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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) ) AMERICA'S CHOICE COMMUNICATIONS, ) INCORPORATED, ) ) and ) ) LINQ-UP AMERICA (LOS ANGELES), ) ) Complainants, ) ) v. )File No. E-95-08 ) LCI INTERNATIONAL TELECOM CORP.,) ) Defendant. ) MEMORANDUM OPINION AND ORDER Adopted: December 16, 1996; Released: December 17, 1996 By the Chief, Formal Complaints and Investigations Branch, Common Carrier Bureau: I. INTRODUCTION 1. In this Memorandum Opinion and Order, we address a formal complaint filed pursuant to Section 208 of the Communications Act of 1934, as amended (the Act), by America's Choice Communications (ACC) and Linq-Up America (Los Angeles) (Linq) (jointly, complainants) against the above-captioned defendant, LCI International Telecom Corporation (LCI, or defendant). Complainants allege that defendant violated Section 201(a) of the Act by curtailing or failing to provide service; that the defendant violated Section 201(b) of the Act by engaging in unreasonable practices in providing its service; that the defendant violated Section 202(a) of the Act and the Commission's resale policy by unjustly discriminating against complainants in providing its service; and that the defendant violated Section 203(c) of the Act by operating without a tariff. For reasons discussed below, we find that the complainants have failed to carry their burden of proof. We therefore deny the complaint. II. BACKGROUND 2. Complainants are non-facilities-based long distance resellers, and defendant is a switch-based reseller. On January 15, 1993, complainants entered a contract with TM Sepulveda Incorporated (TMS) to resell TMS's interstate voice communications services. On July 11, 1994, defendant acquired substantially all of TMS, and TMS's rights and obligations under the 1993 contract were assigned to defendant. During the next several months, employees of complainants and defendant discussed defendant's service to complainants, complainants' alleged problems with that service, and complainants' alleged failure to pay for services rendered. The parties could not reach agreement, and on December 28, 1994, defendant began terminating its service to complainants' customers. Complainants filed this complaint on December 30, 1994. 3. Complainants allege that defendant treated complainants differently from defendant's other customers because complainants are resellers of defendant's services. Thus, complainants assert, defendant delivered a level of service to complainants that not only violated the Act, but that also was inferior to the service defendant delivered to its other customers, further violating the Act and the Commission's resale policy. As a result of this discriminatory treatment, complainants state, complainants' customer base was significantly eroded, and complainants lost revenues and incurred "fraudulent charges" in excess of $600,000. Complainants seek a Commission order requiring defendant to provide service to complainants and to pay monetary damages and a forfeiture. 4. Defendant filed an answer opposing the relief requested in the complaint, and a cross- complaint seeking monies allegedly due from complainants in the amount of $654,014.31, plus interest and fees. Defendant also requests that the Commission hold a hearing on complainants' fitness to serve as resellers. For the reasons set forth below, we dismiss defendant's cross- complaint. III. DISCUSSION A.Section 201(a) Issues -- Failure to Provide Service 1.Contentions of the Parties 5. Complainants' arguments. Complainants allege that defendant violated Section 201(a) because it failed to provision complainants' customers in a timely manner and it ultimately terminated service to complainants' customers. In affidavits, complainants' employees state that "hundreds of lines" were never provisioned at all. Complainants state that they did not pay the invoices defendant sent them because defendant had extended credit to complainants to compensate for the poor service defendant was providing. 6. Complainants present four documents, in addition to the affidavits previously mentioned, to support their contentions. The first document is the job description of the defendant customer service representative who dealt most regularly with complainants. That description, complainants note, makes no mention of serving defendant's reseller customers. Complainants' second and third documents purport to be written service complaints from complainants to defendant. The fourth document is a set of three order processing requests, provided by complainants as "demonstrative examples of defendant's failure to properly provision service." 7. Defendant's arguments. Affidavits by employees of the defendant state that virtually all provisioning was done in a timely manner. Defendant states that it terminated service to complainants because of six months of unpaid invoices. Defendant also states that in acquiring TMS, defendant acquired a going concern, so that the same employees remained with defendant to provide the same service to the same set of customers out of the same service center. Employee training, they argue, was therefore adequate. 2.Decision 8. Burden of proof -- requirements. The complainant has the burden of proof in establishing a violation of the Act in a formal complaint pursuant to Section 208 of the Act. For the reasons discussed below, we conclude that complainants have failed to carry their burden in proving a violation of Section 201(a) of the Act. 9. Evidence presented. Neither the complainants' affidavits nor the contract between complainants and defendant sustain complainants' burden of proof. The contentions in complainants' affidavits are directly contradicted by those in affidavits presented by defendant. Complainants' affidavits state that there were "long delays" in processing complainants' orders. Affidavits from defendant's employees state that all orders were processed within a day or, at most, within a few days, and that delays often were due to the faulty customer information provided by complainants. Further, the contract between the two parties appears to give defendant the right to terminate its transmission services upon a determination by defendant that complainants' payments are in arrears. Defendant introduced into evidence six months of partially unpaid invoices sent to complainants, and denies it extended credit to complainants. The contract states that continued service in the face of nonpayment shall not be interpreted as a waiver by defendant. 10. Job description. Complainants' documentary evidence also does not sustain the required burden of proof. The job description of defendant's customer service employee is some evidence that perhaps the position's occupant was not sufficiently prepared to assist complainants, but this evidence is outweighed by the fact that the person who served in this role for defendant was the same person who served, apparently satisfactorily, in this role for defendant's predecessor, TMS. Complainants state that procedures and equipment changed after the defendant acquired TMS, but the holder of the position testifies in her affidavit that she was able to continue to service complainants' account in a routinely prompt manner. 11. Written notices. Complainants produce two written notices to defendant that allegedly are complaint notices. We find neither document to be convincing evidence. Neither statement indicates how long defendant was taking to process specific provisioning orders, nor how the number of the problem accounts compared to the number of accounts defendant had successfully provisioned. Neither statement shows how many accounts defendant failed to provision, nor provides a list of those failed accounts. 12. Sample provisioning requests. The three sample provisioning requests by complainants are actually one provisioning request and two requests to disconnect service. The provisioning request was first made on September 28, 1994, and reiterated on October 26, 1994, but there is no indication whether the account ultimately was provisioned, nor do we know defendant's response to this evidence, because it was first introduced in complainants' reply brief. We do not find a single provisioning request to be sufficient evidence of "hundreds" of failed provisioning attempts. B.Section 201(b) Issues -- Unreasonable Charges and Practices 1.Contentions of the Parties 13. Complainants' arguments. Complainants assert defendant violated Section 201(b) when it delayed, and ultimately stopped, sending customer billing and call traffic information to complainants. In addition, complainants state that defendant changed switches during the business day, disrupting complainants' customers, causing complainants to lose customers, and permitted "fraudulent charges" to be added to complainants' account. As evidence of defendant's poor service, complainants provide affidavits from complainants' employees who were assigned to work with defendant. In addition, complainants provide an invoice analysis, two written complaints to defendant regarding service, and two delayed disconnection requests that were offered as evidence of violations of Section 201(a). Complainants state that under the service agreement assigned to defendant, defendant was obligated to provide complainants with billing information every three days, but that the invoice analysis reveals that the billing cycles were much longer. 14. Defendant's arguments. Defendant's employees contend, in affidavits, that defendant provided customer traffic information in a timely manner. Defendant states that customer usage information to complainants eventually was discontinued because of five months of nonpayment by complainants. Defendant contends that it quickly restored customers dropped due to switch changes, and that defendant was the first to detect and block calls that "may have been fraudulently billed," and that defendant has not required complainants to pay those charges. 2. Decision 15. Complainants have not sustained the required burden of proof demonstrating that defendant's conduct constituted unreasonable practices under Section 201(b) of the Act. Defendant provided at least two types of customer usage information: call traffic information, and billing information, or invoices. Although the affidavits by complainants' employees state that call traffic information was unduly delayed, the defendant's affidavits state that the information was delivered three times a week to Linq and weekly to ACC. The contract cited by complainants merely states that "[t]raffic reports will be provided in a timely manner." The contract also appears to give defendant the right to terminate service, including termination of the provision of call traffic information, if complainants are in arrears in their payments. Complainants appeared to be in arrears in November 1994, when defendant stopped providing complainants with traffic information. 16. Complainants' evidence regarding billing information is equally unconvincing. The three-day period referred to in the contract section refers to complainants' payment obligations, not defendant's billing obligations. Complainants' analysis of billing intervals also does not provide evidence of the unreasonableness of defendant's practices. Under the contract, defendant appears to have been obligated to provide invoices weekly. Complainants' analysis indicates that the period between invoices generally was weekly, with occasions of longer periods. Whether these longer periods constitute a breach of contract is an issue properly addressed by a state court. Even if the longer periods were determined to be a breach, that, in and of itself, would be insufficient to show a violation of Section 201(b) of the Act. 17. The two lists of problems complainants addressed to defendant do not change our decision. The points made in these notices generally have been rebutted by defendant's affidavits. For example, the notices discuss provisioning problems and switch changes, but defendants respond to these issues in their affidavits. The notices also lack the specificity and overview to prove complainants' sweeping allegations against defendant. One notice states that complainants lost "several" authorization codes when defendant changed switches, but the loss of several codes out of several hundred would not, on the face of it, constituted an unreasonable practice under Section 210(b). We also find unpersuasive the two delayed disconnection requests. Delayed responses to two individual line requests do not appear to constitute unreasonableness under the Act. C.Section 202(a) and Resale Policy Issues -- Discriminatory Practices 1.Contentions of the Parties 18. Complainants' arguments. Complainants state that defendant's allegedly poor service to complainants demonstrated a pattern of actions evidencing discrimination against complainants in violation of Section 202(a) of the Act and of the Commission's resale policy. Complainants allege that defendant's employees were required to put complainants' orders "on the back burner" until defendant's other customers were provisioned. In addition, complainants assert that defendant would not make intraLATA rates available to complainants because defendant viewed complainants as competitors with defendant for the retail market. Complainants also assert that defendant's employees would not quote rates to complainants for dedicated access customers because defendant was going to keep customers billing over $20,000 per month for itself. Finally, complainants assert that defendant segregated resellers by serving them only out of the office center that serviced complainants. 19. Defendant's arguments.Affidavits by defendant's employees contend that all orders and complaints from all defendant's customers were processed by defendant on a first-come- first-served basis. The defendant's employee charged with provisioning complainants' accounts states that she did not process complainants' orders out of sequence. The defendant's employee who discussed intraLATA rates with complainants states that he did not offer such a rate to any similarly situated customer. He also denies saying defendant would keep customers billing over $20,000 a month for itself. Finally, defendant states that it serviced only resellers out of the service center that served complainants because defendant had recently purchased TMS, a reseller that operated out of that site, and it made business sense to continue this practice for the time being. 2.Decision 20. In alleging a violation of Section 202(a), the complainant must make bear the evidentiary burden in showing that the carrier has discriminated in reference to a "like communication" service or has given an "advantage or preference" to a person or group of persons in connection with the service. Complainants have failed to meet this burden. 21. The evidence complainants provide is effectively rebutted by the evidence presented by defendant. Complainants state that they received inferior service from defendant, in violation of Sections 201(a) and 201(b) of the Act, but, as discussed above, complainants have not sustained their burden of proof to demonstrate this allegation. Moreover, defendant reasonably responds that it purchased an ongoing reseller business at the office center that serviced complainants, and assigned particular staff to service the reseller customers. Complainants present no evidence that the resellers were offered services different from those offered defendant's non-reseller customers, or that the services offered out of the office center in question could be distinguished from services offered out of defendant's other office centers. 22. Finally complainants do not demonstrate a violation of the Commission's resale policy. That policy, first enunciated in 1976, declared that certain restrictions on resale are unjust and unreasonable under Section 201(b) of the Act and unreasonably discriminatory under Section 202(a) of the Act. Complainants allege defendant restricted the quality and speed of service provided to complainants. For the reasons we explained above, however, complainants have not sustained their burden of proof to demonstrate that defendant engaged in such practices. Therefore, complainants' claim that defendant violated the Commission's resale policy fails. D.Section 203(c) Issues -- Operating Without A Tariff 23.Contentions of the parties. Complainants contend that defendant provided service to complainants' customers without having an underlying tariff for the service on file with the Commission. As a result, complainants state, defendant is in violation of statute and Commission policy, and defendant cannot charge complainants for the service; hence, complainants do not owe defendant for the service. Defendant did not reply directly to complainants' allegation, because complainants first posed this argument regarding the apparent absence of a tariff in their final pleading, a reply brief. 24. Decision. We will not consider this argument, which was first introduced in a reply brief. Causes of action must be stated in a complaint. If a new cause of action emerges during discovery, the complainant should move to amend the complaint. These rules are necessary to give defendants adequate notice of allegations being presented against them. We note, however, that a purchaser of telecommunications services is not absolved from paying for services rendered solely because the services furnished were not properly tariffed. E.Defendant's Cross-Complaint 25. Contentions of the parties. Defendant alleges in its cross-complaint that complainants owe defendant $654,014.31, plus interest and fees, for services rendered but for which complainants never paid. Defendant also questions complainants' tariff status and the propriety of defendant's continuing to serve as a common carrier. Complainants assert the Commission lacks jurisdiction under the Act to consider defendant's cross-complaint. 26. Decision. We dismiss defendant's cross-complaint for failure to state a cause of action under Section 208 of the Act. Sections 206-209 of the Act are not intended to allow carriers to use the Commission as a means of collecting allegedly unpaid charges from customers. Similarly, complainants' tariff status and its practices are not in issue in this proceeding. We decline, therefore, defendant's suggestion of a hearing to examine complainants' practices. IV. CONCLUSION AND ORDERING CLAUSES 27. Complainants have failed to allege and prove sufficient facts to demonstrate that defendant has violated Sections 201(a), 201(b), 202(a), 203(c) of the Act, or the Commission's general policy on resellers. Complainants allege that the level of service defendant provided violated Sections 201(a) and 201(b). We have determined, however, that complainants' affidavits in support of their contentions were effectively rebutted by defendant's affidavits, and we found the documentary evidence unpersuasive. Although we considered all of complainants' evidence, we also found much of it was submitted in an untimely manner. Complainants also allege defendant engaged in discriminatory practices that violated Sections 201(b) and 202(a) of the Act, and the Commission's resale policy. We determined, however, that complainants did not sustain their burden of proving that defendant made unjust or unreasonable classifications, or made unreasonable discriminations in charges, practices, classifications, facilities or services for like communications services, or exercised unreasonable prejudice or disadvantage against any persons or class of persons. Finally, we dismiss defendant's cross-complaint for failure to state a cause of action pursuant to the Act, and we decline defendant's suggestion of a hearing to examine complainants' practices. 28. Accordingly, IT IS ORDERED, pursuant to Sections 4(i), 4(j), 201, 202, 203 and 208 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 201, 202, 203 and 208, and the authority delegated in Section 0.291 of the Commission's rules, 47 C.F.R.  0.291, that the above-captioned complaint filed by America's Choice Communications, Inc., and Linq-Up America (Los Angeles) IS DENIED. 29. IT IS FURTHER ORDERED that the defendant's cross-complaint IS DISMISSED WITH PREJUDICE for failure to state a cause of action under Section 208 of the Act. 30. IT IS FURTHER ORDERED that the above-captioned complaint IS DISMISSED WITH PREJUDICE and this proceeding IS TERMINATED. FEDERAL COMMUNICATIONS COMMISSION Kurt A. Schroeder Chief, Formal Complaints and Investigations Branch Enforcement Division Common Carrier Bureau