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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-97-02 Telephone Publishing Corporation ) and Telemedia Network, Inc. d/b/a ) International Telnet ) ) NAL/Acct. No. 716EF0001 ) Apparent Liability for Forfeiture ) Notice of Apparent Liability for Forfeiture Adopted: April 15, 1997 ; Released: April 18, 1997 By the Chief, Common Carrier Bureau: I. INTRODUCTION 1. By this Notice of Apparent Liability for Forfeiture ("NAL"), we initiate enforcement action against Telephone Publishing Corporation and Telemedia Network, Inc. d/b/a International Telnet (collectively referred to as "International Telnet"). For the reasons discussed below, we find that International Telnet apparently willfully or repeatedly provided information services through certain 800 numbers in violation of the Telephone Disclosure and Dispute Resolution Act ("TDDRA") and Part 64 of the Commission's rules. Based upon our review of the facts and circumstances surrounding the violations, we find that International Telnet is apparently liable for a forfeiture in the amount of forty-nine thousand dollars ($49,000). II. BACKGROUND 2. Pay-per-call services, also known as "audiotext" or "900" services, provide telephone users with a variety of recorded and interactive information programs for which they are charged rates different from, and usually higher than, the normal transmission rates for ordinary telephone calls. The Commission first adopted regulations governing interstate pay-per-call services in 1991 to address complaints from consumers of widespread abusive practices involving 900 services. Among other protective measures, the Commission: (1) required that pay-per-call programs begin with a preamble disclosing, inter alia, the cost of the services, and affording the caller an opportunity to hang up before incurring charges; (2) required local exchange carriers (LECs) where technically feasible, to offer telephone subscribers the option of blocking access to 900 numbers; and (3) prohibited common carriers from disconnecting basic telephone service for failure to pay pay-per- call charges. 3. To expand upon this regulatory framework, Congress enacted the TDDRA in 1992. The statute required both the Commission and the Federal Trade Commission (FTC) to adopt rules intended to increase consumers' protection from fraudulent and deceptive practices and promote the development of legitimate pay-per-call services. In response to complaints from consumers, businesses, and organizations alleging that they had been billed for calls made from their phones to toll-free numbers, the TDDRA also mandated explicit restrictions on the use of 800 and other toll- free numbers to provide information services. 4. On July 15, 1993 the Commission adopted a Report and Order amending its pay-per- call regulations to be consistent with the TDDRA's statutory mandate. The new rules required that all interstate services within the TDDRA's definition of "pay-per-call" be provided through 900 numbers. The TDDRA, however, specifically exempted three categories of information services from the definition of pay-per-call status and, thus, from the attendant obligations: directory services provided by a common carrier or its affiliate or by a local exchange carrier or its affiliate, or any service the charge for which is tariffed, or any service for which users are assessed a charge only after entering into a presubscription or comparable agreement with the provider of such service. These statutory exclusions might have created incentives for information providers (IPs) to tailor their services to fit within these exclusions in order to avoid pay-per-call regulation. 5. The abuses involving presubscribed information services and tariffed-service schemes described above deprive consumers of several important safeguards that the Commission has determined are necessary to ensure that consumers are fully informed about the information services they choose to purchase and are able to block access to unwanted services from their telephone lines. The full panoply of protective measures applicable to pay-per-call services under the TDDRA are not available to consumers if IPs structure certain information services to fit, ostensibly, within exemptions to pay-per-call status. Moreover, because these services are not offered through 900 numbers, telephone subscribers are unable to block their access to such services. In addition, because the FTC requires an informative preamble only for pay-per-call services, callers to toll-free and other numbers used for presubscribed or tariffed information services may not receive information about the cost of a call or be afforded an opportunity to hang up without incurring charges. Finally, because charges for calls to these information services may be billed as ordinary communications services on a monthly telephone bill, consumers may face disconnection of local and long-distance telephone service for failure to pay charges. 6. Section 228(c) and Section 64.1504 of the Commission's rules generally prohibit the use of 800 numbers, or any other number "advertised or widely understood to be toll-free", to charge callers for information services. For purposes of this investigation, the relevant statutory provision states that: (c) Within 270 days after the date of enactment of this section, the Commission shall, by regulation, establish the following requirements for common carriers: *** (7) Billing for 800 Calls. A common carrier shall prohibit by tariff or contract the use of any 800 telephone number or other telephone number advertised or widely understood to be toll free, in a manner that would result in- *** (D) the calling party being called back collect for the provision of audio information services or simultaneous voice conversation services. The applicable provision of Section 64.1504(d) of the Commission's rules provides that: Common carriers shall prohibit, by tariff or contract, the use of any telephone number beginning with an 800 service access code, or any other telephone number advertised or widely understood to be toll free, in a manner that would result in: *** (d) The calling party being called back collect for the provision of audio or data information services, simultaneous voice conversation services, or products. 7. Even with these safeguards, carriers and IPs are still free to use 800 numbers to provide a wide variety of information services. For example, information services charged on a per- call basis may be made using 800 numbers when they are charged to a credit or charge card or provided under a written presubscription arrangement. Thus, the safeguards simply recognize the significant governmental interest in shielding consumers from deceptive practices associated with a service that the public widely perceives as free. III. THE INVESTIGATION 8. After receiving complaints from the public about International Telnet, the Formal Complaints and Investigation Branch of the Common Carrier Bureau ("Branch") initiated this investigation. At the Branch's direction, a field office representative of the Commission's Compliance and Information Bureau ("CIB") placed a total of 15 calls to 800 numbers on October 4, 8, and 9, 1996. CIB tape-recorded each of the calls to the 800 numbers, as well as the collect callbacks they generated. These calls can be divided into two separate, yet related, categories, both of which involve violations of the TDDRA and the Commission's rules. 9. In the first category of 800 calls, the caller was greeted by a recording offering adult entertainment. After being thanked for calling International Telnet, the caller was given the option to pay for the call to the ". . .beautiful blonde women of Sweden" by charging it to the caller's credit card by pressing "2" or by charging it to the caller's phone by pressing "1". Upon electing to charge the call to the originating phone, the caller was told that "all the snow bunnies are tied up right now" but that if the caller hangs up, her or she will be called back collect. Upon hanging up the phone, the caller was promptly called back collect for the provision of an audio information service. 10. The second category of 800 calls also involved adult entertainment. After being informed that the caller must be 18 years-old to continue, the caller was offered the option of charging the call to a credit card by using the key pad to punch in the credit card number. The caller was assured that the call, which costs "as little as" $2.99 a minute, will be discreetly billed on the credit card bill as "Frontier". If the caller did not wish to be billed to a credit card, he or she was given another 800 number to call. Upon calling the new 800 number, the caller was greeted by the exact message received from the first category of calls detailed above, in which the caller was thanked for calling International Telnet. The same option of billing the call to the caller's phone was offered, and after selecting to do so, the caller was again told that all lines were busy and that the caller would be called back collect. The caller received a collect callback for the provision of an audio information service almost immediately. IV. DISCUSSION 11. We have evaluated the information submitted in connection with the informal complaints filed against International Telnet, as well as the information compiled by the Branch's independent investigation. Based upon this evaluation, the Bureau concludes that International Telnet apparently willfully or repeatedly violated Section 228(c)(7)(D) of the Act and Section 64.1504(d) of the Commission's rules by failing to prohibit, by tariff or contract, the use of 800 numbers in a manner that resulted in the calling party being called back collect for the provision of information services. The violations are particularly egregious because they transgress the clear meaning and purpose of the statute and the Commission's rules. 12. In the first category of calls where the party calls an 800 number, is thanked for calling International Telnet, and is called back collect after choosing to have the call billed to the caller's phone, we find one violation for each of the six calls placed. Both the TDDRA, 47 U.S.C.  228(c)(7)(D), and the Commission's rules, 47 C.F.R.  64.1504(d), specifically require that a carrier prohibit, by contract or tariff, the use of 800 numbers to call a party back collect for the provision of audio information services or simultaneous voice conversation services. International Telnet has failed to prohibit by contract or tariff the use of 800 numbers that result in collect callbacks because International Telnet is actively engaging in the prohibited activity. International Telnet's misuse of the 800 numbers goes to the very heart of the Commission's concern with deceptive practices associated with a service that the public widely perceives to be free. 13. In regard to the second category of 800 calls where the caller is first offered the option of charging the call to a credit card or if the caller chooses not to do so, is given a different 800 number, we find that the second 800 number, which results in a collect callback, violates the provisions of the TDDRA and the Commission's rules that require a carrier prohibit by contract or tariff the use of 800 numbers to call a party back collect for the provision of audio information services or simultaneous voice conversation services. Because each of the six 800 numbers called leads to the same collect callback 800 number, the Commission will treat the calls as one repeated violation. The collect callback 800 number has the same message and options as the 800 numbers called in the first category of calls and violates the TDDRA and Commission rules in the same manner. International Telnet failed to prohibit by contract or tariff the use of 800 numbers that result in collect callbacks because International Telnet is actively engaging in the prohibited activity. 14. The violations of the Act and Commission rules occurring in both categories of calls discussed above threaten public confidence in toll-free numbers and leave telephone subscribers vulnerable to unexpected charges for calls to information services. Subscribers may be unable to block access to these services and may be subject to threats of collection for failure to pay the unlawful charge. 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 continuing violation, up to a statutory maximum of one million dollars ($1,000,000) for a single act or failure to act. In exercising this authority, the Commission takes into account "the nature, circumstances, extent, and gravity of the violation and, with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and such other matters as justice may require." For purposes of determining an appropriate forfeiture penalty in this case, we regard International Telnet's conduct as seven separate violations. After weighing the circumstances surrounding each violation, we find that International Telnet is apparently liable for a forfeiture of $7,000 for each prohibited use of its 800 numbers, resulting in a total forfeiture of $49,000. International Telnet will have the opportunity to submit evidence and arguments in response to this NAL to show that no forfeiture should be imposed or that some lesser amount should be assessed. V. CONCLUSIONS AND ORDERING CLAUSES 16. We have reviewed the information submitted in connection with the informal complaints against International Telnet as well as the facts gathered by the Branch's independent investigation. The Bureau concludes that on October 4 and 8, and 9, 1996, International Telnet failed to prohibit by tariff or contract the use of seven different 800 numbers that resulted in collect call backs to individuals for the provision of audio information services. We further conclude that International Telnet thereby apparently, willfully, or repeatedly violated the Communications Act and Section 64.1504(d) of the Commission's rules and that its conduct warrants a forfeiture in the amount of $49,000. 17. 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 Commissions's rules, 47 C.F.R.  1.80, and the authority delegated in Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291, that International Telnet, Inc. IS HEREBY NOTIFIED of an Apparent Liability for Forfeiture in the amount of forty-nine thousand dollars ($49,000) for its willful or repeated violation of the Act and the Commission's information service rules, 47 U.S.C.  228(c)(7)(D) and 47 C.F.R.  64.1504(d). 18. IT IS FURTHER ORDERED, pursuant to Section 1.80 of the Commission's rules, 47 C.F.R.  1.80, that within thirty days of the release of this Notice, International Telnet SHALL PAY the full amount of the proposed forfeiture OR SHALL FILE a response showing why the proposed forfeiture should not be imposed or the amount should be reduced. 19. IT SHALL BE FURTHER ORDERED that a copy of this Notice of Apparent Liability or Forfeiture SHALL BE SENT by certified mail to Mr. Bob Hilby, Telephone Publishing Corporation/Telemedia Network, Inc., 1355 Terrell Mill Road, Marietta, Georgia 30067. FEDERAL COMMUNICATIONS COMMISSION Regina M. Keeney Chief, Common Carrier Bureau