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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 ) ) THE PEOPLE'S NETWORK INCORPORATED, ) Complainant, ) ) File No. E-92-99 v. ) ) AMERICAN TELEPHONE AND TELEGRAPH ) COMPANY, ) Defendant. ) MEMORANDUM OPINION AND ORDER Adopted: April 4, 1997 : Released: April 10, 1997 By the Chief, Common Carrier Bureau: I. INTRODUCTION 1. We have before us a formal complaint filed by The People's Network, Incorporated ("TPN") against the American Telephone and Telegraph Company ("AT&T"), pursuant to Section 208 of the Communications Act of 1934, as amended (the "Act"). TPN alleges that AT&T has violated the Act by, (1) denying TPN service in violation of Section 201(a); (2) imposing certain limitations that were unjust and unreasonable under Section 201(b); and (3) discriminating against TPN in violation of Section 202(a). Additionally, TPN asserts that AT&T has violated the Commission's resale policy, and that AT&T violated Section 203 of the Act by failing to amend its tariff to reflect certain service limitations. TPN seeks an order prohibiting AT&T to bill or collect amounts which, TPN asserts, were unlawfully backbilled. TPN also requests that we award damages against AT&T for its alleged misconduct while providing service to TPN and its customers. For the reasons stated below, we find in favor of TPN on its Section 201(b) claim relating to backbilling and deny the remainder of its complaint. II. BACKGROUND 2. TPN is a Texas corporation that provides interstate long distance services, including the resale of AT&T's Software Defined Network ("SDN") and Distributed Network Services ("DNS") services. AT&T is a communications common carrier that provides domestic and international telecommunications services, including SDN and DNS, subject to the Commission's jurisdiction under Title II of the Act. 3. TPN began reselling AT&T's SDN service after signing an agreement with AT&T on October 13, 1989. After experiencing certain difficulties with AT&T's services, TPN requested, on February 18, 1992, that AT&T write off the remaining charges on TPN's account, alleging that AT&T's conduct justified this action. Subsequently, AT&T notified TPN of its intention to terminate TPN's service for non-payment of accrued charges. TPN sought emergency relief from the Commission to prevent termination of its service; and while AT&T originally opposed the requested emergency relief, it later agreed not to terminate TPN's service. Shortly thereafter, TPN filed its formal complaint with the Commission. III. DISCUSSION A. SECTION 201(a) ISSUES 1. Service Limits 4. The Parties' Contentions. TPN asserts that AT&T violated Section 201(a) of the Act by failing to provide TPN with service upon reasonable request. According to TPN, it agreed to purchase AT&T's SDN service only after receiving AT&T's assurances that it could promptly provide service to TPN's projected customer base of 4,000 to 8,000 subscribers. Shortly thereafter, in February 1990, AT&T announced that it would limit to 400 the number of orders per month on which AT&T would provide new service for each of its SDN customers. TPN asserts that it subsequently subscribed to the DNS service in reliance on AT&T's representations that orders for DNS service could be filled more quickly than could those for SDN service. TPN alleges, however, that, in December 1991, AT&T imposed a 100 order-per-week limit on the number of DNS orders for which it would provide service. TPN argues that these service limits effectively denied service to TPN in contravention of the Act. As discussed below, AT&T points out that TPN rarely placed enough orders that it exceeded the applicable service limits. TPN asserts, however, that, in response to the announced service limits, it scaled back its marketing efforts to avoid being unable, because of the service limits, to deliver the service that its customers had requested. Thus, TPN asserts that, but for the service limits, it would have marketed its services more heavily and, consequently, would have built a larger, more profitable customer base. 5. AT&T concedes that it imposed the monthly service limits. It asserts, however, that it imposed these limits in an attempt to keep pace with unexpected demand, and that, after announcing the limits, it specifically informed TPN that the limits were "not in concrete" and that AT&T would attempt to accommodate customers when their monthly service requirements exceeded the announced limits. Moreover, AT&T has provided evidence that on only one occasion -- in January 1991, when TPN submitted 523 orders for SDN service -- did the complainant's requirements exceed AT&T's announced limits. On that one occasion, AT&T states that it accepted for processing all 523 of the orders that TPN submitted. 6. Discussion. It is well established that, in a formal complaint proceeding under Section 208, the complainant has the burden of establishing a violation of the Act or of the Commissions rules or orders. On the present record, we conclude that TPN has failed to carry its burden of establishing that AT&T's monthly service limits violated Section 201(a) by effectively denying service to TPN or its customers. 7. As discussed above, record evidence indicates that AT&T attempted to accommodate customer requests in excess of the monthly limits. Moreover, TPN admits that only once did it submit orders in excess of AT&T's monthly limits. On that one occasion, AT&T accepted all of the orders for processing. Nonetheless, TPN seeks to establish a Section 201(a) violation by arguing that, but for the service limits, it would have submitted many more orders during the relevant period. The primary record evidence to which TPN cites for its claimed likely customer base is deposition testimony of Robert Castleberry, one of TPN's founders, which discusses, without numerical specifics or supporting documentation, service agreements with various customer groups that he claimed to recall. We cannot accept this portion of TPN's argument. It would require us to speculate impermissibly on the accuracy of TPN's largely unsupported initial projections regarding its customer base. We therefore find no violation of Section 201(a) arising from AT&T's imposition of monthly service order limits. 2. Provisioning Delays 8. The Parties' Contentions. In addition to the above service limits, TPN asserts that the delay in AT&T's provisioning process for TPN's customers' orders often was so long from the time of placement of a service order with AT&T to the actual receipt of service by TPN's customers that it was tantamount to a denial of service in violation of Section 201(a). In support of this argument, TPN's complaint identifies three of its customers who allegedly suffered unreasonable provisioning delays. TPN also takes the position that any provisioning delay beyond five months is, per se, a violation of section 201(a). 9. AT&T concedes that, during the time in question, many of its SDN customers experienced provisioning intervals that were longer than normal. According to AT&T, this added delay was attributable to the inability of its provisioning systems to meet the sudden and unexpected demand for its SDN services. AT&T denies, however, that any of TPN's customers experienced delays that were sufficiently prolonged to constitute a denial of service under Section 201(a). Additionally, AT&T has submitted evidence indicating that it had completed the necessary process to provision two of the TPN customers named in the complaint within 75 days, and that it had completed work on the third order within 135 days. 10. Discussion. We find that TPN has failed to meet its evidentiary burden to establish that either it or its customers suffered any provisioning delay that would amount to a denial of service under Section 201(a). As discussed above, AT&T has submitted evidence tending to show that, even under TPN's proposed five-month rule, it provided reasonably prompt service to the three end users who, TPN's complaint contends, experienced an allegedly unreasonable delay. Beyond these three instances of alleged provisioning delay, TPN has failed to provide evidence to support this portion of its argument. AT&T correctly points out that, in responding to an interrogatory regarding the alleged delay, TPN offered evidence only of the dates on which certain of its customers actually received SDN service. TPN has not provided evidence indicating the date on which it ordered service for these customers from AT&T. Without such evidence, it is plainly impossible to determine what delay, if any, occurred. Accordingly, this portion of TPN's claim under Section 201(a) is denied. B. SECTION 201(b) ISSUE 1. Backbilling 11. The Parties' Contentions. TPN alleges that AT&T violated Section 201(b) of the Act by including on the bills of many TPN customers calls that had been placed long before the date of the bill. TPN asserts that this backbilling caused it to lose both revenues and customers. The complaint offers numerous examples of backbilling by AT&T and includes, as exhibits, copies of several letters written by TPN customers complaining about bills reflecting calls placed long before the bill date. TPN asserts, without elaboration, that the Bureau's Order in American Network, Inc. compels a ruling that billing for a call more than 60 days after it is placed is, per se, unreasonable and a violation of Section 201(b). Additionally, TPN complains that certain of its customers received bills that simply requested payment of a lump sum and provided no call detail. 12. AT&T concedes that, during the time relevant to this proceeding, TPN and many of its other SDN customers experienced substantial delays in their billing. It asserts that this problem arose because its billing systems were not able to accommodate the unanticipated increase in demand that arose for SDN service. Specifically, AT&T explains, because of certain delays inherent in the provisioning process, end users who had been activated on SDN service made calls before a billing identifier was in place to match the customer's calls to the appropriate billing record. As a result, calls were placed that were not matched to any account. AT&T would subsequently investigate these calls and attempt to attribute them to the proper account. This investigation was largely manual, however, and caused delays that resulted in the late billing of messages once they were attributed to the proper customer. 13. AT&T maintains that, upon realizing the magnitude of the delays in its billing process, it instituted a variety of remedial measures. Thus, AT&T argues that, given its inability to foresee the increase in SDN demand, which, in turn, gave rise to the billing difficulties, and given its attempts to cure the problem, the level of delayed billing that occurred here was reasonable and therefore did not violate Section 201(b). 14. Discussion. In ruling on TPN's backbilling claim, we first note that, as the parties recognize, the Bureau has previously addressed the issue of backbilling. In AmNet, we held that, notwithstanding the 2-year statute of limitation for recovery actions provided in Section 415(a) of the Act, a "delay of much less than 24 months between the rendering of service and the receipt of an initial bill for such service may be an unjust and unreasonable practice" and consequently violative of Section 201(b). In that proceeding, however, the party seeking a declaratory ruling on the backbilling issue failed to provide evidence that adequately established the nature and extent of the alleged backbilling. Accordingly, we declined to decide at what point the alleged backbilling became unjust and/or unreasonable within the meaning of Section 201(b). 15. The record currently before us does not appear to suffer from those weaknesses present in the AmNet record. AT&T concedes that it rendered bills as much as 15 months after provision of service. Moreover, TPN has presented additional evidence that at least one of its customers received a bill for calls placed 20 months earlier. We have little difficulty in determining that, under the facts of this case, billing delays of 15 or 20 months qualify as an unreasonable practice within the meaning of Section 201(b). AT&T does not deny that delays of this magnitude could substantially and unreasonably disrupt the operations of both TPN and its end users. Indeed, the record reflects that AT&T issued most of the bills about which TPN complains more than 10 months after service was rendered. TPN would have us conclude that billing delays of 60 days or more are, per se, unreasonable under Section 201(b). Such a limit is necessary, it asserts, so that it may have some reasonable chance of obtaining payment, for the billed services, from its end users who, given the conditions prevailing in the marketplace, may regularly change their long-distance carrier. TPN also argues that some limit is necessary because its business customers wish either to pass their phone bills through to clients on a timely basis, or, at least, to be able accurately to track their long-distance expenses for budgeting purposes. 16. We accept AT&T's position that the backbilling that TPN experienced arose because of the unprecedented and unforeseen demand for its SDN service. Moreover, AT&T has represented that it took what it viewed as reasonable and timely steps to attribute and bill the unbilled messages to its various customers, including TPN's end users, and revised its billing and provisioning systems in an attempt to reduce the future incidence of unbilled messages. In the absence of credible evidence to counter these assertions, we are not prepared to adopt the 60-day limit for reasonable backbilling that TPN's complaint urges. On the other hand, AT&T has failed to make a persuasive showing that the billing delays experienced by TPN's customers -- in some cases more than 10 months -- should be viewed as reasonable under Section 201(b), especially in light of the particular requirements of TPN as a resale carrier and its dual status as a customer and competitor of AT&T. AT&T has provided no specific information regarding the policies and procedures it followed in preparing the bills at issue that might show what period was reasonably required to prepare and render some or all of the bills. 17. For the purposes of this Order and taking into account the arguments and evidence presented by the parties, we find that AT&T's actions in backbilling TPN's customers for services rendered more than 120 days after such services were rendered constituted an unreasonable practice, violative of Section 201(b). In reaching this conclusion, we note that, in 1993, AT&T amended its tariff for SDN service to guarantee that calls would be billed within 120 days of the date on which they were placed. As early as 1992, it appears that AT&T had set as its goal to bill all calls within 60 days: TPN provided evidence reflecting AT&T's "objective to write off all messages that are greater than 60 days past the message date starting January 1, 1993." Consistent with our findings in this case, to the extent that TPN has established in its complaint that it experienced backbilling delays exceeding 120 days in connection with AT&T's SDN service offerings, it may file a supplemental complaint for damages as provided in section 1.722 of the Commission's Rules. 18. Our decision regarding the reasonableness of AT&T's backbilling practices in this particular case should not be construed as establishing a rule of general applicability. As we stated in the AmNet Order, "any fixed limit upon all backbilling should be established in a Rule Making proceeding." Today's ruling is limited strictly to the facts of this case. We do not foreclose the possibility that backbilling delays of less than 120 days could be found to be unjust and unreasonable under the facts of a particular case. Likewise, backbilling delays exceeding 120 days may be reasonable in certain instances. We will consider such matters on a case-by- case basis to determine compliance with the just and reasonable requirements of Section 201(b). 2. Other Alleged Unjust Practices 19. In addition to the backbilling, discussed above, TPN argues in its briefs that AT&T also violated Section 201(b) in several other respects. In most instances, TPN did not include these additional claimed Section 201(b) violations in either its complaint or its reply. Accordingly, these further alleged violations are not properly before us. Nonetheless, we have reviewed each of these claims; for the reasons discussed below, we find that, in each instance, TPN has failed to establish a violation of Section 201(b). 20. First, TPN assigns as a violation of Section 201(b) AT&T's allegedly unreasonable delays in the provisioning and termination of service in response to customer orders. As we have set out above, TPN has presented evidence of the date on which certain of its customers actually received AT&T's SDN service, but it has not provided evidence from which it is possible to determine the extent of any delay. Nor has TPN presented persuasive evidence in support of its claim that AT&T delayed in disconnecting service. Indeed, the primary record evidence of delay in the termination of service -- evidence to which, inexplicably, TPN's brief does not cite for this portion of its argument -- is what appears to be an internal AT&T survey of problems with its SDN service. This survey concludes only that "disconnects were not done in a timely manner," and TPN has failed to present other evidence of the disconnect delays that it claims to have suffered. Accordingly, we find that TPN has failed to carry its burden of establishing a violation of Section 201(b) with respect to these two claims. 21. Second, TPN asserts that AT&T unreasonably refused to transfer customers to TPN unless AT&T received a letter in which the end user's prior carrier consented to the change. The record evidence on this issue demonstrates solely that, when an end user wished to change its service from a reseller to a different carrier, AT&T required that the end user provide to the new carrier a copy of the letter terminating the end user's service with the prior reseller. We agree with AT&T's position that this requirement was not an unreasonable means of "protect[ing] itself from claims of improperly removing end users from one reseller's account to another carrier's account." Accordingly, we find no violation of Section 201(b) with respect to TPN's untimely claim on this issue. 22. Third, TPN complains that AT&T allegedly required it to waive any liability limit on calling cards that AT&T issued for the ultimate use of TPN's end users. In support of its argument, TPN provides the "AT&T Card -- Bulk Issuance Agreement" (the "Card Agreement"), which states that, "AT&T will not know that a billing card number has been compromised, or that a subscriber's account with Customer has been closed, unless Customer so notifies AT&T"; the agreement therefore provides that AT&T's customer shall be liable for all calling card charges until AT&T is notified "that the billing card number . . . should be invalidated." TPN offers, as its sole authority that the card issuance agreement violates Section 201(b), a regulation issued by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). Given the limitations on AT&T's ability to contact a reseller's end users, we decline to rule that it is unreasonable, within the meaning of Section 201(b), for AT&T to require TPN to waive the subject liability limitation for the unauthorized use of calling cards issued to TPN. This claim is therefore denied. Furthermore, the Commission is clearly not empowered to interpret or apply the regulations of the Federal Reserve Board. To the extent that TPN seeks such a ruling in this proceeding, it is also denied. 23. Fourth, in the last pages of its Brief, TPN asserts -- for the first time -- that AT&T violated Section 201(b) by requiring that TPN refrain from using AT&T's trademarks and service marks in marketing TPN's services. Apart from its unsupported assertion of a violation, TPN has offered no authority for the proposition that AT&T's attempts to protect its registered marks constitute an unjust or unreasonable practice under the Act. Accordingly, this claim is also denied. C. SECTION 202(a) ISSUE: DISCRIMINATION AGAINST RESELLERS 24. TPN argues that, in a variety of different ways, AT&T unreasonably discriminates against it and other resellers in preference to AT&T's commercial, non-reseller customers. Thus, as discussed more fully below, TPN argues that: (1) for a variety of reasons, AT&T's response to the service orders of its reseller customers was substantially slower than was its response to similar orders from its commercial customers, and (2) reseller customers suffered a higher level of backbilling than did commercial customers. As we set out below, AT&T controverts TPN's arguments on each of these points. 25. Applicable judicial decisions establish a three-prong test for determining whether a violation of Section 202(a)'s prohibition of unreasonable discrimination has occurred. First, the Commission must determine whether the services at issue are like one another. Second, if the services in question are sufficiently similar, the Commission must decide whether the defendant carrier is offering disparate pricing or treatment to different customers receiving the like services. Third, if disparate pricing or treatment exists, the Commission must decide whether such disparity is justified and, therefore, not unreasonable. Under Section 208, the complainant has the evidentiary burden of establishing that the services are like and that the discrimination exists between them. Once the complainant has established the presence of like services and discrimination, the burden shifts to the defendant carrier to show that the discrimination is not unreasonable. In connection with each of the above instances of alleged discrimination, TPN's claim of discrimination fails. 1. Provisioning Delays 26. TPN alleges that several different factors contribute to make the provisioning interval for resellers substantially greater than for similarly situated commercial customers. Specifically, TPN asserts that the greater delays experienced by AT&T's reseller customers were caused by: (1) the claimed fact that the 400 order-per-month provisioning limit had a disproportionate effect on resellers; (2) AT&T's alleged refusal directly to contact TPN's end users to collect order information or to correct errors in the service orders that TPN submitted to AT&T; (3) AT&T's decisions to process reseller service orders through its SMD and not to pay sales commissions to its sales employees who processed resellers' orders. 27. Monthly Order Limits. TPN speculates that AT&T's monthly service limits had a disproportionate effect on resellers; TPN provides no evidence of this effect, however. Instead, TPN has restricted itself to inferring discrimination based on what it asserts are the typical structures of AT&T's reseller and nonreseller customers. On the other hand, AT&T has both averred, and presented substantial evidence tending to show, that it applied these service limits to both its commercial and its reseller customers. Thus, this portion of TPN's Section 202(a) claim fails to prove that the carrier differentiates between its customers in the provision of its services. 28. Data Collection. TPN next asserts that resellers' orders were processed more slowly because, in contrast to its practice with its commercial, nonreseller customers, AT&T refused to contact the resellers' end users to obtain accurate data for use in provisioning the ordered service. AT&T argues persuasively in response that, during the provisioning process, it declined to contact resellers' end users directly in order to protect itself from accusations of improperly attempting to lure away the resellers' customers. We find that AT&T has articulated a reasonable basis for the distinction that it has drawn in connection with its collection of order data from the resellers' end users and its own end users. 29. Provisioning Support. TPN's next instance of claimed discrimination relates to the facilities and personnel that, it alleges, AT&T used to process resellers' service requests. In particular, TPN complains of AT&T's practice of routing through its Specialized Market Division all reseller service requests and its decision not to pay sales commissions to employees who processed reseller service orders. TPN has not, however, presented adequate evidence to establish that it, or resellers generally, suffered slower service as a result of either of these two factors. Indeed, substantial record evidence shows that resellers' orders were provisioned at least as quickly as those of AT&T's commercial customers. Accordingly, this portion of TPN's claim also must fail. 2. Backbilling 30. TPN's second major claim of unreasonable discrimination in violation of Section 202(a) relates to AT&T's practice, discussed above, of backbilling its SDN customers during the time in question. TPN asserts that reseller customers suffered a higher incidence of backbilling than did AT&T's commercial customers. In particular, TPN avers that, on its "information and belief" AT&T simply wrote off or deleted the older charges on the bills of its commercial customers, while it routinely backbilled its reseller customers. Notwithstanding its information and belief, TPN has failed to present evidence that it, or resellers in general, were subject to a higher level of backbilling than were AT&T's commercial customers. Because TPN has failed to establish the necessary element of disparate treatment, its discrimination claim relating to backbilling is denied. D. THE COMMISSION'S RESALE POLICY 31. The Parties' Contentions. TPN's complaint generally alleges that AT&T's various practices discussed above violate the Commission's resale policies by discriminatorily making AT&T's SDN service less attractive to resellers than to nonreseller commercial customers. In response to TPN's allegations, AT&T asserts that all of its SDN customers have experienced the problems of which TPN complains; consequently, it argues, it cannot have violated the Commission's resale policies. 32. Discussion. As indicated above, TPN's claim regarding violation of the Commission's resale policies is restricted to the allegation that AT&T discriminated against resellers in the provision of its SDN service. As we previously have discussed, however, we do not find that AT&T has treated TPN, or resellers in general, in a discriminatory manner. Similarly, we do not find that AT&T has violated the Commission's resale policies, which generally prohibit a carrier's discrimination among its customers, on grounds of price or service, depending on whether the customers are, in turn, reselling the service that they have purchased from the carrier. TPN has not demonstrated that the 400 order-per-month limit, the alleged provisioning delays, or AT&T's backbilling practices had a discriminatory effect, or were meant to discriminate against TPN or resellers. Rather, we agree with AT&T's assertion that TPN experienced these problems along with all other SDN customers. Since there was no showing by TPN to support its allegations that AT&T's reseller customers suffered a disproportionate impact as a result of these problems, we do not find discrimination in violation of the Commission's orders on resale. E. SECTION 203(a) ISSUE 33. The Parties' Contentions. Additionally, TPN contends that AT&T violated Section 203(a) of the Act by failing to amend the applicable tariff to reflect the monthly order limitations that AT&T placed on its service provisioning. AT&T responds to this claim by arguing that its order limits do not affect the charges applicable for its services and that Section 203(a) therefore does not require their inclusion in the tariff. 34. Discussion. The Commission previously has ruled that, where a carrier establishes a reasonable and impartial means of responding to customer demand for service, the "carrier's practices for filling service orders are not required by Section 203 to be included in the tariff." We reiterate, however, that, "as a general rule, where a carrier can reasonably foresee a shortage of facilities, it would be advisable to include a tariff provision setting forth the practices it follows in filling orders for service." Since AT&T's monthly order limitations did not affect the charges for its services, TPN's claim under Section 203(a) is denied. F. TPN's REMAINING MOTIONS 35. Finally, we note that, during the course of this proceeding, TPN filed numerous motions and petitions, not all of which were formally ruled upon. These include: (1) its July 21, 1992 Petition for Emergency Relief; (2) its August 3, 1992 Petition for Sanctions; (3) its August 6, 1992 Motion to Strike and for Sanctions; (4) its September 20, 1993 Motion for Entry of Confidentiality Order; (5) its August 23, 1996 Third Motion to Compel; and (6) its August 23, 1996 Motion to Deem Facts Established for the Record. Given the instant ruling disposing of this proceeding, these prior, interlocutory motions are rendered moot. Accordingly, they are dismissed. IV. CONCLUSION 36. As set out more fully above, we find that TPN has made a persuasive showing that AT&T violated Section 201(b) of the Act to the extent that it rendered, to TPN or its customers, bills for calls that had been placed more than 120 days earlier. This portion of TPN's complaint is thus granted. The remainder of TPN's complaint is denied for the reasons that we previously have discussed. V. ORDERING CLAUSES 37. ACCORDINGLY IT IS ORDERED pursuant to Sections 4(i), 201(a), and 208 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 201(a), 208, and authority delegated by Sections 0.91 and 0.291 of the Commission's Rules, 47 C.F.R.  0.91, 0.291, that TPN's complaint IS GRANTED, IN PART, AND DENIED, IN PART. 38. IT IS FURTHER ORDERED that TPN, in accordance with Section 1.722 of the Commission's Rules, 47 C.F.R.  1.722, MAY FILE a supplemental complaint concerning damages relating to the backbilling issue within 60 days of the date of this decision. 39. IT IS FURTHER ORDERED that the various motions listed above in paragraph 35 are hereby DISMISSED AS MOOT. FEDERAL COMMUNICATIONS COMMISSION Regina M. Keeney Chief, Common Carrier Bureau