******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of) )File No. ENF-97-003 LDS, Inc.) )NAL/Acct. No. 716EF0002 Apparent Liability for Forfeiture) NOTICE OF APPARENT LIABILITY FOR FORFEITURE Adopted: December 12, 1996; Released: December 17, 1996 By the Chief, Common Carrier Bureau: I. INTRODUCTION 1.By this Notice of Apparent Liability for Forfeiture ("NAL"), we initiate enforcement action against Long Distance Services, Inc. ("LDS, Inc."). For the reasons discussed below, we find that LDS, Inc. apparently willfully violated Commission rules and orders by changing the primary interexchange carriers ("PICs") designated by the complainants identified below without their authorization. Based upon our review of the facts and circumstances surrounding the violations, we find that LDS, Inc. is apparently liable for a forfeiture in the amount of eighty thousand dollars ($80,000). II. BACKGROUND 2.In its Allocation Order and subsequent Reconsideration Order and Waiver Order, the Commission set forth rules and procedures for implementing equal access and customer presubscription to an interexchange carrier ("IXC"). The Commission's original allocation plan required IXCs to have on file a letter of agency ("LOA") signed by the customer before submitting PIC-change orders to the local exchange carrier ("LEC") on behalf of the customer. After considering claims by certain IXCs that this requirement would stifle competition because consumers would not be inclined to execute the LOAs even though they agreed to change their PIC, the Commission later modified the requirement to allow IXCs to initiate PIC changes if they had "instituted steps to obtain signed LOAs." When it continued to receive a large number of complaints concerning unauthorized PIC changes, the Commission revised its rules again in 1992. Specifically, while the Commission recognized the benefits of permitting a telephone- based industry to rely on telemarketing to solicit new business, it required IXCs to institute one of the following four confirmation procedures before submitting PIC-change orders generated by telemarketing: (1) obtain the consumer's written authorization; (2) obtain the consumer's electronic authorization by use of an 800 number; (3) have the consumer's oral authorization verified by an independent third party; or (4) send an information package, including a prepaid, returnable postcard, within three days of the consumer's request for a PIC change, and wait 14 days before submitting the consumer's order to the LEC, so that the consumer has sufficient time to return the postcard denying, cancelling, or confirming the change order. Hence, the Commission's rules and orders currently require that IXCs either obtain a signed LOA or, in the case of telemarketing solicitations, complete one of the four telemarketing verification procedures before submitting PIC-change requests to LECs on behalf of consumers. 3. Because of its continued concern over unauthorized PIC changes, the Commission recently prescribed the general form and content of the LOA used to authorize a change in a customer's primary long distance carrier. The Commission's current rules prohibit the potentially deceptive or confusing practice of combining the LOA with promotional materials in the same document. The rules also prescribe the minimum content of LOAs, require that they be written in clear and unambiguous language, prohibit all "negative option" LOAs, and require that LOAs be completely translated if they employ more than one language. III. THE COMPLAINTS 4.This forfeiture action is based on the staff's investigation of two consumer complaints involving allegations of slamming by LDS, Inc. that were filed with the Commission on July 15, 1996 and August 24, 1996. The first complainant alleges that LDS, Inc. converted her long distance service provider without her authorization through the apparent use of a falsified or forged LOA. The second complainant did not understand that the raffle ticket she signed was an LOA and claims that the language on the ticket did not indicate that her IXC would be switched from MCI to LDS, Inc. Both of the complaints are described more fully below. A. Karen S. Putnam 5.On July 19, 1996 the Commission received a written complaint from Karen S. Putnam alleging that LDS, Inc. had converted her presubscribed long distance service provider from AT&T Communications ("AT&T") to LDS, Inc. without her authorization. According to Putnam, she first learned of the switch when she received notice from her local carrier, NYNEX, on her June 1996 phone bill. Upon contacting LDS, Inc. for an explanation of the conversion, she received a copy of an LOA purporting to bear her signature. Putnam states that the signature on the LOA is not hers and that it reflects her maiden name, which she has not used since she was married eight years ago. Further, she points out that an improper zip code appears on the LOA. Putnam attached true copies of her signature as it appears on both a cancelled check and her driver's license. 6.On August 13, 1996 the Common Carrier Bureau's Consumer Protection Branch directed LDS, Inc. to provide specific information regarding the conversion of Putnam's phone. To date, it has not responded to the Commission's notice as required by Section 1.717 of the Commission's rules, 47 C.F.R.  1.717, and Section 416 (c) of the Act, 47 U.S.C.  416 (c). B. Benjamen Wetherill 7.Benjamen Wetherill filed a written complaint with the Commission dated August 28, 1996 alleging that LDS, Inc. had converted his presubscribed long distance service provider from MCI Communications, Inc. ("MCI") to LDS, Inc. without his authorization. When Wetherill called Integretel, LDS, Inc.'s billing agent, to determine why his long distance carrier had been changed, he was told that his wife had signed an LOA authorizing the change. Upon receiving a copy of the LOA from Integretel, Wetherill admits that his wife's signature appears on the LOA, but he does not believe that when she signed it, it contained any language changing their long distance carrier. Wetherill and his wife only remember that she signed a raffle ticket to win a Ford Explorer, and that some of the raffle money would be donated to the "Hugs not Drugs Campaign." The Wetherills submitted a copy of the LOA with their complaint. 8.On September 17, 1996 the Common Carrier Bureau's Consumer Protection Branch directed LDS, Inc. to provide specific information regarding the conversion of the Wetherill's telephone service. In its response, LDS, Inc. states that although it received a "valid" LOA from the Wetherills, upon their request, LDS, Inc. would "re-rate" their phone bill to the previous carrier's rates if those rates were less expensive. IV. DISCUSSION 9.We have evaluated the information submitted in connection with the Putnam and Wetherill informal complaints and conclude that LDS, Inc. is apparently liable for forfeiture for willful violations of the Commission's rules and PIC change requirements. LDS, Inc's use of the LOAs in question are particularly egregious. It appears that on or about May 13, 1996 and July 10, 1996, LDS, Inc. submitted PIC change requests to NYNEX and Bell Atlantic based upon apparently forged or unlawful LOAs, resulting in the conversion of Putnam's and Wetherill's telephone service from AT&T and MCI to LDS, Inc. 10.The statements and information provided by Putnam indicate that the LOA was not executed by Putnam and that LDS, Inc. lacked the requisite authorization to request a PIC change in her long distance service. The LOA bears Putnam's maiden name, although she states that she has not used it in eight years. It also indicates the incorrect zip code. The most casual comparison of Putnam's signature on the LOA and the signatures she provided to the Commission indicates that they are not similar. Under these circumstances, we conclude that LDS, Inc.'s apparent actions were in willful violation of the Commission's PIC change rules and orders and that a forfeiture penalty is appropriate. 11.Regarding the Wetherill complaint, we find the LOA used by LDS, Inc. to convert Wetherill's long distance service to be in violation of our rules. Section 64.1150, 47 C.F.R.  64.1150, requires interexchange carriers to obtain necessary written authorization from subscribers for a primary interexchange carrier change by using a letter of agency that complies with specific provisions enumerated in that rule. Section 64.1150 further provides that: (b) The letter of agency shall be a separate document (an easily separable document containing only the authorizing language described in paragraph (e) of this section) whose sole purpose is to authorize an interexchange carrier to initiate a primary interexchange carrier change . . . (c) The letter of agency shall not be combined with inducements of any kind on the same document. . . . (e) At a minimum, the letter of agency must be printed with a type of sufficient size and readable type to be clearly legible and must contain clear and unambiguous language that confirms: . . . (4) That the subscriber understands that only one interexchange carrier may be designated as the subscriber's interstate primary interexchange carrier for any one telephone number. To the extent that a jurisdiction allows the selection of additional primary interexchange carriers (e.g., for intrastate or international calling), the letter of agency must contain separate statements regarding these choices . . . 12.The Wetherill LOA violates Section 64.1150 in several ways. Although Section 64.1150(b) does not allow an LOA to be contained in the same document with language that has nothing to do with authorizing a PIC change, the Wetherill LOA is combined with language stating: "Yes. I want to qualifty for four hours of free long distance and I would like LDS Inc. to donate a part of my monthly long distance bill to the Hugs not Drugs campaign." Section 64.1150(c) further prohibits combining an LOA with inducements of any kind. Both the opportunity to qualify for four free hours of long distance service and the contribution of part of the subscriber's monthly phone bill to a charity are inducements that should not be included in an LOA. Finally, Section 64.1150(e)(4) requires that an LOA allowing the selection of additional interexchange carriers, e.g., for intrastate calls, must contain separate statements regarding this choice. The Wetherill LOA combines the selection of a new long distance carrier with the selection of new intraLATA service in the same sentence, in clear violation of the requirement that they appear in separate statements. 13. Furthermore, we note that the Wetherill's confusion regarding the actual purpose and consequence of signing what they believed to be a raffle drawing to win a new truck is compelling testimony in support of Commission rules requiring that LOAs be separate or severable documents. These rules were designed to prohibit certain deceptive or confusing marketing practices and reduce consumer confusion over the use and function of the LOA. In this case, the Wetherills did not realize that their long distance service would be changed by filling out the raffle. Although no direct reference to winning a new truck appears on the LOA, the Wetherills state that they filled out and signed the LOA believeing that they were entering a raffle sponsored by the Hugs not Drugs Campaign to win a Ford Explorer. LDS, Inc., in direct violation of Commission rules, designed its LOA as a single, non-severable entry form that changes the entrant's long distance carrier, insinuates an opportunity to win a new car, and promises to donate money from the entrant's monthly long distance bill to the Hugs not Drugs Campaign. Under these circumstances, we conclude that LDS, Inc.'s apparent actions were in willful violation of the Commission's PIC change rules and orders and that a forfeiture penalty appears appropriate. 14.As a general matter, the unauthorized conversion of a customer's presubscribed long distance carrier continues to be a wide-spread problem in the industry. We are particularly troubled by what appears to be a common practice by some IXCs of relying on unverified LOAs, which turn out to be falsified or forged, to effect changes in consumers' long distance service. We are equally concerned with the use of confusing and misleading LOAs in conjunction with contests, in violation of Commission rules designating proper LOA content. The pervasiveness of these problems suggests that our current administration of the law has not produced sufficient deterrence to noncompliance and the carriers have little incentive to curtail practices that lead to consumer complaints. Furthermore, as a practical matter, many carriers' responses to Commission Notice of Informal Complaint rarely provide detailed explanations or justifications of the carrier's actions. Therefore, to draw the industry's attention to the seriousness of the problem and to provide incentives to comply with the Commission's rules and orders, we intend to scrutinize consumer complaints and to take prompt enforcement action, including the imposition of substantial monetary fines, when the facts indicate that a carrier has failed to take the necessary steps to ensure that LOAs are valid and duly authorized. If carriers intend to rely on a LOA to request a PIC change, they will be responsible for ensuring its validity and comply with our rules designating LOA form and content. 15.Section 503(b)(2)(B) of the Communications Act authorizes the Commission to assess a forfeiture of up to one hundred thousand dollars ($100,000) for each violation, or each day of a continuing violation, up to a statutory maximum of one million dollars ($1,000,000) for a single act or failure to act. In exercising such authority, the Commission is required to take into account "the nature, circumstances, extent, and gravity of the violation and, with respect to the violator, the degree of culpability, and history or prior offenses ability to pay, and such other matters as justice may require." For purposes of determining an appropriate forfeiture penalty in this case, we regard the conversion of Putnam's and Wetherill's phone lines as two separate violations. After weighing the circumstances surrounding each violation, we find that LDS, Inc. is liable for a forfeiture of forty thousand dollars ($40,000) for the unauthorized conversion of each complainants' long distance service, resulting in a total forfeiture of eighty thousand dollars ($80,000). LDS, Inc. will have the opportunity to submit evidence and arguments in response to this NAL to show that no forfeiture should be imposed or that some lesser sum should be assessed. We will give full consideration to any financial information provided by LDS, Inc. before assessing a final forfeiture amount. VI. CONCLUSIONS AND ORDERING CLAUSES 16.We have carefully reviewed the information obtained through our investigation and conclude that during July of 1996, LDS, Inc. apparently converted, or caused a local exchange carrier to convert, Karen Putnam's telephone line without her authorization. We further determine that LDS, Inc. thereby apparently willfully violated Commission rules governing primary interexchange carrier conversions by apparently forging Karen Putnam's name to an LOA and that its conduct warrants a forfeiture in the amount of forty thousand dollars ($40,000). 17.We further conclude that LDS, Inc. employed improper, misleading language in its LOAs and that during August of 1996, it apparently converted or caused a local exchange carrier to convert Benjamen Wetherill's telephone line utilizing an invalid LOA. In so doing, we find that LDS, Inc. thereby apparently willfully violated Section 64.1150 of the Commission rules governing proper LOA content and that its conduct warrants a forfeiture in the amount of forty thousand dollars ($40,000). 18.Accordingly, IT IS ORDERED, pursuant to Section 503(b) of the Communications Act of 1934, as amended, 47 U.S.C.  503(b), Section 1.80 of the Commission's rules, 47 C.F.R.  1.80, and the authority delegated in Section 0.291of the Commission's rules, 47 C.F.R.  0.291, that LDS, Inc. IS HEREBY NOTIFIED of an Apparent Liability of Forfeiture in the amount of eighty thousand dollars ($80,000) for its willful or repeated violation of the Commission's PIC-change rules and orders. 19.IT IS FURTHER ORDERED, pursuant to Section 1.80 of the Commission's rules, 47 C.F.R.  1.80, that within 30 days of the release of this Notice, LDS, Inc. SHALL PAY the full amount of the proposed forfeiture OR SHALL FILE a response showing why the proposed forfeiture should not be imposed or should be reduced. 20.IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability SHALL BE SENT by certified mail to Craig Gerhardt, LDS, Inc., 50 West Big Beaver Road, Troy, Michigan 48084. FEDERAL COMMUNICATIONS COMMISSION Regina M. Keeney Chief, Common Carrier Bureau