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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
Business Options, Inc. ) EB Docket No. 03-85
) File No. EB-02-TC-151
Order to Show Cause and ) NAL/Acct. No. 200332170002
Notice of Opportunity for ) FRN: 0007179054
Hearing )
)
)
ORDER TO SHOW CAUSE AND
NOTICE OF OPPORTUNITY FOR HEARING
Adopted: March 26, 2003 Released: April 7, 2003
By the Commission:
I. INTRODUCTION
1. In this Order to Show Cause and Notice of Opportunity
for Hearing, we commence an evidentiary hearing to determine
whether: (1) the Commission should revoke the operating authority
of Business Options, Inc. (BOI);1 (2) BOI and its principals
should be ordered to cease and desist from any future provision
of interstate common carrier services without the prior consent
of the Commission; and (3) a forfeiture against BOI is warranted
and, if so, the amount of the forfeiture.
2. As set forth in detail below, it appears that BOI may
have engaged in misrepresentation or lack of candor in responses
submitted to the Commission staff to inquiries that were central
to an investigation of possible slamming violations by BOI2 and
in its application to the Commission for authority to discontinue
its domestic interstate access and interstate long distance
service in Vermont.3 These apparent instances of
misrepresentation or lack of candor, as well as related rule
violations, raise serious questions regarding whether BOI and its
principals are qualified to be certified to provide interstate
telecommunications services. The hearing will address these
questions, as well as whether a forfeiture should be issued to
BOI for violations of Commission rules relating to slamming,
discontinuance of service, and carrier registration.
II. BACKGROUND
3. BOI is a reseller of long distance telephone
service, located in Merrillville, Indiana.4 BOI operates as a
common carrier subject to Title II of the Act. Specifically, BOI
currently provides or has provided resale interstate long
distance telecommunications services to consumers in 46 states.5
Under the regulatory scheme established by the Act and the
Commission's rules, BOI is classified as a nondominant
interexchange carrier.6 As such, it is considered to have
``blanket'' authority to operate domestic common carrier
facilities within the meaning of Section 214 of the Act.7
4. After receiving a high number of consumer
complaints against BOI, the Enforcement Bureau, in cooperation
with the Maine Public Utilities Commission, launched an
investigation into the consumers' allegations of slamming. The
Maine Public Utilities Commission, which has chosen to administer
the Commission's informal slamming complaint rules,8 forwarded
information on BOI's activities to the Enforcement Bureau. On
November 1, 2002, Enforcement Bureau staff sent a Letter of
Inquiry to BOI seeking, among other things, BOI's response to
specific consumer allegations.9 Some of the consumer complaints
against BOI that we received related to allegedly unauthorized
changes in the complainants' preferred carrier to BOI which,
after these complainants objected to these changes and the
numbers were restored to their previous carriers, apparently were
again changed to BOI without the complainants' authorization.
The Letter of Inquiry that our staff sent to BOI and this Order
related to these later changes.
5. On September 12, 2002, BOI signed a
stipulation with the Vermont Department of Public Service to
settle a proceeding in which a Vermont Public Service Board
Hearing Officer concluded that BOI had violated Vermont
regulations by (1) offering services without an approved tariff;
(2) filing misleading corporate registration reports; (3)
engaging in deceptive business practices; (4) failing to provide
customers with a toll free number; (5) failing to file a
discontinuance notice; (6) failing to provide consumers with an
accurate written summary of their service order; and (7)
changing consumers' telecommunications carrier without their
authorization.10 Among other things, the stipulation required
that BOI initiate the procedure outlined in 47 C.F.R. § 63.71 for
terminating service to Vermont customers who currently were being
served by BOI.11 On December 20, 2002, BOI mailed an application
to the Commission for authorization to discontinue its provision
of resold interstate long distance service in Vermont on December
21, 2002 pursuant to section 214(a) of the Act and section 63.71
of the Commission's rules.12 BOI simultaneously filed a request
for waiver of the customer notification requirements set forth in
Section 63.71(a) of the Commission's rules.
A. BOI Responses to Commission Inquiries
6. The Letter of Inquiry to BOI of November 1, 2002
asked a number of questions concerning (1) BOI's corporate
structure, (2) its compliance with Commission registration
requirements under 47 C.F.R. § 64.1195, (3) whether it or its
affiliates, subsidiaries, or agents changed the preferred
carriers of listed complainants after April 1, 2002, and (4) its
telemarketing practices. Among other things, the Letter of
Inquiry asked in Paragraph 3:
[d]uring the period from April 1, 2002 to the present, has
BOI or any of its subsidiaries, affiliates, or any other
entity acting under BOI's control or as its agent, submitted
or executed an order to change the preferred carrier as
specified in the complaints in Attachment A? If so:
...
b. For each affirmative response to Paragraph 3 above,
state who authorized the change in service and the
manner in which the authorization was made and provide
all documents and information related to the
authorization.
c. For each affirmative response to Paragraph 3 above,
describe in detail all steps taken to verify the
consumer's request to change his or her preferred
carrier....13
BOI sent a partial response to the staff's Letter of Inquiry on
December 9, 2002.14
7. In its response to the Letter of Inquiry, BOI
asserted that ``[d]uring this period no one representing BOI has
changed the preferred carrier as specified in the complaints in
Attachment A....'' It therefore did not provide any documents,
including verification tapes or other proof of authorization
related to the complaints. BOI also stated that in only one
instance was it aware of actions of its telemarketers such as are
described by the complainants cited above. Further, BOI did not
answer several of the inquiries, including (1) an inquiry that
BOI provide evidence that it had complied with the registration
requirements pursuant to 47 C.F.R. § 64.1195, and (2) an inquiry
whether BOI or its agents found any instances since April 1,
2002, in which BOI telemarketing employees had changed a
consumer's preferred carrier without asking the consumer whether
he or she wanted to change the preferred carrier and without
mentioning the name of Business Options.15 BOI did state that
all of its telemarketers were BOI employees.16 In addition, in
response to the inquiry requesting ``BOI's corporate structure,
including a description of each affiliate of each subsidiary or
affiliate..and a list of the officers and directors of each
affiliated entity,'' BOI did not list any affiliates or their
officers or directors.17
B. Other Responses to Commission Inquiries
8. Enforcement Bureau staff sent Letters of Inquiry
to the local exchange carriers (LECs) that serve the eight
complainants listed in Appendix A,18 requesting information about
whether there had been any preferred carrier changes since April
1, 2002 for these complainants.19 The responses to the LEC
Letters of Inquiry indicate that preferred carrier changes were
submitted for all of these complainants by Qwest Corporation20
after April 1, 2002, and that subsequently the complainants
received bills on behalf of BOI.21 These responses indicate that
while preferred carrier changes to BOI may have been submitted
before April 1, 2002 for several of the complainants, they were
subsequently changed back to their prior carrier, but then
changed again to BOI after April 1.
C. Evidence Concerning Discontinuance
9.In its Discontinuance Application, BOI stated that it
provides resold service to approximately 200 business customers
in Vermont, and that it has ``reevaluated its long distance
business plan and has concluded that it is in the Company's best
interest, at this time, to streamline its service in Vermont.''22
It attached a Notice to Customers, which, it states, its
customers received on December 10, 2002, and has all the
information requested by the State of Vermont. BOI states that
it ``did not know of FCC requirements to send the letter out
pursuant to 63.71.''23 It also stated that it gave customers
``15 days from the day they received our notification letter to
choose another long distance provider and protest our request for
discontinuance.''24 In fact, the letter does not provide any
notice to customers of their right to protest the discontinuance,
or any of the other requirements contained in section 63.71.
Rather, BOI asked for a waiver of those requirements.25
10. The Vermont Department of Public Service filed a letter
in response to the BOI filings.26 In the letter, Vermont
attaches the Stipulation referred to above, which requires BOI to
``initiate the procedure outlined in 47 CFR § 63.71 for
terminating service to Vermont customers who currently are being
served by BOI.''27 Vermont states that BOI's application is
inaccurate. First, Vermont contends that ``[i]t is stretching
credibility to assert that being told that you can no longer do
business in a state is a strategic business decision.'' Second,
it states that BOI did know of the FCC's section 63.71
requirements because the Stipulation that BOI signed required
that BOI initiate the procedure outlined in section 63.71.
Third, Vermont contends that BOI's Notice did not comply with the
information required by Vermont because the Stipulation required
BOI to follow the Commission's section 63.71 requirements and to
send a notice that differed from the notice that BOI sent to its
customers. Finally, Vermont points out that BOI states its
notice was received by its customers on December 10, providing a
notice period of 11 days before termination on December 21, not
15 days.28 Vermont subsequently provided a letter from BOI
stating, among other things, that all customers were disconnected
on December 21, 2002.29
D. The Slamming Complaints and Verification Tapes
11. All of the consumers who filed the complaints
discussed in this Order (see Appendix A) maintain that they never
authorized BOI to change their preferred carriers. For
illustrative purposes, we will profile two complaints that appear
to be representative of BOI's marketing and verification
practices.
12. On May 16, 2002, Fred and Caroline Michaelis
filed a complaint with the Commission alleging that BOI changed
their preferred long distance carrier from AT&T to BOI without
their authorization.30 In support of that complaint, Mr. and
Mrs. Michaelis also filed a declaration, which stated in part:
In April 2002, I (Caroline) received a telephone
call from a telemarketer inquiring about
Southwestern Bell's long distance calling plan.
The telemarketer offered me lower rates and
consolidation of my telephone bills. I assumed
that this telemarketer was calling from
Southwestern Bell since he did not identify
himself; therefore, I agreed to switch to lower
rates and to the consolidation of my telephone
bills.
Later, AT&T contacted me to inquire about the
switching of my long distance service from them to
Business Options, Inc. I told AT&T that I had not
authorized Business Options, Inc. to be my long
distance service provider.
When I received my residential telephone bill for
May 2002, I was shocked to discover $81 in charges
from Business Options, Inc., who is not my
preferred long distance carrier. My normal monthly
bill from AT&T is $18.66. 31
13. In June 2002, Laurie Hart filed a complaint
with the Maine Public Utilities Commission alleging that BOI had
switched her preferred long distance carrier from AT&T to BOI
without her authorization. In support of that complaint, Ms.
Hart filed a declaration that stated that she was contacted by a
telemarketer who claimed to be an AT&T representative. Ms. Hart
further stated as follows:
The telemarketer stated that AT&T was going to
change my long distance service plan. The
telemarketer asked me if this was okay with me.
I told the AT&T telemarketer that this was okay
with me. I was told by the telemarketer that
someone would contact me later in the day to
verify my approval to the new long distance
service plan. Later on that day, someone did
contact me to verify my conversation with the
telemarketer.
After receiving this telephone call, I received
a letter from AT&T later in the week. AT&T
wanted to know why I had changed my long
distance service to Business Options, Inc. I
contacted AT&T regarding this matter. I told
AT&T about the conversation about the
telemarketer. I also told AT&T that I agreed
only to change my long distance plan, but I
never agreed to switch my long distance service
from them. I requested AT&T to switch my long
distance service back to them. 32
14. The Maine Public Utilities Commission sent us third
party verification tapes that had been sent to that agency by
BOI. In these recordings, the verifier identified himself or
herself, said ``you are authorized and give permission to
Business Options to change the long distance phone service, is
that correct?'', asked the consumer if he or she understood that
the rates would be $4.90 per month and 7 cents per minute, and
asked the consumer to verify the name and address, and to provide
the consumer's date of birth. Some of the tapes, but not all,
specify the telephone number to be changed, and some state that
BOI is not the local phone company.33
III. DISCUSSION
A. Whether BOI Engaged in Misrepresentations or Lack of
Candor to the Commission
15. The duty of absolute truth and candor is a
fundamental requirement for those appearing before the
Commission. Our decisions rely heavily on the completeness and
accuracy of parties' submissions because we do not have the
resources to verify every representation made in the thousands of
pages submitted to us each day.34 For this reason, we are very
disturbed by BOI's apparent misrepresentations or lack of candor.
Despite the fact that BOI's Director of Corporate Affairs
declared that BOI's submissions were ``complete'' and ``true and
correct,'' there were significant material omissions and
erroneous statements in them. Further, there were significant
erroneous statements in BOI's Application for Discontinuance.
The facts suggest that, in making these statements, BOI
intentionally sought to deceive the Commission.35
16. It appears that BOI intentionally provided
incorrect or misleading information to the Commission when it
stated in its response to the most central inquiry in the Letter
of Inquiry that, since April 1, 2002, ``no one representing BOI
...changed the preferred carrier as specified in the complaints
in Attachment A.''36 The initial inquiry asked whether any
preferred carrier changes for the complainants listed in
Attachment A to the Letter of Inquiry were made, not whether
unauthorized changes were made. Indeed, the letter specifically
asked for additional information about how any authorized changes
had been authorized and verified.37 In response, BOI denied that
BOI or its agents had ever ``changed the preferred carrier as
specified in the complaints,'' and BOI did not respond to the
inquiries about whether changes were authorized and verified.
Thus, it appears that BOI's response should be read as a denial
that BOI or its agents had made any preferred carrier changes.
The responses from the local exchange carriers of the consumers
in question appear to show that Qwest Corporation did change the
preferred carrier of these consumers after April 1, 2002, and
that these consumers were subsequently billed for BOI charges.38
The fact that the changes were electronically submitted by Qwest,
rather than directly by BOI, is of no consequence here; the
consumer was billed for BOI service, and Qwest, the carrier whose
services BOI was reselling, was apparently acting as BOI's agent
in transmitting the preferred carrier change to the local
exchange carrier.39 Indeed, Qwest has confirmed that it made
these changes on behalf of BOI. The evidence provided by four
LECs and Qwest, who have no stake in this dispute, supported by
bills and other documentary evidence, appears more credible than
that of BOI, which, as explained below, had an interest in
denying that it had changed consumers' preferred carriers without
their authorization. Based on this evidence, it appears that BOI
gave incorrect information when it stated that neither it nor its
representative made these carrier changes after April 1, 2002.
Further, it appears that BOI further lacked candor by not
providing a response to Enforcement Bureau inquiries as to
whether BOI had complied with the common carrier registration
requirements pursuant to 47 C.F.R. § 64.1195, whether BOI or its
agents found any instances since April 1, 2002 in which BOI
telemarketing employees changed a consumer's preferred carrier
without asking the consumer whether he or she wanted to change
the preferred carrier and without mentioning the name of BOI, and
whether BOI had any affiliates or subsidiaries.40
17. BOI's Application for Discontinuance also
appears to contain other misrepresentations or instances of lack
of candor. First, its statement that it was requesting authority
to discontinue because it had reevaluated its business plan
appears flatly inconsistent with its Stipulation that it was
obligated to seek discontinuance authorization to settle the
proceeding that had been brought against BOI by the Vermont
Department of Public Service.41 Second, its statement that it
did not know of the requirements of section 63.71 appears
inconsistent with its agreement to a Stipulation that expressly
required it to initiate the procedure under section 63.71.42
Third, its statement that its Notice provided all the information
that was required by Vermont also appears inconsistent with the
Stipulation that specifically required BOI to comply with section
63.71 procedures and to send the Notice that was attached to the
Stipulation.43 Fourth, its statement that it had given ``its
customers 15 days from the day they received our notification
letter to choose another long distance provider and protest our
request for discontinuance'' appears inconsistent with its
assertions that the customers received the Notice on December 10
and that BOI would terminate service on December 21.44 That
statement also appears inconsistent with the Notice, which did
not inform customers of their right to protest, as is required by
the notice provisions of section 63.71.
18. It appears that these statements and
omissions constitute misrepresentations or lack of candor, aimed
at deceiving the Commission into believing BOI did not violate
the Act and/or Commission rules. With regard to the apparent
misrepresentation or lack of candor in the response to the Letter
of Inquiry, the evidence provided by the LECs and Qwest (as well
as complainants) appears to show that a truthful answer by BOI
would have contained an admission that it changed the consumers'
preferred carriers, and BOI would have had to prove that such
changes were authorized, which presumably it could not do. By
instead stating that ``no one representing BOI ...changed the
preferred carrier as specified in the complaints in Attachment
A'' after April 1, 2002, BOI apparently intended to convey that
it was in compliance with Section 258 and our related rules, in
an apparent attempt to lead the staff to terminate the
investigation without enforcement action. With regard to the
omissions of required information in BOI's response to the Letter
of Inquiry, it appears that they too were designed to deceive the
staff by hiding inculpatory evidence regarding slamming, failure
to file the required registration statement, and hiding any
illegal acts performed in the names of other companies in which
BOI's principals were officers. With respect to the apparent
misrepresentations in the Application for Discontinuance, motives
to deceive also appear to exist. First, BOI's statement in the
Application for Discontinuance that it was seeking discontinuance
for business reasons appears to be an attempt to hide the fact
that it had been charged with serious violations by the Vermont
Department of Public Service, some of which, such as slamming,
were under investigation by the Commission. The other
misstatements in the application appear to have been aimed at
attempting to excuse BOI's late filing of the Application and its
failure to comply with the notice requirements of the
Commission's rules.
19. We therefore direct the ALJ to determine whether BOI
has made misrepresentations or engaged in lack of candor.
B. Whether BOI Violated Section 258 and the Commission's
Slamming Rules
20. 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."45
Section 64.1120(a)(1) of the Commission's rules prescribes that
no submitting carrier ``shall submit a change on the behalf of a
subscriber . . . prior to obtaining: (i) Authorization from the
subscriber, and (ii) Verification of that authorization in
accordance with the procedures prescribed in this section.''46
The Commission's rules thus expressly bar telecommunications
carriers from changing a consumer's preferred carrier without
first obtaining the consumer's consent, and then verifying that
consent.
21. The Commission's rules provide some latitude
in the methods carriers can use to verify carrier change
requests. The carrier can elect to verify that authorization
through one of three options: obtaining the consumer's written or
electronically signed authorization; setting up a toll free
number for the consumer to call for verification; or obtaining
verification through an independent third party.47 There is no
latitude, however, in the requirement that carriers obtain both
authorization and verification prior to submitting a carrier
change request. For those carriers who use an independent third
party for verification, our rules require that the verification
method confirm at least six things:
the identity of the subscriber; confirmation that
the person on the call is authorized to make the
carrier change; confirmation that the person on the
call wants to make the change; the names of the
carriers affected by the change; the telephone
numbers to be switched; and the types of service
involved.48
Our rules also require that carriers keep audio records of the
verification for a minimum of two years after obtaining such
verification.49 Finally, the Commission's rules require that
where a carrier "is selling more than one type of
telecommunications service ... that carrier must obtain separate
authorization from the subscriber for each service sold.... Each
authorization must be verified separately from any other
authorizations obtained in the same solicitation.''50
22. BOI did not submit any evidence of
authorization or verification regarding the consumer complaints
cited in our Letter of Inquiry. Instead, it stated that ``no one
representing BOI has changed the preferred carrier as specified
in the complaints'' after April 1, 2002.51 Based on the LEC and
Qwest Responses, it appears that preferred carrier changes were
made on behalf of BOI after April 1, 2002, for each of the
customers listed in Appendix A.52 Moreover, all of BOI
telemarketers who apparently initiated these changes were BOI
employees.53Further, each of the consumers complains that they
did not authorize any of the preferred carrier changes to BOI.54
23. It appears that BOI has therefore apparently
failed to meet its burden to rebut complainants' assertions that
BOI changed their preferred carriers in violation of the Act and
the Commission's rules. In this record, BOI appears to have
provided no evidence to justify the preferred carrier changes it
apparently made. There is no need to refer to the tapes BOI
provided to the Maine Public Utilities Commission, since BOI did
not provide these tapes to our staff as justification for their
changes of the consumers' preferred carriers. Even if we
consider the five tapes BOI submitted to the Maine Public
Utilities Commission, however, these tapes show that BOI does not
gather the critical information that our rules require. For
example, the tapes discussed above55 do not confirm in an
acceptable manner that the person is authorized to make the
change and, most significantly, do not confirm the switch of the
authorized carrier. First, the tapes do not verify the names of
the consumers' prior carriers which were affected by the change,
as required under our rules, nor do the tapes of Paul Brackett,
Beatrice Violette, and Laura Crowley verify the telephone number
to be switched. Second, the statement in the tapes by the third
party verifier that ``You are authorized and giving permission to
Business Options to change the long distance phone service,
correct?'' confusingly combines questions as to whether the
person is the authorized decisionmaker and whether the person is
choosing BOI as his or her preferred carrier.56 We do not see
how the consumers can know which question they are answering.57
Finally, in two instances, Paul Brackett and Laura Crowley, it
appears that the consumer did not understand what the verifier
was saying. Paul Brackett only respond ed ``Uh-huh'' to all of
the verifier's questions.58 It appears that such an answer was
not sufficient to permit the verifier to know whether Mr.
Brackett agreed to change service providers. Laura Crowley asked
the verifier whether there would be a change to her phone bill,
and the verifier only replied that she was just verifying what
the telemarketer had told the consumer.59 It appears from this
colloquy that Ms. Crowley believed that her service was not going
to change. It appears that in neither case were the consumer's
answers clear enough to verify that they indeed wanted BOI's
service.
24. The above examples appear to show a pattern
of verification that falls egregiously short of the requirements
in our rules, either because they omit certain requirements or
because they pose questions in such a way that the consumer is
confused and the consumer's intent cannot be verified.
Accordingly, the tapes that BOI submitted to the Maine Public
Utilities Commission do not appear to be sufficient to rebut the
allegations in the complaints that BOI changed the preferred
carriers of the five consumers without proper authorization.
25. For the remaining three complaints that were
filed with the FCC, BOI failed to provide a tape or any other
evidence, beyond its denial that ``no one representing BOI has
changed the preferred carrier as specified in the complaints''
after April 1, to rebut the allegations in the complaints.
Based on this failure, it appears that BOI is liable for
changing the preferred carriers of those consumers without
authorization.60 As we discussed above, our rules require
carriers to keep audio records of third-party verification for a
minimum of two years after obtaining the verification. 61 BOI
has not produced evidence to show that it used third?party
verification or any of the other verification methods that our
rules allow.62 Furthermore, based on the evidence of its
practices shown by the several ``verification'' tapes discussed
above, it is reasonable to assume that any verification BOI
might have obtained would likely fall egregiously short of the
requirements in our rules. Therefore, even if BOI used a
third?party verifier, BOI still would not likely have sufficient
evidence to rebut the allegations in the complaints that it
changed the preferred carriers of the remaining three consumers
without prior authorization.
26. We thus direct the ALJ to determine whether BOI
has willfully or repeatedly violated section 258 of the Act and
the related Commission rules by changing consumer's preferred
carriers without their authorization.
C. Whether BOI Failed to File Registration Statement
27. Section 64.1195 of our rules requires that
any telecommunications carrier providing interstate
telecommunications service on or after the effective date of the
rule (March 1, 2001) shall submit an FCC Form 499-A.63 BOI was a
telecommunications carrier on or after the effective date of the
rule. BOI failed to respond to a request to provide evidence
that it had submitted this report.64 Nor do the Commission's
files contain any evidence that BOI has filed this report. We
therefore find that BOI has apparently failed to file FCC Form
499-A, in violation of section 64.1195. Section 64.1195
specifically provides for revocation of operating authority for
failure to comply with its provisions.
28. We therefore direct the ALJ to determine whether
BOI willfully or repeatedly failed to file a Registration
Statement in violation of section 64.1195.
D. Whether BOI Violated Section 214 of the Act and the
Commission's Related Rules
29. BOI's application for authorization appears to show
that BOI did not meet its obligations as a common carrier to
adequately notify its customers of the discontinuance or seek
Commission approval before it discontinued service, in apparent
violation of section 214(a) of the Act and sections 63.71, and
63.505 of the Commission's rules. Section 214(a) has an
essential role in the Commission's efforts to protect consumers.
Unless the Commission has the ability to determine whether a
discontinuance of service is in the public interest, it cannot
protect customers from having essential services cut off without
adequate warning, or ensure that these customers have other
viable alternatives.65
30. Under the Act and our rules, it is clear that a
telecommunications carrier must receive Commission authorization
and provide the required notice to its customers before it may
discontinue service to those customers.66 The service of
approximately 200 BOI customers in Vermont was apparently
terminated by December 21, 2002.67 It appears that BOI did not
file any application until the day before its discontinuance, and
never gave customers notice of their right to protest. Further,
as stated above, it appears that the reasons that BOI gave for
its failure to comply with Commission rules, i.e., its ignorance
of such rules and its compliance with requirements of the State
of Vermont, were not true. The Stipulation BOI signed with
Vermont was executed in September 2002.68 Therefore, it appears
that at that time BOI knew or should have known that in the near
future, it would have to file an application for discontinuance
and provide notice to its customers. In view of the foregoing
facts, it appears that BOI willfully or repeatedly discontinued
service without Commission authorization in violation of section
214(a) of the Act and sections 63.71 and 63.505 of the
Commission's rules.
31. We therefore direct the ALJ to determine whether
BOI willfully or repeatedly discontinued service without
Commission authorization.
E. Whether BOI Should Remain Authorized to Act as a Common
Carrier
32. It appears that BOI engaged in a pervasive pattern of
misrepresentations or lack of candor to the Commission as well as
violations of the Commission's rules regarding slamming,
discontinuance of service and carrier registration. It thus
appears that the continued operation of BOI as a common carrier
may not serve the public convenience and necessity within the
meaning of Section 214 of the Act. We therefore direct the ALJ
to determine whether the BOI's blanket Section 214 authorization
should be revoked. Further, in light of the egregious nature of
BOI's apparently unlawful activities, we direct the ALJ to
determine whether specific Commission authorization should be
required for BOI, or the principal or principals of BOI, to
provide any interstate common carrier services in the future.69
IV. CONCLUSION
33. In light of the totality of the information now before
us, an evidentiary hearing is warranted to determine whether the
continued operation of BOI as a common carrier would serve the
public convenience and necessity within the meaning of Section
214 of the Act. Further, due to the egregious nature of BOI's
apparently unlawful activities, BOI will be required to show
cause why an order to cease and desist from the provision of any
interstate common carrier services without the prior consent of
the Commission should not be issued. In addition, consistent
with our practice in revocation proceedings, the hearing will
also address whether a forfeiture should be levied against BOI.
V. ORDERING CLAUSES
34. ACCORDINGLY, IT IS ORDERED that, pursuant to Sections
4(i) and 214 of the Communications Act of 1934, as amended, 47
U.S.C. §§ 154(i) and 214, the principal or principals of Business
Options, Inc. ARE DIRECTED TO SHOW CAUSE why the operating
authority bestowed on Business Options, Inc. pursuant to Section
214 of the Communications Act of 1934, as amended, should not be
REVOKED.
35. IT IS FURTHER ORDERED that, pursuant to Section 312(b)
of the Communications Act of 1934, as amended, 47 U.S.C. §
312(b), the principal or principals of Business Options, Inc. ARE
DIRECTED TO SHOW CAUSE why an order directing them TO CEASE AND
DESIST FROM THE PROVISION OF ANY INTERSTATE COMMON CARRIER
SERVICES without the prior consent of the Commission should not
be issued.
36. IT IS FURTHER ORDERED that the hearing shall be held at
a time and location to be specified by the Chief Administrative
Law Judge in a subsequent order. The ALJ shall apply the
conclusions of law set forth in this Order to the findings that
he makes in that hearing, upon the following issues:
(a) to determine whether Business Options, Inc. made
misrepresentations or engaged in lack of candor;
(b) to determine whether Business Options, Inc.
changed consumers' preferred carrier without their
authorization in willful or repeated violation of
section 258 of the Act and sections 64.1100-1190
of the Commission's rules;
(c) to determine whether Business Options, Inc. failed
to file Form FCC 499-A in willful or repeated
violation of section 64.1195 of the Commission's
rules;
(d) to determine whether Business Options, Inc.
discontinued service without Commission
authorization in willful or repeated violation of
section 214 of the Act and sections 63.71 and
63.505 of the Commission's rules;
(e) to determine, in light of all the foregoing,
whether Business Options, Inc.'s authorization
pursuant to section 214 of the Act to operate as a
common carrier should be revoked;
(f) to determine whether, in light of all the
foregoing, Business Options, Inc., and/or its
principals should be ordered to cease and desist
from the provision of any interstate common
carrier services without the prior consent of the
Commission;
37. IT IS FURTHER ORDERED that the Chief, Enforcement
Bureau, shall be a party to the designated hearing. Both the
burden of proceeding and the burden of proof shall be upon the
Enforcement Bureau as to issues (a) through (f) inclusive.
1. 38. IT IS FURTHER ORDERED that, to avail
themselves of the opportunity to be heard, the principal or
principals of Business Options, Inc., pursuant to Section 1.91(c)
of the Commission's rules, SHALL FILE with the Commission within
30 days of the mailing of this Order to Show Cause and Notice of
Opportunity for Hearing a WRITTEN APPEARANCE stating that a
principal or other legal representative from Business Options,
Inc. will appear at the hearing and present evidence on the
matters specified in the Show Cause Order. If Business Options,
Inc. fail to file a written appearance within the time specified,
Business Options, Inc.'s right to a hearing SHALL BE DEEMED TO BE
WAIVED. In the event that the right to a hearing a hearing is
waived, the Presiding Judge, or the Chief, Administrative Law
Judge if no Presiding Judge has been designated, SHALL TERMINATE
the hearing proceeding as to that entity and CERTIFY this case to
the Commission in the regular course of business, and an
appropriate order shall be entered.
39. IT IS FURTHER ORDERED that, if it is determined that
BOI has willfully or repeatedly violated any provision of the Act
or the Commission's rules cited in this Order to Show Cause and
Notice of Opportunity for Hearing, it shall be further determined
whether an Order for Forfeiture shall be issued pursuant to
Section 503(b) of the Communications Act of 1934, as amended,70
in the amount of no more than: (a) $80,000 for each unauthorized
conversion of complainants' long distance service in violation of
47 U.S.C. § 258 and 47 C.F.R. § 64.1120; (b) $3,000 for the
failure to file a sworn statement or a Registration Statement in
violation of a Commission directive and 47 C.F.R. § 64.1195; and
(c) $120,000 for the unauthorized discontinuance of service to a
community in violation of 47 U.S.C. § 214 and 47 C.F.R. §§ 63.71
and 63.505.
40. IT IS FURTHER ORDERED that this document constitutes a
NOTICE OF OPPORTUNITY FOR HEARING pursuant to Section
503(b)(3)(A) of the Communications Act of 1934, as amended, 47
U.S.C. § 503(b)(A), for the potential forfeiture liability
outlined above.
41. IT IS FURTHER ORDERED that a copy of this ORDER TO SHOW
CAUSE AND NOTICE OF OPPORTUNITY FOR HEARING shall be sent by
certified mail, return receipt requested, to Kurtis Kintzel,
President and Chairman of the Board of Business Options, Inc.,
8380 Louisiana Street, Merrillville, Indiana 46410-6312.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
APPENDIX A
Complainants Telephone Number Date of Change
of Preferred Carrier
Barbara Beeson 217-932-5584 4/23/02
Paul Brackett 207-474-2170 5/22/02
c/o Bruce Brackett
Norman Crowley 207-375-8155 4/8/02
Ida Guptill 207-698-1850 4/8/02
Bessie Goodbrake 660-885-3139 4/17/02
c/o Sylvia Jane Stack
Laurie Hart 207-862-6202 5/9/02
Fred and Caroline Michaelis 636-479-4324 4/24/02
Beatrice Violette 207-564-2478 4/22/02
_________________________
1 For purposes of this order, ``BOI'' refers to BOI, Buzz
Telecom, and US Bell, including any affiliates, successors or
assigns.
2 Letter from Colleen K. Heitkamp, Chief, Telecommunications
Consumers Division, Enforcement Bureau, FCC, to Legal
Department, BOI (Nov. 1, 2002) (Letter of Inquiry). ``Slamming''
is the submission or execution of an unauthorized change in a
subscriber's selection of a provider of telecommunications
service. See generally 47 U.S.C. § 258; 47 C.F.R.
§§ 64.1100?64.1195.
3 BOI Section 63.71 Application (Dec. 20, 2002) (BOI
Discontinuance Application).
4 BOI's principal place of business is 8380 Louisiana Street,
Merrillville Indiana 46410. It is an Illinois corporation, 98%
owned by Kurtis Kintzel and Keanan Kintzel. Letter from Shannon
Dennie, BOI, to Peter Wolfe, FCC (Dec. 9, 2002)(BOI Response).
It also appears that both Kurtis Kintzel and Keanan Kintzel are
or have been officers in US Bell Corporation and Buzz Telecom
Corporation, which entities have the same address as BOI. BOI
Response; LexisNexis Business Summary Report, U.S. Bell Comm.
(Feb. 24, 2003); Lexis/Nexis Personal Report on Kurtis Kintzel
and Keanan Kintzel (Feb. 24, 2003). For purposes of this NAL,
the term ``BOI'' refers to BOI, Buzz Telecom and US Bell,
including any affiliates, successors or assigns.
5 BOI Discontinuance Application.
6 See CCN, Inc., et al., Order to Show Cause and Notice of
Opportunity for Hearing, 12 FCC Rcd 8547 (1997)(CCN).
7 Id.
8 See Implementation of the Subscriber Carrier Selection Changes
Provisions of the Telecommunications Act of 1996, First Order on
Reconsideration, 15 FCC Rcd 8158, 8169-79 (2000) (establishing
guidelines for state administration of the informal slamming
complaint rules).
9 Letter of Inquiry.
10 Letter from Sarah Hofmann, Vermont Department of Public
Service, to Marlene H. Dortch, Secretary, FCC (Jan. 3, 2003)
(Vermont Letter).
11 Id.
12 BOI Discontinuance Application. The application was stamped
received by the Commission's Mail Room on December 27, 2002.
13 Letter of Inquiry.
14 BOI Response.
15 BOI Response.
16 BOI Response.
17 BOI Response.
18 Appendix A contains a list of complainants who have signed
declarations under penalty of perjury.
19 Letter from Colleen K. Heitkamp, Chief, Telecommunications
Consumers Division, Enforcement Bureau, FCC, to Toni Acton, SBC
Communications, Inc. (Nov. 20, 2002); Letter from Colleen K.
Heitkamp, Chief, Telecommunications Consumers Division,
Enforcement Bureau, FCC, to Suzanne Carmel, Manager, Regulatory
Affairs, Verizon (Nov. 20, 2002); Letter from Colleen K.
Heitkamp, Chief, Telecommunications Consumers Division,
Enforcement Bureau, FCC, to Joyce Walker, Sprint Corporation
(Nov. 20, 2002); Letter from Colleen K. Heitkamp, Chief,
Telecommunications Consumers Division, Enforcement Bureau, FCC,
to Chad Young, Hampden Telephone Company (Nov. 21, 2002)(LEC
Letters of Inquiry).
20 See infra fn. 36 and accompanying text. Qwest Corporation has
confirmed that these preferred carrier changes were submitted on
behalf of Business Options, doing business as US Bell. Letter
from Richard Denny, Qwest Communications, to Sharon D. Lee, FCC
(Feb. 19, 2003) (Qwest Letter). The Letter of Inquiry sought
information concerning ``Business Options, Inc., any affiliate,
d/b/a, parent companies, any wholly or partially owned
subsidiary, or other affiliated companies or businesses, and all
directors, officers, employees, or agents, including consultants
and any other persons working for or on behalf of the foregoing
at any time during the period covered by this letter.''
21 Letter from Terri L. Hoskins, SBC, to Peter G. Wolfe, FCC
(Dec. 9, 2002); Letter from Marie T. Breslin, Director, Federal
Regulatory, Verizon, to Peter G. Wolfe, FCC (Dec. 9, 2002);
Letter from Mary turner, Vice President, Service Operations,
Sprint, to Peter G. Wolfe, FCC (Dec. 4, 2002); Letter from Chad
t. Young, General Manager-Sales & Service, Hampden, Warren, the
Islands, Maine, TDS Telecom, to Peter G. Wolfe, FCC (Dec. 2,
2002)(LEC Responses). SBC requested confidential treatment of
the customer information contained in its response, but
subsequently withdrew its confidentiality request to the extent
the response related to the date of the preferred carrier
change, and filed a redacted response, containing only that
information. Letter from Jackie Flemming, SBC, to Peter G.
Wolfe, FCC, dated January 31, 2002.
22 BOI Discontinuance Application.
23 Id.
24 Id.
25 BOI Request for Waiver (December 20, 2002).
26 Vermont Letter.
27 Id.
28 Id.
29 Letter from Shannon Dennie, BOI, to Sarah Hoffman, Vermont
Department of Public Service (Jan. 8, 2003) ((BOI Letter to
Vermont). This letter states that it sent the letter to
customers on December 6, 2002.
30 Complaint dated May 16, 2002, from Fred and Caroline
Michaelis, filed with the FCC.
31 Declaration of Fred and Caroline Michaelis, dated Oct. 11,
2002.
32 Declaration of Laurie Hart, dated January 13, 2003. One
other complainant, Barbara Beeson, alleged that the telemarketer
led her to believe that she was calling on behalf of Verizon,
the complainant's preferred local and long distance telephone
service provider. Declaration of Barbara Beeson, dated November
25, 2002.
33 See tapes of Paul Brackett, Laura Crowley, Ida Guptil, Laurie
Hart, Beatrice Violette.
34 See, e.g., Swan Creek Communications v. FCC, 39 F. 3d 1217,
1222 (D.C.Cir 1994); RKO General, Inc. v. FCC, 670 F.2d 215, 232
(D.C.Cir 1981), cert. denied, 456 U.S. 927 and 457 U.S. 1119
(1982).
35 Intent to deceive is an essential element of
misrepresentation or lack of candor. See, e.g., Swan Creek, 39
F. 3d at 1222; Garden State Broadcasting Ltd. P'ship v. FCC, 996
F. 2d 386, 393 (D.C. Cir. 1993); Policy Regarding Character
Qualifications In Broadcast Licensing and Amendment of Rules of
Broadcast Practice and Procedure Relating to Written Responses
to Commission Inquiries and the Making of Misrepresentations to
the Commission by Permittees and Licensees,102 FCC 2d 1179, 1196
(1986); Fox River Broadcasting Company, Inc., 93 FCC 2d 127, 129
(1983).
36 BOI Response.
37 Paragraph 3 of the Letter of Inquiry required that if BOI
answered the initial inquiry by acknowledging that it had made
the preferred carrier changes specified in the complaints, it
should then say how the carrier changes were authorized and
verified. See para. 6, supra.
38 LEC Responses.
39 See Implementation of the Subscriber Carrier Selection Changes
Provisions of the Telecommunications Act of 1996 and Policies and
Rules Concerning Unauthorized Changes of Consumers Long Distance
Carriers, 14 FCC Rcd 1508, 1564-65 (1998) (finding that a
reseller which is responsible for the submission of unauthorized
carrier change requests has the obligations of the submitting
carrier where the underlying carrier submits the request on the
reseller's behalf).
40 BOI Response. In addition, a search of Commission files by
our staff does not show that any FCC Form 499-A required by
Section 64.1195 was ever filed by BOI. See also n. 4.
41 See BOI Discontinuance Application; Vermont Letter.
42 See BOI Discontinuance Application; Vermont Letter.
43 See BOI Discontinuance Application; Vermont Letter.
44 BOI Discontinuance Application.
45 47 U.S.C. § 258.
46 47 C.F.R. § 64.1120(a)(1).
47 Id. § 64.1120(c).
48 Id. § 64.1120(c)(3)(iii).
49 Id. § 64.1120(c)(3)(iv).
50 Id. § 64.1120(b).
51 BOI Response.
52 LEC Responses; Qwest Letter.
53 BOI Response.
54 See, e.g., Verizon Response dated December 9, 2002.
55 See fn. 31, supra.
56 It is especially important for the verification procedure to
be clear where, as here, consumers have alleged that they have
been misled by the telemarketers. These unrebutted allegations
were made by Laurie Hart, who stated that the telemarketer
claimed to be a representative of AT&T; Caroline Michaelis, who
stated that the telemarketer led her to believe that the
telemarketer was calling from Southwestern Bell; and Barbara
Beeson, who alleged that the telemarketer led her to believe
that the telemarketer was calling on behalf of Verizon.
Declarations of Laurie Hart, Fred and Caroline Michaelis, and
Barbara Beeson.
57 See WebNet Communications, Inc., 17 FCC Rcd 13874 (2002).
58 See Tape of Paul Brackett.
59 See Tape of Laura Crowley.
60 See Vista Services Corporation, Order of Forfeiture, 15 FCC
Rcd 20646, 20649 (2000), recon. denied, 16 FCC Rcd 8289 (2001).
61 47 C.F.R. § 64.1120(c)(3)(iv).
62 As we discuss above, our rules allow carriers to verify
carrier change authorization in one of three ways: obtaining
the consumer's written or electronically signed authorization;
setting up a toll free number for the consumer to call for
verification; or obtaining authorization through an independent
third party. See 47 C.F.R. § 64.1120(c).
63 47 C.F.R. § 64.1195.
64 See Letter of Inquiry; BOI Response.
65 See Implementation of Section 402(b)(2)(A) of the
Telecommunications Act of 1996 and Petition for Forbearance of
the Independent Telephone & Telecommunications Alliance, Report
and Order in CC Docket No. 97-11 and Second Memorandum Opinion
and Order in AAD File No. 98-43, 14 FCC Rcd 11364, 11380-81
(1999).
66 47 U.S.C. § 214(a); 47 C.F.R. §§ 63.71, 63.505.
67 BOI Letter to Vermont. According to BOI, after receiving the
notice, approximately 100 of these customers had called to
inquire about the notice or to seek immediate disconnection.
68 See Vermont Letter.
69 See CCN, 12 FCC Rcd 8547.
70 47 U.S.C. § 503(b).