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FCC to Fine Optic $7.62M for Cramming, Slamming, and False Recordings

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Released: July 14, 2014
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Federal Communications Commission

FCC 14-101

Before the

Federal Communications Commission

Washington, DC 20554

In the Matter of

)

File No.: EB-TCD-13-00011384

)

Optic Internet Protocol, Inc.

)

NAL/Acct. No.: 201432170009

)

Apparent Liability for Forfeiture

)

FRN: 0017134933

NOTICE OF APPARENT LIABILITY FOR FORFEITURE

Adopted: July 11, 2014

Released: July 14, 2014

By the Commission:

I.

INTRODUCTION

1.

We propose a penalty of $7,620,000 against Optic Internet Protocol, Inc. (Optic or

Company) for switching consumers’ preferred long distance carriers without their authorization

(commonly known as “slamming”) and placing unauthorized or “crammed” charges for its long distance

service on consumers’ telephone bills.

Consumers insist that Optic’s charges were unauthorized because

they had no contact with Optic before the Company began charging them for its service. Instead, Optic

relied on apparently fabricated audio recordings as purported proof that consumers had authorized the

Company to switch their long distance carriers and to charge them for service, and then provided those

fabricated recordings to the Commission, consumers, and state regulatory officials to try to show that the

consumers had authorized its service.

2.

Slamming and cramming are deceptive business practices. Companies that engage in

these practices prey on the likelihood that consumers will fail to notice unauthorized charges on their

multi-page telephone bills. This risk increases as more consumers are encouraged to enroll in paperless

billing and to set up automatic payment plans for their telephone bills. Consumers proceed to pay the bill,

often unaware that it contains unauthorized charges from an entity other than their own telephone

company. Here, the harm Optic caused was even more egregious because it apparently relied on falsified

evidence of consumers’ authorizations and caused consumers to expend significant time and effort to

attempt to return to their preferred carriers, to get the charges removed from their bills, and to file

complaints with law enforcement agencies. The Commission is committed to protecting consumers

against slamming and cramming and will take aggressive action against carriers that perpetrate such

unjust, unreasonable, and deceptive acts. Based on the evidence before us, including over 150 consumer

complaints that demonstrate that Optic’s misconduct was widespread and intentional, we propose a

$7,620,000 forfeiture.

II.

BACKGROUND

3.

Optic is an interexchange carrier1 that is authorized to provide telecommunications

1 Optic’s offices are located at 3050 Royal Blvd., S., #175, Alpharetta, GA 30022. Optic’s President is Gregory

Allpow. See Letter from Michael S. Welsh, Counsel for Optic Internet Protocol, Inc., to Kimberly A. Wild, Deputy

Division Chief, Telecommunications Consumers Division, FCC Enforcement Bureau at 13 (Nov. 30, 2013) (on file

in EB-TCD-13-00011384) (LOI Response).

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FCC 14-101

service in 12 states,2 and in 2013 it billed between 41,000 and 68,000 consumers each month for that

service.3 Optic hires a telemarketing company, Nexophone, to market its service to new customers,4 and

contends that it contracts with All Verified to verify and record a consumer’s authorization to “switch

long distance service providers to Optic.”5 Optic stated that it sends new customer orders to its

underlying carrier Qwest,6 which submits the carrier change request to the consumer’s local exchange

carrier (LEC).

Generally, a reseller such as Optic does not provide proof of consumer authorization when

it submits a carrier change request or any other charge to be billed to the consumer, and the LECs do not

require it.7

4.

The Enforcement Bureau (Bureau) of the Federal Communications Commission

(Commission) reviewed more than 150 complaints against Optic that consumers filed with the

Commission, the Federal Trade Commission (FTC), various state regulatory agencies,8 and the Better

Business Bureau (BBB).9 All complainants contend that Optic charged them for long distance service

without their authorization. No complainant indicated that he or she had contact with Optic or a

Company agent before being charged for Optic’s service; most affirmatively assert that they had never

heard of or spoken to the Company before discovering Optic’s charges on their local telephone bills.10

Many consumers also state that they attempted to have the charges removed, only to see them reappear

month after month. In some cases, Optic agreed to refund only a portion of the fees it charged to the

consumers. Still others claim that when they contacted Optic, they were told that they or someone in their

household had authorized Optic’s service, and that Optic possessed an audio recording evidencing the

authorization. Consumer complainants who heard these recordings contend that they are fabricated.

5.

Based on complaints alleging that Optic had fraudulently charged consumers for long

distance service, the Bureau initiated an investigation of Optic and issued a letter of inquiry (LOI) to the

Company on September 26, 2013.11 The LOI sought information about Optic’s practices and instructed

2 See Streamlined International Applications Accepted for Filing, Report No. TEL-01211S, Public Notice, 2007 WL

4225067, at *2 (Nov. 20, 2007); see also LOI Response at 3. According to Optic’s 499 filing, however, the

Company offers domestic and international long distance service in all 50 states, the District of Columbia and

certain U.S. territories.

3 LOI Response at Exhibit A.

4 Id. at 7. Optic provides its telemarketers with sales scripts to sell one of three different long distance calling plans.

For each plan, Optic charges consumers a $3.95 or $4.95 one-time set up fee and a second monthly service fee of

$4.95, $8.95, or $29.95. Id. at 4, 7.

5 LOI Response at 7.

6 Although Optic identified Qwest as its underlying carrier, some consumer telephone bills identified WorldCom as

the underlying carrier from which Optic purchased the service.

7 See Main Street Telephone Company, Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 8853, 8854, para. 4

(2011) (Main Street NAL).

8 With its LOI Response, Optic provided complaints that consumers had filed against Optic with the Public Utility

Commission of Texas (TX PUC) and the Public Utilities Commission of Nevada. The Bureau obtained additional

complaints from the TX PUC that Optic failed to provide; the Company stated that it was its practice “to delete

records of TX PUC complaints once those were resolved to the satisfaction of the PUC.” See E-mail from Michael

S. Welsh, Counsel for Optic Internet Protocol, Inc., to Erica H. McMahon, Attorney Advisor, Telecommunications

Consumers Division, FCC Enforcement Bureau (Jan. 9, 2014, 15:27 EDT) (on file in EB-TCD-13-00011384)

(Second Supplemental LOI Response).

9 See consumer complaints on file in EB-TCD-13-00011384.

10 Optic contracts with a billing aggregator, ILD Teleservices, Inc. (ILD), to bill consumers’ local exchange carriers

for Optic’s service. LOI Response at 4. ILD’s name generally appears on the bills, along with Optic’s.

11 See Letter from Richard A. Hindman, Chief, Telecommunications Consumers Division, FCC Enforcement

Bureau, to Optic Internet Protocol, Inc., Attn: Greg Allpow (Sept. 26, 2013) (on file in EB-TCD-13-00011384)

(continued….)

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FCC 14-101

the Company to produce various documents and records. Optic initially responded to the LOI on

December 2, 2013, and it later supplemented that response.12

III.

DISCUSSION

6.

We find that Optic apparently willfully and repeatedly violated Sections 201(b) and 258

of the Communications Act of 1934, as amended (Act),13 and Section 64.1120 of the Commission’s

rules.14 Specifically, we find that Optic apparently violated Section 201(b) of the Act by placing

unauthorized charges on consumers’ local telephone bills. In some of those cases, Optic also violated

Section 258 by switching consumers’ preferred long distance carrier without authorization verified in

compliance with the Commission’s verification procedures. In addition, we find that Optic apparently

violated Section 201(b) when it submitted fabricated audio “verification” recordings to the Commission,

consumers, and state regulatory authorities as evidence of consumers’ authorization to switch their

carriers and to be charged for service when, in fact, consumers had never spoken to Optic or agreed to its

service. Accordingly, we propose a forfeiture of $7,620,000 for the apparent violations that occurred

within the twelve months prior to the release date of this Notice of Apparent Liability for Forfeiture

(NAL).15

A.

Apparent Violations

1.

Optic Placed Unauthorized Charges on Consumers’ Telephone Bills in

Apparent Violation of Section 201(b) (“Cramming”)

7.

Section 201(b) of the Act states, in pertinent part, that “[a]ll charges, practices,

classifications, and regulations for and in connection with [interstate or foreign] communication service

[by wire or radio], shall be just and reasonable, and any such charge, practice, classification, or regulation

that is unjust or unreasonable is hereby declared to be unlawful . . . .”16 The Commission has found that

the inclusion of unauthorized charges and fees on consumers’ telephone bills—known as “cramming”—is

an “unjust and unreasonable” practice under Section 201(b).17 Cramming can occur either when third

(Continued from previous page)

(LOI); see also E-mail from Erica H. McMahon, Attorney Advisor, Telecommunications Consumers Division, FCC

Enforcement Bureau, to Michael Welsh, Counsel to Optic Internet Protocol, Inc. (Dec. 17, 2013, 16:04 EDT).

12 See LOI Response, supra note 1. Optic requested, and the Bureau granted, an extension of time until November

15, 2013, to respond to the LOI. The Bureau granted a second request for an extension until December 2, 2013. See

also E-mail from Michael S. Welsh, Counsel for Optic Internet Protocol, Inc., to Erica H. McMahon, Attorney

Advisor, Telecommunications Consumers Division, FCC Enforcement Bureau (Dec. 9, 2013, 12:56 EDT) (on file in

EB-TCD-13-00011384) (Supplemental LOI Response); Second Supplemental LOI Response, supra note 8.

13 47 U.S.C. §§ 201(b), 258.

14 47 C.F.R. § 64.1120.

15 The Appendix identifies the 71 complaints, evidencing 81 apparent violations of the Act occurring in the last year

that underlie the proposed forfeiture.

16

47 U.S.C. § 201(b).

17 Indeed, any assessment of an unauthorized charge on a telephone bill or for a telecommunications service is an

“unjust and unreasonable” practice under Section 201(b) of the Act. See, e.g., Central Telecom Long Distance, Inc.,

File No. EB-TCD-13-00011651, Notice of Apparent Liability for Forfeiture, FCC 14-58, 2014 WL 1778549, at *5,

para. 14 (May 5, 2014) (Central NAL); U.S. Telecom Long Distance, Inc., Notice of Apparent Liability for

Forfeiture, 29 FCC Rcd 823, para. 14 (2014) (USTLD NAL); Consumer Telcom, Inc., Notice of Apparent Liability

for Forfeiture, 28 FCC Rcd 17196, para. 15 (2013) (CTI NAL); Advantage Telecomms., Inc., Notice of Apparent

Liability for Forfeiture, 28 FCC Rcd 6843, 6850, para. 17 (2013) (Advantage NAL); see also Long Distance Direct,

Inc., Memorandum Opinion and Order, 15 FCC Rcd 3297, 3302, para. 14 (2000) (LDDI MO&O) (finding that the

company’s practice of cramming membership and other unauthorized fees on consumer telephone bills was an

unjust and unreasonable practice in connection with communication services).

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parties place unauthorized charges on consumers’ local telephone bills or when carriers place

unauthorized charges on the telephone bills of their own customers. In either case, any assessment of an

unauthorized charge on a telephone bill or for a telecommunications service is an “unjust and

unreasonable” practice under Section 201(b) of the Act.18 We find that Optic apparently violated Section

201(b) by placing unauthorized charges on the telephone bills of 71 consumers, in some cases multiple

times.

8.

Optic provides 1+ dialing long distance service.19 For a consumer to use Optic’s service,

the consumer’s long distance service provider must be switched to Optic so that calls are carried over

Optic’s network and billed to Optic.20

If there is no switch, any long distance calls the consumer makes

(by dialing 1 plus the desired ten-digit number) are carried over the consumer’s existing provider’s

network; the consumer would receive no service from Optic. Based on the evidence, Optic switched

complainants’ long distance carrier (e.g., AT&T, Verizon, or CenturyLink) to Optic in some cases and in

others it did not.21 Either way, Optic billed the consumers for long distance service by placing charges for

its set-up fee and recurring monthly fee on their local telephone bills.

9.

All of the consumers whose complaints the Bureau reviewed maintain that whether or not

Optic switched their carrier, they neither requested nor agreed to Optic’s service.22 In fact, most contend

that they had never heard of Optic before discovering the charges on their phone bills, and had taken no

action to change their telephone service.23

Not one complainant describes having had any contact with an

Optic representative prior to being billed by the Company. For example, Complainant Hernandez, who

identified a $4.95 charge from Optic that appeared on his monthly telephone bill for ten months stated:

I have no knowledge of what this company does, but we certainly are receiving

no benefit from them. I know that neither my wife nor I authorized it and we

have no idea who they are. We only answer the phone when we recognize the

telephone number as being from family and friends so we know we did not

respond to any solicitation.24

Complainant De Leon, whose service Optic switched, also complained: “I can confirm that no one from

Optic (a company I had never heard of before this fiasco) or a 3rd party verifier had contacted me, spoke

with me or recorded me authorizing any long distance switch.”25 She added, “I am the only person living

in this household; no other person (adult or child) could have authorized a long distance switch. There

18 See, e.g., Central NAL, 2014 WL 1778549, at *5, para. 14.

19 Such service allows a consumer to make long distance calls by dialing “1” plus the area code and local telephone

number of the person the consumer wishes to call. Using “1+” dialing is also referred to as “direct-dialing” because

once a customer chooses to presubscribe to an interexchange carrier (IXC), the consumer’s calls are directly routed

to and billed by that IXC.

20 In the case of a switchless reseller such as Optic, the calls would actually be carried over the network of Optic’s

underlying carrier, Qwest or Worldcom, which would then charge Optic for the service.

21 In some cases, there is no evidence that Optic submitted a request to the LEC to change the consumer’s carrier,

and in other cases it appears the LEC did not switch the consumer’s carrier because he or she had a preferred or

presubscribed interexchange carrier (PIC) freeze. A PIC freeze “prevents a change in a subscriber’s preferred

carrier selection unless the subscriber gives the carrier from whom the freeze was requested his or her express

consent.” 47 C.F.R. § 64.1190(a).

22 See, e.g., Complaints from R. Duran; C. Castro; M. Chavez; C. Caballero; M. Lopez; C. Lara-Arreola; R.

Godines; J. Rosas; A. Ramirez; J. Alcazar.

23 See, e.g., Complaints from R. Espinosa; P. Bianchi; T. Guzman.

24 Complaint from J. Hernandez.

25 Complaint from C. De Leon.

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were also no handymen, visitors, friends or other persons in my home during this time who could have

provided authorization . . . .”

Moreover, a significant number of complainants stated that they do not

have or need long distance service on their landline telephone. They opted instead to have basic local

service, wireless, or internet service only.26 Complainant Mendez, for example, explained that “[t]he only

reason why I have a number is for the internet. There is no handset connected to the phone jack.”27

Complainant Ochoa stated that he uses his cell phone for all long distance calls and needs AT&T for his

local service only.28

10.

Optic admits that it has received complaints from consumers alleging that Optic never

contacted them before the Company charged them for its service.29

In response to such complaints, Optic

apparently did nothing to ensure that its telemarketers and verification company were appropriately

marketing Optic’s service and obtaining consumers’ authorization before signing them up for the

Company’s service. Rather, Optic stated that when it received such complaints, it simply closed the

customers’ accounts and refunded the fees billed to the customers in full. Specifically, it said that “no

further services were provided or billed to that customer . . . . Everyone who has complained has

immediately been cancelled out of Optic’s system and given a full refund with no questions asked and no

additional action needed.”30

11.

Consumers, however, state otherwise. Upon discovering the unauthorized charges from

Optic on their telephone bills, many complainants contacted the LEC that issued the bill (in most cases

AT&T) to dispute the charges. Although the charges were reversed in some cases, many consumers

contend that they continued to be charged for one or more months after they complained. Other

complainants state that they contacted Optic or its billing aggregator, ILD Teleservices, Inc. (ILD),

numerous times to try to stop the charges.31 Complainant Anaya complained:

I have never authorized ILD Teleservices [on behalf of Optic] to provide long

distance service for me, yet I continue to have recurring charges of $4.95/month

for services. I have spoken to ILD . . . on numerous occasions, and have

questioned their unauthorized billing . . . It seems like a never-ending cycle,

every month I receive my telephone bill and there again appear these

unauthorized charges from ILD.32

Complainant Dominguez similarly explained:

26 See, e.g., Complaints from L. Von Elling; M. Ruiz; L. Ochoa; R. Vieto; J. Garcia (stating “[s]ince we started with

AT&T of Texas back in 2007, we only apply for local service only period!”); Complaint from A. Gardea (explaining

“I am the legal representative for A. Gardea . . . I set her up on an unlimited LOCAL phone plan with AT&T.

Beginning the next month Optic Internet Protocol-LD started charging her account for long distance service, which

was never authorized. She doesn’t make long distance calls—that’s why I set her up on a local plan.”); Complaint

from J. Molinar (stating “[i]t’s not possible that I have long distance telephone service of any type because I only

contracted basic service with AT&T company with only local calls or service, without long distance service, without

long distance calls.”).

27 Complaint from A. Mendez. See also Complaint from P. McNallen (stating that his DSL line was charged by

Optic even though he used it only for internet service).

28 Complaint from L. Ochoa.

29 LOI Response at 10.

30 Id.

31 See, e.g., Complaints from A. Ariza; R. Duran; C. Giron; D. Cross; O. Lopez; M. Lopez; C. Lara-Arreola; R.

Gutierrez; U. Hernandez; J. Hernandez; J. Castillo; R. Vieto.

32 Complaint from A. Anaya.

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[Optic] has been cramming a charge on my AT&T bill since March 2013. I do

not have long distance service on my landline. This is definitely unauthorized, so

every month I have to call them, and call AT&T to reverse the charges. AT&T

even volunteered several times to block access to my account by this company.

Apparently that hasn’t worked. AT&T just keeps adding on the charges . . . .33

12.

Although complainants disputed Optic’s charges, some paid them fearing that their

telephone service would be disconnected or their credit affected.34 Complainant Garcia, who initially

refused to pay the monthly charges from Optic said, “I receive[d] a notice from AT&T of Texas [about]

disconnecting the phone service if I didn’t pay $62.66 [so] I did pay that amount plus the $37.75 for local

service which I have only with AT&T of Texas.”35 Complainants spent considerable time and effort

trying to stop Optic from billing them.36 Some were further harmed when they learned they could not

return to the calling plans they previously had with their preferred carriers before Optic switched them.

Complainant D. Castello, for instance, tried to reestablish long distance service with Verizon but was

advised that the Verizon Freedom Price Guarantee Plan was no longer offered and that she had to choose

a different plan, which was 50 percent more expensive.37

13.

Based on this evidence, we conclude that Optic failed to obtain complainants’

authorization to charge them for its service.

Therefore, we find that Optic, in apparent violation of

Section 201(b) of the Act, repeatedly placed charges on consumers’ telephone bills without their

authorization.

2.

Optic Provided Fabricated Audio Recordings to the Commission,

Consumers, and States in Apparent Violation of Section 201(b)

14.

We find that Optic apparently violated Section 201(b) by engaging in deceptive practices

when signing up and charging consumers for its service. Specifically, Optic relied on fabricated audio

recordings associated with its “customers” and submitted them to the Commission, consumers, and states

to make it appear as if the consumers had authorized Optic to be their preferred carrier and thus, to charge

them for service—when in fact they had not. The Commission has found that such deceptive, fraudulent

practices are unjust and unreasonable practices that apparently violate Section 201(b) of the Act.38

33 Complaint from D. Dominguez.

34 See, e.g., Complaint from M. Chavez; Complaint from C. Acosta (stating that AT&T agreed to place her account

“in dispute” while it attempted to seek reimbursement from Optic for the charges).

35 Complaint from J. Garcia. See also Complaint from R. Duran (explaining “I want to have my money back since I

have been paying to have my credit protected but enough is enough. I want my money back, the cancellation of that

fraudulent charge and for the FCC to check on the business practices of this company.”).

36 See, e.g., Complaint from U. Hernandez (stating that “[f]or at least a year AT&T has allowed [Optic] to bill me

for a service that I did not request. When I call them they credit my bill on the next bill but then charge me again. I

am so tired of this and am seriously considering canceling all business with AT&T”); Complaint from T. Guzman

(complaining “When you call the number provided (800 433-4518) you get a recorded message to try back some

other time.”); Complaint from A. Ramirez (stating “I tried in vain to acquire a contact number for this company but

could not find any information on them and they did not put a contact number on my AT&T statement.”).

37 Complaint from D. Castello. See also Complaint from N. Homedes (explaining that she had an AT&T plan that

allowed her to make unlimited calls to Spain on weekends for $19.95. After Optic switched her long distance carrier

without her authorization, she was later reinstated with AT&T; however, “[AT&T] did not grandfather me under my

old program, so [AT&T] charged me over $5 per each minute I called Spain … for a total of $2,147.25… so ILD

has caused me quite a bit of financial harm….”).

38 See United Telecom, Inc., Notice of Apparent Liability for Forfeiture, 27 FCC Rcd 16499, 16503, para. 11 (2012)

(United NAL) (finding a carrier in apparent violation of Section 201(b) for fabricating TPV recordings).

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15.

Several consumers who filed complaints with the Public Utility Commission of Texas

listened to the recordings that Optic had provided to the agency as proof of consumer authorization, and

stated that the voice they heard on the recordings was not their own, and that they did not otherwise have

any conversation with Optic’s third-party verifier.39

16.

Following up on the consumers’ allegations, Bureau staff contacted a dozen additional

complainants about the recordings Optic had provided to the Public Utility Commission of Texas as

evidence that consumers had authorized Optic to switch their long distance carrier and to charge them for

service. Eleven complainants listened to the recordings, and each one adamantly denied that the voice on

the recording was that of the subscriber to the number.40

In fact, none of the complainants recognized the

voice on the recording or indicated that they had authorized any other person to switch their long distance

carrier. Complainant Ramirez emailed the Bureau after listening to the recording:

Please be informed that this audio is bogus[.] First I never speak to anyone on

the phone that I do not know and I do not have conversations in Spanish . . . This

company created this alleged conversation illegally. No telling who is

responding to these questions, probably one of their own employees.41

Complainant De Leon, after listening to Optic’s recording also confirmed, “[t]he voice is definitely not

mine . . . I never had such a conversation with anyone regarding switching my long distance service.”42

In addition, De Leon said the person who claimed to be Ms. De Leon on the recording provided a maiden

name that was incorrect. Similarly, Complainants Mr. and Mrs. Salinas maintained that the recording had

been fabricated, that the voice on the recording was not Mr. Salinas’s, and that the birthdate the person

provided was not his.43 Further supporting her contention that she did not speak with an Optic

representative, Mrs. Salinas told Bureau staff that she and her husband are in their 70s, retired, and never

answer the phone if they do not recognize the number on the Caller ID. They also stated that their

Spanish is not good, and if they had spoken with Optic’s verifier, they would not have been able to

understand the questions he was asking in Spanish. All of the complainants whom Bureau staff contacted

and who listened to the recordings that Optic had provided as purported “proof” of their authorization to

switch carriers insisted that Optic’s recordings had been falsified, and that they had not spoken with

Optic. There is simply no evidence that Optic contacted complainants or anyone else the complainants

knew and recorded their authorization to switch the complainant’s carrier.44 Nevertheless, Optic relied on

39 The Illinois Attorney General filed a lawsuit against Optic alleging that the Company billed Illinois residents for

service by falsifying their authorization. Specifically, the suit alleged the Company made fraudulent audio

recordings in which the voice on the recording was not the consumer’s or the name on the recording did not match

the consumer’s name. See Illinois Attorney General Press Release, Madigan Sues Company for Long Distance

Phone Scam, (Aug. 30, 2013), available at

http://www.illinoisattorneygeneral.gov/pressroom/2013_08/20130830.html. In March 2014, Illinois and Optic

agreed to settle the matter. See Illinois v. Optic Internet Protocol, Inc., Final Judgment & Consent Decree, No.

2013-CH-843 (Ill. Cir. Ct. Mar. 11, 2014).

40 In two of the 11 cases, the complainants filed complaints on behalf of their elderly mothers, and those

complainants confirmed that the voice on the recordings was not that of their mother’s. The twelfth consumer

contacted by the Bureau elected not to listen to the recording.

41 See E-mail from A. Ramirez to Erica McMahon, Telecommunications Consumers Division, FCC Enforcement

Bureau (Mar. 11, 2014, 13:08 EDT).

42 E-mail from C. De Leon to Erica McMahon, Telecommunications Consumers Division, FCC Enforcement Bureau

(Mar. 10, 2014; 23:08 EDT).

43 Complaint from A. Salinas.

44 Optic indicated that it has used an independent third party verification company, All Verified, to verify and record

each customer’s authorization. LOI Response at 7. While it is unclear whether All Verified or Optic itself falsified

the audio recordings, Optic affirmatively relied on these recordings to show that it had authorization to charge

consumers for service. Optic continued to do so even after it had received numerous complaints over the course of

(continued….)

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apparently fabricated audio recordings and presented them to consumers and regulatory authorities as

evidence that the Company did not slam or cram consumers.45

17.

Based on this evidence, we conclude that Optic or its agent,46 in apparent violation of

Section 201(b) of the Act, falsified audio “verification” recordings in order to provide the façade of

genuine consumer authorization for Optic’s service.

3.

Optic Switched Consumers’ Long Distance Carriers Unlawfully in Apparent

Violation of Section 258 (“Slamming”)

18.

Optic apparently violated Section 258 of the Act and Section 64.1120 of the

Commission’s rules by switching 10 consumers’ long distance carriers without authorization. Section

258 of the Act makes 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 such verification procedures as the Commission shall prescribe.”47 Section 64.1120 of

the Commission’s rules prohibits carriers from submitting a request to change a consumer’s preferred

provider of telecommunications services before obtaining authorization from the consumer; carriers can

verify that authorization in one of three specified ways, including third party verification (TPV).48 If a

carrier relies on TPV, the independent verifiers must, among other things, confirm that the consumers

with whom they are speaking: (i) have the authority to change the carrier associated with their telephone

number; (ii) in fact wish to change carriers; and (iii) understand that they are authorizing a carrier

change.49

19.

The Commission has made clear that a carrier that engages in an initial “slam” that leads

to a subsequent cram violates Section 201(b) of the Act for the cram, and Section 258 of the Act for the

slam.50 Under the circumstances here, we charge Optic with both apparent violations.51 As the evidence

discussed above shows, Optic apparently failed to speak with the complainants, obtain their authorization

(Continued from previous page)

more than a year from consumers who alleged they had no contact with Optic, had never heard of Optic, and had not

authorized the Company’s service. Optic was therefore on notice that an ongoing problem existed, yet it took no

action to correct the fraudulent behavior or terminate its relationship with its third party verifier. See, e.g., Silv

Commc’n Inc., Notice of Apparent Liability for Forfeiture, 25 FCC Rcd 5178, 5181–5182, paras. 6–7 (Silv NAL)

(finding that the carrier was on notice of a problem with its third party telemarketers based on complaints it received

from consumers). Instead, Optic continued to rely on fabricated recordings.

45 We warn carriers that we may also pursue apparent violations of Section 1.17 of the Commission’s rules where a

carrier provides falsified audio recordings, or otherwise misleads or provides false information, to the Commission

in any investigatory or adjudicatory matter within its jurisdiction. See 47 C.F.R. § 1.17.

46 See 47 U.S.C. § 217. Section 217 imposes liability on a carrier for the acts and omissions of its agents simply if

those agents act within the scope of their employment; a carrier’s knowledge of its agents’ misdeeds is not required.

See, e.g., Preferred Long Distance, Inc., Notice of Apparent Liability for Forfeiture, 27 FCC Rcd 16489, 16491,

para. 6 (2012) (finding a carrier apparently liable for deceptive marketing practices of the third party telemarketers).

In any event, Optic has not claimed or produced any evidence that it was unaware of its third party verifier’s actions

or that the Company should not be held responsible for those actions. See Silv NAL, 25 FCC Rcd at 5185, para. 14.

47 47 U.S.C. § 258(a).

48 47 C.F.R. § 64.1120(c)(1)–(3) (a carrier may also verify authorization by obtaining the subscriber’s written or

electronically signed authorization in a format that meets the requirements of Section 64.1130 or by obtaining

confirmation from the subscriber via a toll-free number provided exclusively for the purpose of confirming orders

electronically).

49 47 C.F.R. § 64.1120(c)(3)(iii).

50 See Advantage NAL, 28 FCC Rcd at 6850, n.48.

51 See USTLD NAL, 28 FCC Rcd at 835–836, para. 24, n.93 (stating that the Commission can charge the carrier with

violations for cramming and slamming); CTI NAL, 28 FCC Rcd at 17208, para. 26, n.78 (same).

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to switch carriers, or even attempt to comply with the Commission’s verification procedures; it simply

fabricated audio recordings to mislead consumers and regulatory officials into believing that it had

received the consumers’ authorizations. We therefore find that Optic apparently violated Section 258 of

the Act and Section 64.1120 of the Commission’s rules by switching 10 consumers’ preferred providers

of telecommunications services without proper authorization verified in accordance with the

Commission’s rules.

B.

Proposed Forfeiture

20.

Section 503(b)(1) of the Act states that any person who willfully or repeatedly fails to

comply with any provision of the Act or any rule, regulation, or order issued by the Commission, shall be

liable to the United States for a forfeiture penalty.52 Section 503(b)(2)(B) of the Act empowers the

Commission to assess a forfeiture of up to $150,000 for any violation by Optic occurring before

September 13, 2013, and $160,000 for any violations occurring on or after that date.53 In exercising our

forfeiture authority, we are 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.”54 In addition, the Commission has

established forfeiture guidelines, which set forth base penalties for certain violations and identify criteria

that we consider in exercising our discretion in determining the penalties to apply in any given case.55

Under the guidelines, we may adjust a forfeiture upward for violations that are egregious, intentional, or

repeated, or that cause substantial harm or generate substantial economic gain for the violator.56

21.

The Commission’s forfeiture guidelines currently establish a base forfeiture amount of

$40,000 for violations of our slamming rules and orders.57 Although the guidelines provide no base

forfeiture for cramming, the Commission has established through case law a base forfeiture of $40,000

for cramming violations.58

Applying the $40,000 base forfeiture to each of the 10 slamming violations59

52 See 47 U.S.C. § 503(b)(1).

53 47 U.S.C. § 503(b)(2)(B); see also 47 C.F.R. § 1.80(b)(2). These amounts reflect inflation adjustments to the

forfeitures specified in Section 503(b)(2)(B) of the Act ($100,000 per violation or per day of a continuing violation

and $1,000,000 per any single act or failure to act). The Federal Civil Penalties Inflation Adjustment Act of 1990,

Pub. L. No. 101-410, 104 Stat. 890, as amended by the Debt Collection Improvement Act of 1996, Pub. L. No. 104-

134, Sec. 31001, 110 Stat. 1321 (DCIA), requires the Commission to adjust its forfeiture penalties periodically for

inflation. See 28 U.S.C. § 2461 note (4). The Commission most recently adjusted its penalties to account for

inflation in 2013. See Amendment of Section 1.80(b) of the Commission’s Rules, Adjustment of Civil Monetary

Penalties to Reflect Inflation, 28 FCC Rcd 10785 (Enf. Bur. 2013); see also Inflation Adjustment of Monetary

Penalties, 78 Fed. Reg. 49370–01 (2013) (setting Sept. 13, 2013, as the effective date for the increases). Because

the DCIA specifies that any inflationary adjustment “shall apply only to violations which occur after the date the

increase takes effect,” however, we apply the forfeiture penalties in effect at the time the violation took place. 28

U.S.C. § 2461 note (6).

54 See 47 U.S.C. § 503(b)(2)(E); see also The Commission’s Forfeiture Policy Statement and Amendment of Section

1.80 of the Commission’s Rules, Report and Order, 12 FCC Rcd 17087, 17100–01, para. 27 (1997).

55 47 C.F.R. § 1.80(b)(8), Note to paragraph (b)(8).

56 Id.

57 See 47 C.F.R. § 1.80, Appendix A, Section I.

58 See LDDI MO&O, 15 FCC Rcd at 3304, para. 19 (affirming the $40,000 penalty for cramming imposed by the

Commission in the forfeiture order).

59 A slamming violation occurs whenever a carrier submits an unlawful request to change service providers

regardless of whether the change actually takes place. See 47 U.S.C. § 258(a) (“[n]o telecommunications carrier

shall 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 [the Commission’s] verification procedures. . . .”) (emphasis added).

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and each of the 71 cramming violations60 that occurred within the last twelve months would result in a

forfeiture of $3,240,000.

22.

Consistent with prior cramming and slamming enforcement actions that have involved

evidence of deceptive marketing or fabricated recordings of consumer authorization,61 we upwardly adjust

the penalty for the apparent slamming and cramming violations at issue here that are coupled with direct

evidence of such misconduct. Specifically, we propose an additional $80,000 penalty for each of the 11

apparent slamming or cramming violations that occurred in the past 12 months and for which Optic or its

agent apparently fabricated an authorization recording. The subtotal for this adjustment is $880,000.

23.

Given the facts presented here, we believe that a further upward adjustment is warranted.

Optic apparently engaged in cramming repeatedly: we have reviewed more than 150 complaints,

including the 71 identified in the Appendix, by consumers alleging that Optic charged them for its service

without authorization, and in many cases did so over the course of several months.62 Moreover, the

record shows that Optic’s conduct was egregious. The Company apparently fabricated verification

recordings and submitted them to the Commission, consumers, and state regulatory authorities in

response to complaints from consumers alleging that Optic had either slammed or crammed them.

Indeed, there is no evidence in the record to show that Optic completed a single authentic verification

recording for any of the complainants. Optic also caused substantial and continuing harm to consumers.

As discussed above, for example, Optic’s misconduct caused some consumers thousands of dollars of

harm.63

24.

Under Section 503 and our forfeiture guidelines, we must take into account the egregious

and repeated nature of Optic’s actions, as well as the substantial harm that the Company caused

consumers. Given the circumstances here and the extent of Optic’s improper conduct, all in the face of

the repeated warnings of the Commission that slamming and cramming would not be tolerated,64 an

additional upward adjustment of $3,500,000 is appropriate.65

We thus propose a total forfeiture of

$7,620,000.

60 The Commission has made clear that each unauthorized charge a carrier places on a consumer’s bill—or

“cram”—constitutes a separate and distinct violation of Section 201(b). See CTI NAL, 28 FCC Rcd at 17208, para.

26 (citing NOS Commnc’ns, Inc., Notice of Apparent Liability for Forfeiture, 16 FCC Rcd 1833 (2001)). Based on

the record in the instant case, we decline to exercise our discretion in that way at this time, but we caution other

carriers that the Commission is committed to aggressive enforcement of its rules, especially in addressing the

protections afforded consumers.

61 See Central NAL, 2014 WL 1778549, at *10, para. 26 (proposing an additional $80,000 penalty for violations that

involved deceptive marketing); USTLD NAL, 29 FCC Rcd at 836, para. 25 (same); United NAL, 27 FCC Rcd at

16506, para. 18 (proposing an additional $80,000 penalty for violations that involved fabricated authorization

recordings).

62 Although the Bureau’s investigation uncovered no direct evidence that Optic targeted any particular group of

consumers, we note that the overwhelming majority of the complainants have Spanish surnames and many of the

apparently fabricated consumer authorizations were in Spanish.

63 See supra note 37.

64 See, e.g., Central NAL, 2014 WL 1778549, at *11, para. 28; USTLD NAL, 29 FCC Rcd at 837, para. 27;

Advantage NAL, 28 FCC Rcd at 6855–56, para. 30; Main Street NAL, 26 FCC Rcd at 8861, para. 24 (stating “we

may propose more significant forfeitures in the future as high as is necessary, within the range of our statutory

authority, to ensure that such companies do not charge consumers for unauthorized services.”).

65 The Commission has proposed similar upward adjustments for egregious behavior in recent slamming and

cramming cases. See Central NAL, 2014 WL 1778549, at *11, para. 28 (proposing an upward adjustment of

$1,500,000 to the base forfeiture of $1,960,000); USTLD NAL, 29 FCC Rcd at 837, para. 27 (proposing an upward

adjustment of $2,000,000 to the base forfeiture of $2,480,000); CTI NAL, 28 FCC Rcd at 17209, para. 29 (proposing

(continued….)

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IV.

CONCLUSION

25.

Based on the facts and record before us, we have determined that Optic has apparently

willfully and repeatedly violated Sections 201(b) and 258 of the Act and Section 64.1120 of the

Commission’s rules.

V.

ORDERING CLAUSES

26.

Accordingly, IT IS ORDERED, pursuant to Section 503(b) of the 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 Optic Internet Protocol, Inc. is hereby NOTIFIED of this APPARENT LIABILITY FOR

FORFEITURE in the amount of seven million, six hundred twenty thousand dollars ($7,620,000), for

willful and repeated violations of Sections 201(b) and 258 of the Communications Act of 1934, as

amended,66 and Section 64.1120 of the Commission’s rules.67

27.

IT IS FURTHER ORDERED THAT, pursuant to Section 1.80 of the Commission’s

rules, 47 C.F.R. § 1.80, within thirty (30) days of the release date of this Notice of Apparent Liability for

Forfeiture, Optic Internet Protocol, Inc. SHALL PAY the full amount of the proposed forfeiture or

SHALL FILE a written statement seeking reduction or cancellation of the proposed forfeiture.

28.

Payment of the forfeiture must be made by check or similar instrument, wire transfer, or

credit card, and must include the NAL/Account number and FRN referenced above. Optic shall send

electronic notification of payment to Johnny Drake at johnny.drake@fcc.gov on the date said payment is

made. Regardless of the form of payment, a completed FCC Form 159 (Remittance Advice) must be

submitted.68 When completing the FCC Form 159, Optic should enter the Account Number in block

number 23A (call sign/other ID) and enter the letters “FORF” in block number 24A (payment type

code). Below are additional instructions Optic should follow based on the form of payment it selects:

Payment by check or money order must be made payable to the order of the

Federal Communications Commission. Such payments (along with the

completed Form 159) must be mailed to Federal Communications Commission,

P.O. Box 979088, St. Louis, MO 63197-9000, or sent via overnight mail to U.S.

Bank – Government Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza,

St. Louis, MO 63101.

Payment by wire transfer must be made to ABA Number 021030004, receiving

bank TREAS/NYC, and Account Number 27000001. To complete the wire

transfer and ensure appropriate crediting of the wired funds, a completed Form

159 must be faxed to U.S. Bank at (314) 418-4232 on the same business day the

wire transfer is initiated.

Payment by credit card must be made by providing the required credit card

information on FCC Form 159 and signing and dating the Form 159 to

authorize the credit card payment. The completed Form 159 must then be mailed

to Federal Communications Commission, P.O. Box 979088, St. Louis, MO

(Continued from previous page)

an upward adjustment of $1,500,000 to the base forfeiture of $1,560,000). These prior NALs also included

additional upward adjustments of $500,000 or $750,000 for targeting elderly consumers.

66 47 U.S.C. §§ 201(b), 258.

67 47 C.F.R. § 64.1120.

68 An FCC Form 159 and detailed instructions for completing the form may be obtained at

http://www.fcc.gov/Forms/Form159/159.pdf.

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FCC 14-101

63197-9000, or sent via overnight mail to U.S. Bank – Government Lockbox

#979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO 63101.

Any request for making full payment over time under an installment plan should be sent to:

Chief

Financial Officer — Financial Operations, Federal Communications Commission, 445 12th Street, SW,

Room 1-A625, Washington, DC 20554.69 If Optic Internet Protocol, Inc. has questions regarding

payment procedures, it should contact the Financial Operations Group Help Desk by phone, 1-877-480-

3201, or by e-mail, ARINQUIRIES@fcc.gov.

29.

The response, if any, must be mailed both to the Office of the Secretary, Federal

Communications Commission, 445 12th Street, SW, Washington, DC 20554, ATTN: Enforcement

Bureau – Telecommunications Consumers Division, and to Richard A. Hindman, Chief,

Telecommunications Consumers Division, Enforcement Bureau, Federal Communications Commission,

445 12th Street, SW, Washington, DC 20554, and must include the NAL/Acct. No. referenced in the

caption.

30.

The Commission will not consider reducing or canceling a forfeiture in response to a

claim of inability to pay unless the petitioner submits: (1) federal tax returns for the most recent three-

year period; (2) financial statements prepared according to generally accepted accounting practices; or (3)

some other reliable and objective documentation that accurately reflects the petitioner’s current financial

status. Any claim of inability to pay must specifically identify the basis for the claim by reference to the

financial documentation submitted.

31.

IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability for

Forfeiture shall be sent by Certified Mail Return Receipt Requested and First Class Mail to Gregory

Allpow, Optic Internet Protocol, Inc., 3050 Royal Blvd. S., #175, Alpharetta, GA 30028 and 900 Arnold

Mill Road, Roswell, GA 30075, and to Michael S. Welsh, Esquire, 3212 Northlake Parkway, P.O. Box

450586, Atlanta, GA 31145.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

69 See 47 C.F.R. § 1.1914.

12

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APPENDIX

Apparent Violations of Sections 258 and 201(b) of the Act

Complainant

Date of Carrier Switch

Violation(s)

and/or Date Charge Placed

on Consumer’s Bill

1.

A. Salinas

7/15/13

Section 201(b) cram; fabricated recording

2.

O. Lopez

7/15/13

Section 201(b) cram

3.

I. Juarez

7/24/13

Section 201(b) cram

4.

M. Lopez

7/25/13

Section 201(b) cram

5.

C. Lara Arreola

7/27/13

Section 201(b) cram

6.

B. Cortez

8/5/13

Section 201(b) cram

7.

D. Perez

8/7/13

Section 201(b) cram

8.

F. Herrera

8/11/13

Section 201(b) cram

9.

I. Figueroa

8/20/13; 8/11/13

1

Section 258 slam; Section 201(b) cram

10.

J. Hernandez

8/11/13

Section 201(b) cram

11.

M. Llanas

8/15/13

Section 201(b) cram

12.

L. Lui

8/17/13

Section 201(b) cram

13.

L. Von Elling

8/17/13

Section 201(b) cram

14.

C. Acosta

8/19/13

Section 201(b) cram

15.

P. McNallen

8/19/13

Section 201(b) cram

16.

C. Estrada

8/20/13; 11/9/13

Section 258 slam; Section 201(b) cram

17.

C. Hatem

8/21/13

Section 201(b) cram

18.

C. Leal

8/25/13

Section 201(b) cram

19.

K. Moran

8/27/13

Section 201(b) cram

20.

C. Castro

8/29/13

Section 201(b) cram

21.

D. Rodriguez

9/1/13

Section 201(b) cram

22.

A. Ramirez

9/4/13; 9/23/13

Section 258 slam; Section 201(b) cram;

fabricated recording

23.

N. Mejia

9/5/13

Section 201(b) cram

24.

D. Dominguez

9/5/13

Section 201(b) cram

25.

J. Alcazar

9/9/13

Section 201(b) cram

26.

C. Chavez

9/13/13

Section 201(b) cram

27.

M. Flores

9/15/13

Section 201(b) cram

28.

R. Vieto

9/15/13; 11/15/13

Section 258 slam; Section 201(b) cram

29.

O. Coronado

9/16/13

Section 201(b) cram

30.

A. Hurtado

9/22/13

Section 201(b) cram

31.

M. Castillo

9/27/13

Section 201(b) cram

32.

R. Godines

9/29/13

Section 201(b) cram

33.

D. Castello

10/2/13; 11/16/13

Section 258 slam; Section 201(b) cram

34.

M. Chavez

10/10/13

Section 201(b) cram

35.

R. Gutierrez

10/16/13

Section 201(b) cram

36.

D. Nguyen/Eva Nail &

10/19/13

Section 201(b) cram

Spa

37.

M. Munoz/Restaurant

10/21/13

Section 201(b) cram

Marla

1 The evidence shows that Optic first crammed the consumer and then unlawfully switched the consumer’s preferred

long distance carrier.

13

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38.

C. Guzman

10/21/13; 11/13/13

Section 258 slam; Section 201(b) cram;

fabricated recording

39.

A. Gardea

10/22/13; 11/21/13

Section 258 slam; Section 201(b) cram;

fabricated recording

40.

S. Delgado

10/25/13

Section 201(b) cram

41.

F. Morales

10/27/13

Section 201(b) cram

42.

U. Hernandez

10/27/13

Section 201(b) cram

43.

M. Cantu

10/30/13; 11/25/13

Section 258 slam; Section 201(b) cram;

fabricated recording

44.

A. Gonzalez

11/3/13

Section 201(b) cram

45.

J. Ramos

11/4/13

Section 201(b) cram

46.

J. Rosas

11/5/13

Section 201(b) cram

47.

E. Lara

11/7/13

Section 201(b) cram

48.

E. Gonzales

11/7/13

Section 201(b) cram

49.

J. Lara

11/7/13

Section 201(b) cram

50.

A. Mendez

11/7/13

Section 201(b) cram

51.

C. De Leon

11/11/13; 1/13/14

Section 258 slam; Section 201(b) cram;

fabricated recording

52.

A. Castelan

11/15/13

Section 201(b) cram

53.

G. Campos

11/19/13

Section 201(b) cram

54.

K. Mayorga

11/21/13

Section 201(b) cram

55.

L. Ochoa

11/23/13

Section 201(b) cram

56.

J. Hernandez

11/25/13

Section 201(b) cram

57.

A. Ramirez

12/6/13; 12/11/13

Section 258 slam; Section 201(b) cram;

fabricated recording

58.

B. Arcela

12/9/13

Section 201(b) cram

59.

A. Anaya

12/17/13

Section 201(b) cram; fabricated recording

60.

G. Uribarri

12/23/13

Section 201(b) cram; fabricated recording

61.

A. Reyes

1/21/14

Section 201(b) cram

62.

T. Azcarate

2/7/14

Section 201(b) cram

63.

R. Salinas

2/9/14

Section 201(b) cram

64.

E. Vazquez

2/10/14

Section 201(b) cram

65.

J. Vasquez

2/11/14

Section 201(b) cram

66.

T. Guzman

2/13/14

Section 201(b) cram; fabricated recording

67.

J. Castillo

2/15/14

Section 201(b) cram

68.

J. Gonzalez

2/17/14

Section 201(b) cram

69.

H. Gomez

2/25/14

Section 201(b) cram

70.

R. Garza

2/25/14

Section 201(b) cram; fabricated recording

71.

F. Candal

5/7/14

Section 201(b) cram

14

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