******************************************************** 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. ***************************************************************** DA 97-1247 June 13, 1997 CERTIFIED MAIL, RETURN RECEIPT REQUESTED Mr. Joseph J. Weiss TWC Communications 38 Carriage Place Edison, NJ 08820 Dear Mr. Weiss: This constitutes a letter of admonishment issued to TWC Communications ("TWC") pursuant to authority contained in Sections 4(i), 4(j), and 251(e)(1) of the Communications Act of 1934, as amended ("the Act"), 47 U.S.C.  154(i), 154(j), 251(e)(1), and authority delegated in Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91, 0.291, regarding toll free number marketing practices. BACKGROUND By letter dated February 5, 1997, AT&T has presented evidence to the Commission that TWC Communications ("TWC") has allegedly acted in violation of the Commission's policies prohibiting the establishment of ownership interests in and the warehousing, selling, bartering, or brokering of toll free telephone numbers. The facts as alleged in AT&T's letter, and supported by attached documentation, are as follows: 1) ITT Sheraton is an AT&T customer that was assigned the toll free number (800) 325-3535. ITT Sheraton has invested a substantial amount of money over a period of years to market this toll free number within the United States and internationally. As a result of this investment, this toll free number is well known among consumers of its services. 2) Because of an error, AT&T did not request a "set aside" on behalf of ITT Sheraton for the toll free number (888) 325-3535 ("The Number"), the 888 equivalent to ITT Sheraton's 800 number, pursuant to the FCC's provision for such reservation. 3) TWC is a Responsible Organization ("RespOrg") and manages the record of The Number in the Service Management System ("SMS") database that is administered by Database Services Management, Inc. ("DSMI"). 4) On February 15, 1996, AT&T first contacted TWC to discuss what it viewed as a potential problem that could arise through customer confusion over usage of The Number, in light of its heavily marketed 800 equivalent. 5) In that and subsequent conversations with AT&T, TWC represented that it had a customer that had been assigned The Number and that this customer had already invested in a marketing plan for usage of The Number. TWC indicated that its customer might be amenable to accepting compensation in exchange for The Number and further inquired whether AT&T or ITT Sheraton would be willing to absorb its costs. 6) TWC further represented during these conversations with AT&T that its customer might be willing to transfer the number in exchange for (1) the same tariffed service rates that ITT Sheraton paid, (2) free hotel room reservations, or (3) similar in-kind services. 7) On July 10, 1996, Mr. Sander Y. Pomper of ITT Sheraton contacted Mr. Joseph Weiss of TWC to inquire about the reassignment of The Number to ITT Sheraton. This telephone conversation was transcribed by Ms. Darla Dudley, an employee of ITT Sheraton with the consent of Mr. Weiss. 8) In the course of the July 10, 1996, conversation, TWC intimated to ITT Sheraton that (1) TWC represented the interests of its customer in negotiating an agreement for the transfer for The Number; (2) TWC's customer was interested in exchanging its right to use The Number for some amount of cash or other valuable services; (3) TWC's customer viewed the interest expressed in The Number "as a possible 'unique marketing opportunity'"; and (4) the sale of toll free numbers was not a violation of the Commission's Rules. 9) Following the initial conversation, TWC proceeded to contact Mr. Pomper of ITT Sheraton to discuss possible exchanges of valuable services for the telephone number. Mr. Pomper initiated correspondence with Mr. Weiss of TWC that evidences discussions of the possible exchange of valuable services for The Number. TWC's response confirms that such discussions took place. DISCUSSION The Commission has the authority to establish policies, rules and regulations to govern the distribution of telephone numbers in the United States. RespOrgs reserve toll free telephone numbers for subscribers and are subject to Commission orders and regulations designed to ensure the efficient, fair, and orderly allocation of toll free numbers. The Commission has determined, as a matter of policy, that, in order to manage the dissemination of the limited supply of toll free telephone numbers, it is in public interest to preclude the establishment of ownership interests in toll free telephone numbers. At the same time, the Commission recognized that certain numbers have a value that result from, inter alia, either numerical characteristics that make the number simple to remember or marketing efforts that make the number widely recognizable, or both. These numbers are known as "Vanity Numbers", and it is not unusual for businesses to invest significant resources in the marketing of Vanity Number(s). The Commission's policies regarding the warehousing, hoarding, or brokering of toll free numbers were the subject of a Commission rule making proceeding at the time the actions in question occurred. In that proceeding, the Commission expressed its long- standing policy against the establishment of ownership interests in and the warehousing, hoarding, or brokering of toll free telephone numbers and stated: The Commission has characterized telephone numbers as a public resource that is not the property of the carriers. The Commission has further stated that carriers "do not 'own' codes or numbers, but rather administer their distribution for the efficient operation of the public switched telephone network." Further, the Commission tentatively concluded "that warehousing of toll free numbers by communications service providers subject to Title II of the Communications Act is an unreasonable practice, and, thus, inconsistent with the public interest." Additionally the Commission indicated in the First Report and Order that it relied on the reservation procedures set out in the Industry Guidelines. The Industry Guidelines for Toll Free Number Administration provide: Toll Free numbers are not to be treated as commodities which can be bought or sold, and no individual or entity is granted a proprietary interest in any Toll Free number assigned. Resp Orgs [sic] and Toll Free Service Providers are prohibited from selling, brokering, bartering, or releasing for a fee (or other consideration) any Toll Free number. Reserving, Assigning, or activating (Working) Toll Free numbers by Resp Orgs [sic], Toll Free Service Providers, or Customers for the primary purpose of selling, brokering, bartering, or releasing for a fee (or other consideration) that Toll Free number is prohibited. . . . Reservation, Assignment or Activation (Working) of Toll Free Numbers may only be made by a Resp Org [sic] based upon negotiations with a specific prospective Customer. When the Resp Org [sic] learns of the Customer's decision not to utilize the Reserved or Assigned Toll Free number, the Resp Org [sic] must release the Toll Free number back to Spare status and the pool of numbers available for assignment within 48 hours of Customer notification. On April 11, 1997, the Commission released the Second Report and Order, which set forth the Commission's rules regarding the warehousing and brokering of toll free numbers. The Second Report and Order states: We conclude that warehousing, which is the practice whereby RespOrgs, either directly or through an affiliate, reserve toll free numbers from the SMS database without having identified subscribers for whom they are reserving those numbers, is an unreasonable practice under [section] 201(b) and also is inconsistent with our obligation under [section] 251(e)(1) to ensure that numbers are made available on an equitable basis. It further states: [The Commission] has concluded that hoarding, defined as the acquisition of more toll free numbers than one intends to use for the provision of toll free service, as well as the sale of a toll free number by a private entity for a fee, is contrary to the public interest in the conservation of the scarce toll free number resource and contrary to the [Commission's] responsibility to promote the orderly use and allocation of toll free numbers. TWC's alleged actions at issue in this letter occurred prior to the release of the Second Report and Order. At the time the actions in question occurred, however, TWC, as a RespOrg, was under the obligation to comply with Commission rules and policies in the conduct of its business. The Commission had established policies concerning the management of toll free numbers at the time of the alleged actions. TWC managed the records of The Number in the SMS Database that is administered by DSMI. If TWC managed The Number on behalf of an existing customer, it was under no obligation to reassign The Number to ITT Sheraton upon either ITT Sheraton's or AT&T's request. TWC was obligated, however, in its capacity as a RespOrg, to comply with Commission policies and abstain from attempting to establish an ownership interest in The Number by warehousing, selling, bartering, or brokering it. TWC was obligated to hold toll free numbers only for existing customers that intended to use them. The evidence presented to the Commission by AT&T supports the allegations that TWC attempted to sell The Number, either on behalf of an unidentified customer or itself, thereby attempting to establish an ownership interest in the Number in derogation of its obligations as a RespOrg. We find that TWC's actions in attempting to negotiate the transfer of a toll free number for profit were contrary to the longstanding Commission policy prohibiting the establishment of ownership interests in toll free numbers. Accordingly, pursuant to Sections 4(i), 4(j) and 251(e)(1) of the Act, TWC is hereby strongly admonished for its actions in the manner and on the date(s) described above. We expect TWC to take appropriate corrective measures to cease warehousing, hoarding, or brokering either The Number or any other toll free numbers. We caution TWC that, in accordance with the Commission's findings in the Second Report and Order, further actions of the nature described herein may result in: (1) a finding that TWC has violated Commission rules, which may lead to a forfeiture penalty under Section 503(b) of the Act; (2) a limitation of TWC's allocation of toll free numbers or decertification of TWC as a RespOrg under Sections 251(e)(1) or 4(i) of the Act; and/or (3) a referral of the matter to the Department of Justice to determine whether a fine, imprisonment or both are warranted under Sections 501 or 502 of the Act. Further, if TWC falsely indicates that it has identified subscribers for particular numbers, it may be liable for false statements under Title 18 of the United States Code. This action is taken pursuant to Sections 4(i), 4(j), and 251(e)(1) of the Act, 47 U.S.C.  4(i), 4 (j), 251(e)(1), and the authority delegated by Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91, 0.291. FEDERAL COMMUNICATIONS COMMISSION John B. Muleta Chief, Enforcement Division Common Carrier Bureau