******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D. C. 20554 In the Matter of ) ) File No. ENF-97-08 Minimum Rate Pricing, Inc. ) ) NAL/Acct. No. 816EF001 ) Apparent Liability for Forfeiture ) NOTICE OF APPARENT LIABILITY FOR FORFEITURE Adopted: October 31, 1997; Released: October 31, 1997 By the Acting Chief, Common Carrier Bureau: I. INTRODUCTION 1. By this Notice of Apparent Liability for Forfeiture ("NAL"), we initiate enforcement action against Minimum Rate Pricing, Inc. ("MRP"). For the reasons set forth below, we find that MRP apparently willfully or repeatedly violated Section 258 of the Communications Act of 1934, as amended by the Telecommunications Act of 1996 ("Act"), as well as Commission rules and orders, by changing the primary interexchange carriers ("PICs") for interstate service designated by Ms. Patricia M. Cohoon of Belleville, Michigan and Ms. Cheryl Sowers of Farina, Illinois without their authorization. Based upon our review of the facts and circumstances surrounding the violations, we find that MRP is apparently liable for a forfeiture in the amount of eighty thousand dollars ($80,000). II. THE COMMISSION'S PIC-CHANGE RULES AND ORDERS AND SECTION 258 OF THE ACT 2. In its Allocation Order and subsequent Reconsideration Order, the Commission set forth rules and procedures for implementing equal access and customer presubscription to an interexchange carrier ("IXC"). The Commission's original allocation plan required IXCs to have on file a letter of agency ("LOA") signed by the customer before an IXC was permitted to submit a PIC-change order to the local exchange carrier ("LEC") on behalf of the customer. Certain IXCs claimed that this requirement would hinder long distance competition because consumers would not be inclined to execute promptly the LOAs even though they agreed to change their PIC. After considering these claims, the Commission allowed IXCs latitude regarding the timing of PIC-change submissions by permitting "initiation" of PIC changes if the IXCs either had "instituted steps to obtain signed LOAs" or had signed LOAs on file. The Commission stated, however, that "IXCs should maintain such signed customer authorizations on file for use in dispute resolution." 3. Despite the adoption of the consumer protection mechanisms described above, the Commission continued to receive a growing number of consumer complaints. Accordingly, the Commission modified its rules in 1992. Specifically, while the Commission recognized the benefits of permitting a telephone-based industry to rely on telemarketing to solicit new business, it sought to curb telemarketing abuses by requiring IXCs to institute one of the following four confirmation procedures before submitting PIC change orders generated by telemarketing: (1) obtain the subscriber's written authorization; (2) obtain confirmation from the subscriber via a toll-free number provided exclusively for the purpose of confirming orders electronically; (3) utilize an independent third party to verify the subscriber's order; or (4) send an information package, including a prepaid, return postcard, within three days of the subscriber's request for a PIC change, and wait 14 days before submitting the subscriber's order to the LEC, so that the subscriber has sufficient time to return the postcard denying, cancelling or confirming the change order. Hence, the Commission's rules and orders require that IXCs either obtain a signed LOA or, in the case of telemarketing solicitations, complete one of the four telemarketing verification procedures before submitting PIC-change requests to LECs on behalf of consumers. 4. Because of its concern over the rising volume of consumer complaints alleging that IXCs had employed deceptive LOAs, the Commission in 1995 prescribed the general form and content of the LOA used to authorize a change in a customer's primary long distance carrier. The Commission's current rules prohibit the potentially deceptive or confusing practice of combining in the same document the LOA with promotional materials. The rules also prescribe the minimum information that must be included in the LOA and require that the LOA be written in clear and unambiguous language. Further, the rules prohibit all "negative option" LOAs and require that LOAs and any accompanying promotional materials contain complete translations if they employ more than one language. 5. In February 1996, Congress passed the Telecommunications Act of 1996. Section 258 of the Act substantially bolstered the Commission's authority to deter, punish, and ultimately, eliminate slamming by making it unlawful for any telecommunications carrier to "submit or execute a change in a subscriber's carrier selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the Commission shall prescribe." Section 258 further provides that any carrier that violates the Commission's procedures and collects charges for telecommunications service from a subscriber after such violation shall be liable to the subscriber's properly authorized carrier for all charges collected. On July 15, 1997, the Commission released the 1997 FNPRM & Order on Recon., in which the Commission, among other things, proposed to reexamine its rules in light of Section 258. The Commission sought comment on, for example, its tentative proposal to incorporate the specific language of Section 258 into Part 64 of the Commission's rules. III. THE MRP TARIFF 6. MRP's Tariff F.C.C. No. 1, which became effective on April 1, 1997, included the following tariff provision: 1.2.6. Termination by Customer 1.2.6.A. Customer may cancel service by providing written or verbal notice to MRP. The Carrier requires such notification in order to protect Customer from unauthorized account transfer, "slamming." If Carrier is not notified accordingly, Carrier may reinstate Customer's account by implementation of its automatic provisioning system. The Company will confirm all cancellations, either verbal or written, in writing within five (5) business days of any cancellation. Additionally, in the event that the Company has found, through its automatic polling system, that Customer is no longer receiving service, Customer may be reinstated as above and written notice of same will be sent to Customer within five (5) business days of such action. On May 22, 1997, MRP filed Tariff F.C.C. No. 3 to replace Tariff F.C.C. No. 1 in its entirety. Section 1.2.6.A. of Tariff F.C.C. No. 1, set forth above, was renumbered Section 2.9 of Tariff F.C.C. No. 3, and retitled "Cancellation of Service by Customer." Except for a few minor, non-substantive changes to the text of Section 1.2.6.A., new Section 2.9 of Tariff F.C.C. No. 3 is substantially the same as Section 1.2.6.A. of Tariff F.C.C. No. 1. Both sections require the customer to notify MRP if the customer plans to change its PIC selection from MRP to another IXC. If the customer fails to provide notification, both sections provide that MRP may automatically switch the customer back to MRP. IV. THE COHOON AND SOWERS COMPLAINTS A. The Cohoon Complaint 7. Ms. Patricia Cohoon filed a written complaint with the Commission on June 5, 1997, alleging that MRP had converted her presubscribed long distance service provider from AT&T Communications ("AT&T") to MRP without her authorization. Ms. Cohoon discovered the switch at the end of April 1997 when she received a letter from AT&T informing her that her long distance service had been changed to MRP. Ms. Cohoon states that on May 1, 1997, she called her local carrier, Ameritech, to complain that her long distance service had been switched without her authorization, and to request that her service be changed back to AT&T. 8. On May 8, 1997, Ms. Cohoon received a postcard in the mail from MRP advising her that if she did not respond by mail or phone, she would automatically be switched back to MRP from AT&T. Ms. Cohoon states that she then notified MRP by phone that she did not wish to be presubscribed to MRP's service. Nevertheless, when she received her May 1997 phone bill from Ameritech, Ms. Cohoon discovered that she had been switched back to MRP on May 6, 1997, two days before she received the MRP postcard. Upon reviewing her bill, she found that several of her long distance calls had been carried by MRP. Ms. Cohoon immediately notified MRP that her long distance service had been switched without her authorization, and that she wished to return to AT&T. According to Ms. Cohoon, an MRP representative informed her that Ms. Cohoon "could not change her carrier" for long distance calls; "only they [MRP] can do this." 9. On August 4, 1997, the Common Carrier Bureau's Consumer Protection Branch sent MRP a Notice of Informal Complaint ("Notice") directing MRP to respond within 30 days with specific information regarding the conversion of Ms. Cohoon's presubscribed interexchange carrier. MRP failed to respond to the Notice within 30 days, or to seek an extension of time in which to submit the requested information. On October 9, 1997, over one month after its response was due, MRP filed with the Commission what appears to be a form letter with case- specific information, such as the complainant's name, inserted at various points. In its letter, MRP states that it received Ms. Cohoon's tape-recorded order and corresponding paperwork from an independent sales contractor. MRP further states that an independent mailing company then sent Ms. Cohoon a welcome package, a copy of which is attached to MRP's letter. MRP, however, does not address Ms. Cohoon's allegation that her long-distance service was switched back to MRP after she returned to AT&T, her presubscribed interexchange carrier. Nor does MRP address Ms. Cohoon's contention that upon learning she had been switched back to MRP, she immediately contacted an MRP representative, who informed her that only MRP could change her long-distance carrier. B. The Sowers Complaint 10. On September 9, 1997, the Commission received a written complaint from Ms. Cheryl Sowers alleging that MRP had switched her presubscribed long distance service provider without her authorization. Specifically, Ms. Sowers explains that on or about May 9, 1997, she changed her presubscribed long distance service provider from MRP to AT&T. Ms. Sowers subsequently discovered that she had been switched back to MRP when she received her July phone bill from GTE Corporation ("GTE"), her local exchange carrier, and noticed charges from MRP. When Ms. Sowers called AT&T to find out why she had been billed for calls carried by MRP instead of AT&T, she was told that she had been switched back to MRP on or about May 16, 1997. Ms. Sowers immediately complained to an MRP representative, who informed her that MRP "could legally switch [her back to MRP] unless [Ms. Sowers] wrote them personally" indicating her desire to be presubscribed to another interexchange carrier. 11. On September 15, 1997, the Common Carrier Bureau's Consumer Protection Branch sent MRP a Notice of Informal Complaint ("Notice") directing MRP to respond within 30 days with specific information regarding the conversion of Ms. Sowers' presubscribed interexchange carrier. On October 16, 1997, MRP filed with the Commission what appears to be a brief form letter with case-specific information, such as the complainant's name, inserted at various points. MRP failed to provide any supporting documentation to accompany its letter. In its letter, MRP merely states that it was not notified of Ms. Sowers' decision to cancel her MRP service and change her long-distance carrier to AT&T. MRP's letter, however, fails to address Ms. Sowers' allegation that she was then switched back to MRP without her authorization. V. DISCUSSION 12. We have evaluated the information submitted in connection with the informal complaints filed by Ms. Cohoon and Ms. Sowers, and conclude that MRP is apparently liable for forfeiture for willful or repeated violation of Section 258 of the Act and the Commission's rules and requirements concerning PIC changes. It appears that on or about April 2, 1997, May 6, 1997, and May 16, 1997, MRP submitted PIC-change requests to Ameritech and GTE, resulting in the unauthorized conversion of Ms. Cohoon's and Ms. Sowers' presubscribed interexchange carrier from AT&T to MRP. 13. The statements and information provided by Ms. Cohoon indicate that MRP not only lacked the requisite authorization to request a PIC-change in Ms. Cohoon's long distance service initially, but that MRP also lacked authorization to switch Ms. Cohoon's long distance service back to MRP in accordance with MRP's automatic switchback tariff provision. As Ms. Cohoon states in her complaint, she discovered the initial switch to MRP when she received a letter from AT&T informing her that her long distance service had been changed to another carrier. After Ms. Cohoon complained about the unauthorized switch and successfully returned to AT&T, Ms. Cohoon received a postcard from MRP informing her that if she did not respond by mail or phone, she would automatically be switched back to MRP. Even though Ms. Cohoon notified MRP by phone that she did not want MRP's service, she was switched back to MRP shortly thereafter. Similarly, in the case of Ms. Sowers' complaint, we find that MRP failed to obtain the requisite authorization prior to switching Ms. Sowers' long distance service back to MRP in accordance with its automatic switchback tariff provision, in violation of Section 258 of the Act and the Commission's PIC-change rules and orders. As was the case with Ms. Cohoon, the statements and information provided by Ms. Sowers are persuasive evidence that Ms. Sowers did not authorize MRP to switch her long distance service back to MRP. 14. As explained above, Section 258 of the Act bolstered the Commission's existing verification procedures by making it unlawful for any telecommunications carrier to submit or execute a change in a subscriber's selection of a provider of telephone exchange service or telephone toll service, except in accordance with Commission-prescribed verification procedures. MRP has failed to provide evidence to show that it followed these verification procedures when it submitted changes to the complainants' selections of presubscribed interexchange service providers, as required by Section 258 of the Act. For example, MRP has not demonstrated that it secured an LOA prior to effecting changes in the complainants' presubscribed interexchange carriers. Moreover, in the face of the clear language of Section 258, we find particularly troubling MRP's automatic switchback tariff provision, by which MRP reserves the right unilaterally to switch a customer back to MRP absent direct notification from the customer, rather than complying with the specific verification procedures prescribed by the Commission. 15. Further, it appears that MRP apparently knew or should have known that its automatic switchback tariff provision would enable MRP to switch consumers' PICs without their authorization, in violation of Section 258 of the Act and the Commission's PIC-change rules and orders. Thus, it appears that the unauthorized PIC changes at issue were the result of either deliberate misconduct by MRP or reckless disregard for Congressional decree and the Commission's rules and orders. Under these circumstances, we conclude that MRP's apparent actions were in willful or repeated violation of Section 258 of the Act and the Commission's PIC-change rules and orders, and that a forfeiture penalty is appropriate. We also note that Sections 1.2.6.A. and 2.9 of MRP's tariffs appear to raise questions of reasonableness under the terms and requirements of Section 201(b) of the Act, to the extent these tariff provisions enable MRP to engage in the unlawful act of slamming. We invite MRP to respond to these Section 201(b) concerns. After reviewing MRP's response to this NAL, we will determine whether MRP's tariff provisions violate Section 201(b), and, if so, whether further enforcement action is warranted. 16. Section 503(b)(2)(B) of the Act authorizes the Commission to assess a forfeiture of up to one hundred ten thousand dollars ($110,000) for each violation, or each day of a continuing violation, up to a statutory maximum of one million, one hundred thousand dollars ($1,100,000) for a single act or failure to act. In exercising this forfeiture authority, the Commission is required to take into account "the nature, circumstances, extent, and gravity of the violation and, with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and such other matters as justice may require." For purposes of determining an appropriate forfeiture penalty in this case, we regard the conversion of Ms. Cohoon's and Ms. Sowers' presubscribed interexchange carriers as two violations. After weighing the circumstances surrounding the violation, we find that MRP is apparently liable for a forfeiture of forty thousand dollars ($40,000) for the unauthorized conversion of Ms. Cohoon's presubscribed interexchange carrier and forty thousand dollars ($40,000) for the unauthorized conversion of Ms. Sowers' presubscribed interexchange carrier, resulting in a total forfeiture of eighty thousand dollars ($80,000). MRP will have the opportunity 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. VI. CONCLUSIONS AND ORDERING CLAUSES 17. We have evaluated the information submitted in connection with the informal complaints filed by Ms. Cohoon and Ms. Sowers, and conclude that on or about April 2, 1997, May 6, 1997, and May 16, 1997, MRP apparently converted or caused a local exchange carrier to convert Ms. Cohoon's and Ms. Sowers' presubscribed interexchange carriers without their authorization. We further conclude that MRP thereby apparently willfully or repeatedly violated Section 258 of the Act and Commission rules and orders governing primary interexchange carrier conversions, and that MRP's conduct warrants a forfeiture in the amount of eighty thousand dollars ($80,000). 18. Accordingly, IT IS ORDERED, pursuant to Section 503(b) of Communications Act of 1934, as amended, 47 U.S.C.  503(b), Section 1.80 of the Commission's rules, 47 C.F.R.  1.80, and the authority delegated in Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91, 0.291, that Minimum Rate Pricing, Inc. IS HEREBY NOTIFIED of an Apparent Liability for Forfeiture in the amount of eighty thousand dollars ($80,000) for willful or repeated violation of Section 258 of the Act and the Commission's PIC-change rules and orders. 19. 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, Minimum Rate Pricing, Inc. SHALL PAY the full amount of the proposed forfeiture OR SHALL FILE a response showing why the proposed forfeiture should not be imposed or should be reduced. 20. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability for Forfeiture SHALL BE SENT by certified mail to Tom Salzano, President, Minimum Rate Pricing, Inc., 300 Broad Acres Drive, P.O. Box 8000, Bloomfield, New Jersey 07003. FEDERAL COMMUNICATIONS COMMISSION A. Richard Metzger, Jr. Acting Chief Common Carrier Bureau