrier ("PIC'') designated by Ms. Jean Flo­ res ("Flores") of Brooklyn, New York, without Flores' authorization. Based upon our review of the facts and circumstances surrounding the violations, we find that AT&T is apparently liable for a forfeiture in the amount of forty thousand dollars ($40,000). II. THE COMMISSION'S PIC CHANGE RULES AND ORDERS 2. In its AllocaJion Order and subsequent Reconsideration Order and Waiver Order,3 the Commission set forth rules and procedures for implementing equal accessJ and cus­ tomer presubscription to an interexchange carrier 1 AT&T Corporation is a Delaware Corporation located at 295 North Maple Avenue, Baskin Ridge, New Jersey. 2 47 C.F .R. § 64.1100: Investigation of Access and Divestiture Related Tariffs, CC Docket 83-1145, Phase I, IOI FCC 2d 911 ( 1985) (Allocation Order); recon. denied, 102 FCC 2d 503 ( 1985) · (Reconsideration Order); Investigation of Access and Divestiture Related Tariffs, CC Docket 83- I l.i5. Phase I. JO I FCC 2d 935 ~1985) (Waiver Order). See supra proceedings cited at note 2. 4 Equal access for interexchange carriers ("IXCs") is that which is equal in type. quality and price to the access to local exchange facilities provided to AT&T and its affiliates. United States v. American Tel. & Tel., 552 F. Supp. 131. 227 (D.D.C. 1982), affd sub nom. Maryland v. United States, -i60 U.S. 1001 (1983) (Modification of Final Judgement or "MFJ"). "Equal ac­ cess allows end users to access facilities of a designated (IXCI by dialing' I' only." Allocation Order, 101 FCC 2d at 911. s Presubscription is the process by which each customer selects one primary interexchange carrier ("PIC"). from among several available carriers, for the customer's phone line(s). Allocation Order, 101 FCC 2d at 911, 928. Thus. when a customer dials 1885 ("IXC").6 The Commission's original allocation plan re­ quired IXCs to have on file a letter of agency ("LOA") signed by the customer before submitting PIC change or­ ders to the local exchange carrier ("LEC'') on behalf of the customer.7 After considering claims by certain IXCs that this requirement would stifle competition because consum­ ers would not be inclined to execute the LOAs even though they agreed to change their PIC, the Commission modified the requirement to allow IXCs to initiate PIC changes if they had "instituted steps to obtain signed LOAs. "8 In 1992, the Commission again revised its rules because it continued to receive complaints about unauthorized PIC changes.9 Specifically, while the Commis­ sion recognized the benefits of permitting a telephone-based industry to rely on telemarketing to solicit new business, it required IXCs to institute one of the following four confirmation procedures before submitting PIC change orders generated by telemarketing: (1) obtain the consumer's written authorization; (2) obtain the con­ sumer's electronic authorization by use of an 800 number; (3) have the consumer's oral authorization verified by an independent third party; or (4) send an information pack­ age, including a prepaid, return postcard, within three days of the consumer shrequest for a PIC change, and wait 14 days before submitting the consumer's order to the LEC, so that the consumer has sufficient time to return the post­ card denying, cancelling or confirming the change order.10 Hence, the Commission's rules and orders require that IXCs either obtain a signed LOA or, in the case of telemarketing solicitations, complete o ne of the four telemarketing verification procedures before submitting PIC change requests to LECs on behalf of consumers. 3. Because of its continued concern over unauthorized PIC changes, the Commission recently prescribed the gen­ eral form and content of the LOA used to authorize a change in a customer's primary long distance carrier .11 The Commission's recent rules prohibit the potentially decep­ tive or confusing practice of combining the LOA with promotional materials in the same document.12 The rules also prescribe the minimum information required to be included in the LOA and require that the LOA be written in clear and unambiguous language .13 The rules prohibit "I." only the customer accesses the primary IXC's services. An end user can also access other IXCs by dialing a five-digit access code ( IOXXX). Id. at 911. 6 Pursuant to the MFJ, the Bell Operating Companies (BOCs) were ordered to provide. where technically feasible, equal access to their customers by September 1986. Id. 7 An LOA is a document, signed by the customer, which states that the customer has selected a particular carrier as that cus­ tomer's primary long distance carrier. Allocation Order, IOI FCC 2d at 929. 8 Waiver Order, 101 FCC 2d at 942. 9 Policies and Rules Concerning Changing Long Distance Car­ riers, 7 FCC Red 1038-39 (1992) (PIC (.hange Order). io See 41 C.F.R. § 64.1100: PIC Change Order, 7 FCC Red at in.is. 11 Policies and Rules Concerning Unauthorized Changes of Consumers' Long Distance Carriers, 10 FCC Red 9560 (1995). 12 See id. at 9574-75. Checks that serve as an LOA are excepted from the "separate or severable" requirement so long as the check contains certain information clearly indicating that en­ dorsement of the check authorizes a PIC change and otherwise complies with the Commission's LOA requirementS. Id. at 9573. 13 See id. at 9564-65. ------------------·-- DA 96-48 Federal Communications Commission Record 11 FCC Red No. 4 all "negative option" LOAs" and require that LOAs and any accompanying promotional materials contain complete translations if they employ more than one tanguage.15 Ill. THE FLORES COMPLAINT 4. On April 6, 1995, the Commission received a written complaint from Flores alleging that AT&T had converted her prescribed long distance service provider from Sprint Communications Company, L.P. ("Sprint") to AT&T with­ out her authorization.16 The CommonCarrier Bureau's Consumer Protection Branch17 sent a letter to AT&T di­ recting it to provide specific infor mation regarding the alleged conversion of Flores' telephone service.18 On July 26, 1995, AT&T provided a response to the staffs inquiry. AT&T stated that Flores' service was switched to AT&T on the basis of a form captioned "AT&T Long Distance Ser­ vice Agreement" ("service agreement") that conta ined a LOA purportedly signed by Flores.'9 AT&T also sent Flores copies of both its letter in response to the Consumer Protection Branch and the service agreement. On August 15, 1995, Flores again contacted the Commission by letter and stated that the signature on the service agreement is not hers.20 In a follow-up response to the Consumer Pro­ tection Branch, AT&T appears to concede that the service agreement was signed by someone other than Flores. AT&T stated that the service agreement was obtained at a market­ ing event but did not offer any explanation for who may have signed it. AT&T added that based upon the informa­ tion available to it at the time it processed the PIC change order, AT&T believed that Flores had signed the service agreement. 21 IV. DISCUSSION 5. We have carefully evaluated the information submitted in connection with Flores' informal complaint and con­ clude that AT&T is apparently liable for forfeitu re for willful violation of the Commission 's rules and PIC change requirements. We find AT&T's apparent actions particu­ larly egregious. It appears that on or about January 24, 1995, AT&T submitted a P!C change request. based on an apparently fo rged LOA, to NYNEX-New York ("NYNEX"). This actio n resulted in the conversion of Flo­ res ' telephone service from Sprint to AT&T. The state­ ments and information provided by Flores and AT&T leave virtually no doubt that the LOA was not executed by the complainant and that AT&T lacked the requisite authoriza­ tion to request a PIC change to Flores' tong distance ser­ vice. There is no similarity between the signature on Flores' complaint and her purported signature on the LOA form that AT&T used as the basis for the P!C change 14 See id. at 9565-66. "Negative option" LOAs require consum­ ers to take some action to avoid having their long distance telephone service changed. is See id. at 9581. 16 . • Jean Flores. Informal Complaint No. IC 95-131-14 (April 6, 1995). 17 Formerly known as the Informal Complaints and Public Inquiries Branch. 18 Notice of Informal Complaint (June 28. 1995). 19 AT&T Response to Informal Complaint No. IC 95- 131-1-1 (July 26. 1995). AT &T's response includes a copy of the service 1886 submitted to NYNEX.22 Under these circumstances, we conclude that AT &T's apparent actions were in willfu l violation of the Commission's PIC change rules and orders and that a substantial forfeiture penalty is appropriate. 6. As a general matter, the unauthorized conversion of a customer's presubscribed long distance carrier continues to be a wide-spread problem in the industry.23 We are particu­ larly troubled by what appears to be a common practice by some IXCs of relying on unverified LOAs, which turn o ut to be falsified or forged , to effect changes in consumers' long distance service. The pervasiveness of the problem suggests that our current administration of the law has .not produced sufficient deterrence to non-compliance and the carriers have little incentive to curtail practices that lead to consumer complaints. Furthermore, as a practical matter, the carriers' responses to alleged unauthorized conversion complaints rarely provide a detailed explanation or jus­ tification of the carrier's actions. Therefore, to draw in­ dustry's attention to the seriousness of the problem and to provide incentives to comply with the Commission 's rules and orders, we intend to scrutinize consumer complaints and to take prompt enforcement action , including the im­ position of substantial monetary fines, when the facts in­ dicate that a carrier has failed to take the necessary steps to ensure that LOAs are valid and duly authorized. lf carriers intend to rely on a LOA to request a PIC change, they will be responsible for ensuring its validity. 7. Section 503(b)(2)(B) of the Communications Act au­ thorizes the Commission to assess a forfeiture of up to one hundred thousand dollars ($100,000) for each violation, o r each day of a continuing violation, up to a statutory maxi­ mum of o ne million dollars ($1 ,000,000) ·for a single act or failure to act.24 In exercising such authority, the Commis­ sion is required to take into account "the nature, cir­ cumstances, extent, and gravity of the violation and, with respect to the violator, the degree of c ulpability. any his­ tory of prior offenses, ability to pay, and such other matters as justice may require."2 ~ For purposes of determin ing an appropriate forfeiture penalty in this case. we regard the conversion of Flores' telephone line as a single violation. After weighing the circumstances surrounding the viola­ tion, we find that AT&T is apparently liable for a forfeiture of forty thousand dollars ($40,000) for the unauthorized conversion of the Flores line. AT&T will have the opportu­ nity to submit evidence and arguments in response to this NAL to show that no forfeiture should be imposed or that some lesser amount should be assessed. 26 In this regard, we note that the Commission has previously held that a li­ censee's gross revenues are the best indicator of its ability to pay a forfeiture and that use of gross revenues to deter­ mi ne a party's ability to pay is reasonable, appropriate, and a useful yardstick in helping to analyze a company's fina n- agreement allegedly signed by F lore~ that AT&T used to request a PIC change to Flores' long distance service. 20 Letter from Flores to Sandra Bailey (August 15, 1995). 21 AT&T Response to Follow-up No1ice of Informal Complaint No. IC 95- 13 144 (November 22, 1995). 22 See Attachment I. 23 From June 1994 to June 1995, of the 28,773 informal com­ plaints filed , 7,960 were for alleged unauthorized conversions of the customer's presubscribed long distance carrier. 24 47 U.S.C. § 503(b)(2)(B). . zs Id: § 503(b)(2)(0). 2b See id. § 503(b)(4)(C); 47 C.F.R. § l.80(f)(3). 11 FCC Red No. 4 Federal Communications Commwion Record DA 96-48 , . cial condition for forfeiture purposes.27 We will give full consideration to any financial information provided by AT&T before assessing a final forfeiture amount. V. CONCLUSIONS AND ORDERING CLAUSF.S 8. We have carefully reviewed the information submitted in connection with Jean Flores' informal complaint and conclude that on or about January 24, 1995, AT&T appar­ ently converted or caused a local exchange carrier to con­ vert Flores' telephone line without Flores' authorization through the use of an apparently forged LOA. We further conclude that AT&T thereby apparently willfully violated Commission rules governing primary interexchange carrier conversions, and that its conduct warrants a forfeiture in the amount of forty thousand dollars ($40,000). 9. Accordingly, IT IS ORDERED, pursuant to Section 503(b) of Communications Act of 1934, as amended, 47 U.S.C. § 503(b), and Section 1.80 of the Commission's rules, 47 C.F.R. § 1.80, that AT&T Corporation IS HERE­ BY NOTIFIED of an Apparent Liability for Forfeiture in the amount of forty thousand dollars ($40,000) for its willful violation of the Commission's PlC change rules and orders, 47 C.F.R. § 64.1100; PIC Change Order, 7 FCC Red 1038 (1992); Allocation Order, 101 FCC 2d 911 (1985); Wiliver Order, 101 FCC 2d 935 (1985). 10. IT IS FURTHER ORDERED, pursuant to Section 1.80 of the Commission's rules, 47 C.F.R. § 1.80, that within thirty days of the release of this Notice, AT&T Corporation SHALL PAY the full amount of the proposed forfeiture28 OR SHALL FILE a response showing why the proposed forfeiture should not be imposed or should be reduced. 11. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability for Forfeiture SHALL BE SENT by certified mail to Mr. Robert C. Allen, Chairman of AT&T Corporation, 295 North Maple Avenue, Fourth Floor, Baskin Ridge, New Jersey 07921. FEDERAL COMMUNICATIONS COMMISSION Regina M. Keeney Chief, Common Carrier Bureau 27 PJB Communications of Virginia, 7 FCC Red 2088, 2089 (1992) (finding that forfeitures of SS.000 and S3.000 asse~sed against two jointly owned and operated paging companies were not excessive because the total forfeiture amount (SR,()()()) repre­ sented approximately 2.02 percent of the companies' combined gross revenues of $395.469); see also David L. Hollingsworth d/bla Worland Services, 7 FCC Red 6640 (Com. Car. Bur. 1992) ($6,000 forfeiture representing approximately 1.21 percent of licensee's 1991 gross revenues and approximately 1.34 percent of projected 1992 gross revenues not found to be excessive); Afton Communications Corp .. 7 FCC Red 6741 (Com. Car. Bur. 1992) 1887 ($6,000 forfeiture representing approximately 3.91 percent of 1990 gross revenues and 2.75 percent of projected 1992 gross revenues not found to be excessive). 28 The forfeitu re amount should be paid by check or money order drawn to the order of the Federal Communications Com­ mission. Reference should be made on AT&T Corporation check or money order to "NAUAcct. No. 616EF