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                           Before the

                    Washington, D. C.  20554



In the Matter of                )
                                )       File No. EB-00-TC-005
NOS Communications, Inc. and    )  
Affinity Network Incorporated   )
Apparent Liability for Forfeiture  )         NAL/Acct.        No. 


        Adopted: March 28, 2001              Released:  April  2, 

By the Commission:   Commissioner Furchtgott-Roth dissenting  and 
issuing a statement.

                         I.  INTRODUCTION

     1.   By this  Notice of  Apparent Liability  for  Forfeiture 
("NAL"), we  find that  NOS  Communications, Inc.  (``NOS'')  and 
Affinity  Network   Incorporated   (``ANI'')1   have   apparently 
willfully  or   repeatedly  violated   section  201(b)   of   the 
Communications Act of 1934, as  amended ("Act"),2 by engaging  in 
unjust  and  unreasonable  practices  in  connection  with  their 
provision of  interstate  communication services.   As  discussed 
more fully  below,  we find  that  NOS and  ANI  have  apparently 
engaged in deceptive marketing of their interstate  communication 
services  by  failing  to  disclose  clearly  and   conspicuously 
material facts  regarding their  promotional plan  offerings  and 
pricing methodology.
     2.   The Commission received almost 900 consumer  complaints 
against NOS and  ANI.  Based  upon our  review of  the facts  and 
surrounding circumstances, we find that NOS Communications,  Inc. 
and Affinity  Network  Incorporated  are  apparently  liable  for 
proposed forfeitures in the amount of $500,000 each, resulting in 
a total proposed forfeiture amount of $1,000,000.

                         II. BACKGROUND

     3.   NOS and ANI  are long distance  service resellers  that 
primarily market to  small and medium-sized  companies.  NOS  and 
ANI solicit new customers through telemarketing calls. 
As described more fully below, NOS and ANI employ what they  term 
a ``call unit  rate structure'' for  their long distance  pricing 
methodology.  Under that pricing methodology, which appears to be 
unique to these companies, rates are billed not in terms of cents 
per minute, but in  cents per call  unit (``CPCUs'').3  The  call 
unit is made  up of  usage and non-usage  charges, and  generally 
does not  equal  a minute.4   Thus,  determining total  per  call 
charges requires  a conversion  calculation.  NOS  and ANI  state 
that,  during   telemarketing  calls,   they  provide   potential 
customers with both  verbal5 and  written disclosures  explaining 
their plan  offerings  and  charges.  They  also  state  that  in 
addition  to   information   conveyed  by   their   telemarketing 
representatives, they  routinely  fax prospective  customers  two 
written disclosures, a ``rate sheet''  and an enrollment form  or 
Letter of Agency (``LOA'') to explain their service and pricing.

     4.   Despite the purported pricing  explanations by NOS  and 
ANI,  consumers  have  filed  almost  900  complaints  with   the 
Commission against the  companies since  1997.  These  complaints 
suggest widespread  consumer confusion  regarding the  companies' 
plan offerings and charges. Common themes in these complaints are 
that NOS and  ANI misrepresent  their rates,  resulting in  rates 
charged that  are substantially  higher than  what the  companies 
promised. Consumers also complain that NOS's and ANI's call  unit 
pricing methodology  is  complicated and  confusing  and  appears 
designed for the purpose  of cheating the public.6   Complainants 
allege that when  they complain  directly to  the companies,  the 
companies are  unresponsive or  claim ignorance  or error,  often 
promising credits and discounts  which never materialize.7   Many 
complainants also allege that when  they refused to pay  disputed 
bill amounts,  they  were  threatened with  collection  or  legal 
action, or their toll-free numbers  were ``held hostage'' by  the 
companies.8  Additionally,  complainants  state  that  when  they 
attempted  to  discontinue   service  with  NOS   or  ANI,   they 
experienced undue delays or  difficulties switching carriers,  or 
continued to be billed  for services by  the companies after  the 
switch was complete.9 

     5.   In addition to  complaints filed  with the  Commission, 
NOS and ANI have received complaints directly from consumers, but 
have requested  confidential  treatment  of the  number  of  such 
complaints as well  as the number  of requested cancellations  of 
service that they receive.10  Hence, this information will not be 
revealed here. 

                         III. DISCUSSION

     6.   Section 201(b) of the  Act, states, in pertinent  part, 
that ``[a]ll charges, practices, classifications, and regulations 
for and in connection with  such communication service, shall  be 
just   and   reasonable,   and   any   such   charge,   practice, 
classification, or regulation that  is unjust or unreasonable  is 
hereby declared  to  be unlawful.''11   The  FCC has  found  that 
unfair and  deceptive marketing  practices by  interstate  common 
carriers may constitute unjust  and unreasonable practices  under 
section 201(b).12 

A.   Calculating the Rate

     7.   Understanding how NOS and  ANI calculate their  charges 
is central  to  any  discussion of  whether  the  companies  have 
unjustly and unreasonably marketed  their services. Although  the 
companies assert that calculation is not difficult, we  disagree, 
finding the process both complicated and confusing.13  

     8.   To  illustrate,  we  borrow  from  materials  that  ANI 
provided to  a customer.   The  example concerns  a  nine-minute, 
interstate call at 14.9 cents per call unit.14  The first step in 
calculating total charges under the  call unit rate structure  is 
to identify the  call duration  in seconds.   A nine-minute  call 
equals 540  seconds  (9 x  60).   Next, to  determine  the  usage 
charges, the minimum call unit (MCU) and any additional call unit 
increments (ICUs) must be  determined.  For interstate calls  the 
MCU is 30  seconds, which  is described as  being the  same as  5 
ICUs.  Additional  ICUs are  added in  increments of  5 for  each 
additional 30  seconds.   Thus, at  14.9  cents, the  MCU  equals 
$0.745 ($0.149 x  5 ICUs).15  After  adjusting for the  30-second 
MCU (540 seconds - 30 seconds), the remaining seconds are divided 
by 30 seconds to determine the additional ICUs (510 seconds ¸  30 
seconds = 17).  At 14.9 cents, the additional ICUs equal  $12.665 
($0.149 x 5 ICUs x 17 or $0.149 x 85 ICUs).16  To determine  non-
usage  charges,  the  equivalent  call  units  (ECUs),  must   be 
determined.  ECUs are  provided by  a table, and  are based  upon 
call duration.  For 540 seconds, the table states that the  total 
ECUs are 95.   At 14.9 cents,  the ECUs equal  $14.155 ($0.149  x 
95).17  The sum of the charges for the MCU, ICUs, and ECUs  equal 
$27.565.18  This amount is then  rounded to $27.6 and divided  by 
10 to get the final  bill amount ($27.6 ¸  10 = $2.76).19  If  we 
take this example one step further and divide the total charge of 
$2.76 by 9 minutes (the duration  of the call), the result is  an 
actual per call  rate of 30.6  cents per minute,  as compared  to 
14.9 cents per call unit.

     9.   We  believe  the  foregoing  example  demonstrates  the 
complexity of the  call unit pricing  methodology, which  employs 
MCUs, ICUs, and  ECUs to determine  usage and non-usage  charges.  
To determine the  total charge of  a call under  call unit  based 
rates, the customer must have detailed information regarding each 
of  the  aforementioned   call  unit  components,   as  well   as 
instructions  on  conversion   calculation.20   Based  upon   the 
foregoing, NOS's and ANI's  use of the  call unit rate  structure 
would almost certainly be misleading to consumers in the  absence 
of clear  and conspicuous  disclosure  regarding the  nature  and 
components  of  the  rate  structure,   as  well  as  clear   and 
conspicuous disclosure on how  to calculate the  total cost of  a 

B.   Plan Disclosures

     10.  Until recently,21  NOS and  ANI used  promotional  plan 
offerings  as   their  primary   vehicle  for   marketing   their 
communication services  to  customers.   These  promotional  plan 
offerings were not expressly denominated as promotional, however.  
The companies marketed and sold these plans in terms of cents per 
minute.  Then, following the second billing period, the companies 
calculated the charges  based on  the call  unit rate  structure.  
According to NOS and ANI, the companies calculated the cents-per-
minute rate by waiving non-usage charges for peak domestic  calls 
during the first  two invoices.  After  the second invoice,  non-
usage charges did apply.

     11.  We believe that consumers would likely view the limited 
duration of  NOS's and  ANI's  promotional rates  as  significant 
qualifications.  NOS's  and  ANI's  promotional  plan  offerings, 
although marketed in cents per minute, are really equal to a call 
unit based rate with non-usage  charges waived for the first  two 
invoices only.  As can be seen from the example of the  9-minute, 
interstate call, non-usage charges make up a significant  portion 
of the total cost of a call (almost half, in the example).  Thus, 
the application of non-usage charges to a call after a customer's 
second invoice could result  in double the cost  of that call  as 
compared to a  similar call made  during the promotional  period.  
Therefore, although NOS and ANI clearly disclosed the  cents-per-
minute  rate,  we  must   determine  whether  they  clearly   and 
conspicuously disclosed the limited duration of that rate and the 
rates to be charged thereafter.

     a.    ``Rate Sheet''

     12.  During sales calls,  NOS and ANI  appear to have  faxed 
prospective customers  a  ``rate  sheet'' which  sets  forth  the 
companies' rates and plan offerings.   The rate sheet states  the 
rate in cents per minute in bold  letters at the very top of  the 
page.22  Nowhere does  the rate  sheet expressly  state that  the 
advertised   per   minute   price   is   a   ``promotional''   or 
``introductory'' rate. Near the bottom of the rate sheet, under a 
heading entitled ``No Contracts or Term Plans,'' the sheet states 
that ``[s]tandard tariffs on file with the FCC apply to all calls 
after the first two invoices and, during the first two  invoices, 
to all calls  except peak interstate  & peak intrastate  calls.''  
The  rate  sheet  further  states  that   ``[n]on-transport/usage 
charges apply per carrier's tariff'' and that ``[p]romotion terms 
per tariff on file.''

     13.  We believe these purported qualifications on the  rates 
expressly set forth in NOS's  and ANI's rate sheets lack  clarity 
and understandability.  Rather than provide clear and conspicuous 
disclosure of the  promotional nature  of their  cents-per-minute 
offering and of the rates that will apply after that period,  the 
language serves only to obfuscate  and to confuse.  The  language 
does not clearly  indicate to  the consumer  that the  advertised 
cent-per-minute rates are of limited duration, particularly given 
the unrelated  heading.  We  believe that  a reasonable  consumer 
would not gather that the quoted rates are promotional.
     14.  Additionally, we believe the reasonable consumer  would 
not understand that the companies  would use anything other  than 
the  widely   used   and  understood   cents-per-minute   pricing 
methodology.  First,  there  is no  clear  language on  the  rate 
sheets indicating otherwise.  Second,  the only quoted rates  are 
set forth  in cents  per minute.   Third, only  vague  references 
regarding the call unit rate  structure are provided.  While  the 
term ``non-transport/non-usage  charges''  is  used,  it  is  not 
defined or  explained.   In short,  nothing  in the  rate  sheets 
notify the customer that the call unit pricing methodology  would 
be used  after  the undefined  promotion,  or what  that  pricing 
methodology entails.23
     15.  In light  of  the  foregoing, and  our  review  of  the 
confidential materials  submitted by  the companies,  we  believe 
that the rate sheets distributed by NOS and ANI mislead consumers 
about the fact that the quoted  rate is a promotional rate,  fail 
to inform  consumers that  a different  pricing plan  will  apply 
after that  period, and  fail to  inform consumers  how the  non-
promotional pricing plan  will operate.24   Therefore, by  widely 
distributing the rate sheet to consumers in the marketing of  its 
long distance plans,  we find  that NOS and  ANI have  apparently 
engaged  in  unjust  or   unreasonable  marketing  practices   in 
violation of section 201(b) of the Act.  

     b.   Letters of Agency (LOAs)

     16.  NOS and  ANI  fax what  they  refer  to as  an  LOA  to 
          prospective customers together  with the rate  sheet.25  
          The ostensible purpose  of this document  is to  secure 
          the   customer's   written   consent   to   have    its 
          interexchange carrier switched to NOS or ANI.  However, 
          the document  contains  additional  information  beyond 
          what is allowed by our  LOA rules.26  Therefore, as  an 
          LOA, the  document  is  invalid.27   A  valid  LOA  may 
          contain only certain authorizing language as set  forth 
          in our rules.28  While we do not mean to suggest that a 
          carrier may  cure  a  misrepresentation  that  violates 
          section 201(b) with  a violation of  our LOA rules,  we 
          reviewed the document to  see if NOS  and ANI made  any 
          attempts to clarify the terms of their promotional plan 
          offering and the nature of their rate structure for the 
          consumer.  The  document  states,  near the  end  of  a 
          fairly  lengthy  paragraph,  that  ``[s]tandard  tariff 
          rates on file with the FCC and state commissions  apply 
          to  all  calls.''  It  also  states  that  "[n]on-usage 
          charges  apply   per   carrier's  tariff,"   and   that 
          "[p]romotion terms per tariff on file."  This  language 
          suffers   from   the   same   lack   of   clarity   and 
          understandability as  the  rate sheets.   Further,  the 
          language does  not  alert the  consumer  that  anything 
          other than the cents-per-minute pricing methodology  is 
          applicable, and makes only vague references to the call 
          unit rate structure.  Here again, the term  ``non-usage 
          charges'' is used, but not defined or explained.  Thus, 
          as with the rate sheet,  the language does not  provide 
          the consumer with enough information to determine total 
          per  call   charges  after   the  expiration   of   the 
          promotional period.29

C.    Forfeiture Authority

     17.  Section 503(b)(1)  of the  Act states  that any  person 
that willfully or repeatedly fails  to comply with any  provision 
of the  Act or  any  rule, regulation,  or  order issued  by  the 
Commission, shall be liable to the United States for a forfeiture 
penalty.30   Section  503(b)(2)(B)  of  the  Act  authorizes  the 
Commission to  assess a  forfeiture of  up to  $100,000 for  each 
violation, or  each  day  of  a continuing  violation,  up  to  a 
statutory maximum of $1,000,000  for a single  act or failure  to 
act.31  In  determining  the appropriate  forfeiture  amount,  we 
consider the factors  enumerated in section  503(b)(2)(D) of  the 
Act, including "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."

     18.  NOS's and ANI's failure  to make clear and  conspicuous 
disclosures in their rate sheets appear to demonstrate  conscious 
disregard for  section 201(b)'s  prohibition against  unfair  and 
unreasonable marketing  practices.   The rate  sheets  support  a 
conclusion that the companies  intentionally employed ``bait  and 
switch'' marketing techniques and withheld information  regarding 
their promotional  offerings and  call unit  rate structure  from 
consumers.  And the number of consumer complaints filed with  the 
FCC against NOS and ANI, along with the number of complaints  and 
service cancellations reported by the companies, further  suggest 
widespread consumer confusion.
     19.  Each  rate  sheet  sent  to  consumers  constitutes   a 
separate violation of section 201(b).  In Business Discount Plan, 
Inc.,32 the Commission  assessed a forfeiture  amount of  $40,000 
for each instance in which the  carrier engaged in an unjust  and 
unreasonable  telemarketing  practice  in  violation  of  section 
201(b).  In light of  the BDP precedent,  and weighing the  facts 
before us, we find that a total forfeiture amount of $500,000 per 
company is appropriate.   Although a straightforward  application 
of a  $40,000  base  forfeiture amount  would  likely  produce  a 
proposed forfeiture in the millions of dollars, we believe that a 
forfeiture of $500,000 per company  is sufficient to protect  the 
interests of  consumers and  to deter  future violations  of  the 
Act.33  In the  event the companies  continue to violate  section 
201(b)'s prohibition  against unjust  and unreasonable  marketing 
practices, such violations could result in future NALs  proposing 
substantially greater forfeitures, or could result in issuance of 
a show cause  order to revoke  their operating authority.34   NOS 
and ANI shall have the opportunity to submit facts and  arguments 
in response to  this NAL  to show  that no  forfeiture should  be 
imposed or that some lesser amount should be assessed.
     20.  We have  determined that  NOS and  ANI have  apparently 
violated section 201(b) of the Act and the Commission's rules and 
orders as  identified  above.   We have  further  determined  NOS 
Communications,  Inc.  and  Affinity  Network  Incorporated   are 
apparently liable for forfeitures in the amount of $500,000 each.
     21.  Accordingly, IT IS ORDERED, pursuant to section  503(b) 
of the Act, as  amended, 47 U.S.C. §  503(b)(5), section 1.80  of 
the  Commission's   rules,   47   C.F.R.   §   1.80,   that   NOS 
Communications, Inc. and Affinity Network Incorporated ARE HEREBY 
NOTIFIED of an Apparent Liability for Forfeiture in the amount of 
$500,000 each,  for willful  or  repeated violations  of  section 
201(b) of the Act  and the Commission's rules  and orders in  the 
paragraphs described above.
     22.  IT IS FURTHER ORDERED, pursuant to section 1.80 of  the 
Commission's rules, 47  C.F.R. §  1.80, that  within thirty  (30) 
days of the release of this Notice, NOS Communications, Inc.  and 
Affinity Network Incorporated  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.35

     23.  IT IS FURTHER  ORDERED that  a copy of  this Notice  of 
Apparent Liability SHALL BE SENT by Certified Mail/Return Receipt 
Requested to:

NOS Communications, Inc.
4380 Boulder Highway
Las Vegas, NV 89121

Affinity Network, Inc.
3660 Wilshire Boulevard, Suite 400
Los Angeles, CA 90010

                              FEDERAL COMMUNICATIONS COMMISSION

                              Magalie Roman Salas
                     DISSENTING STATEMENT OF 

Re: NOS Communications, Inc. and Affinity Network, Inc. Apparent 
Liability for Forfeiture, Notice of Apparent Liability for 
Forfeiture, File No. EB-00-TC-005, NAL/Acct. No. 200132170011.

     The Commission has taken this action under section 201(b) of 
the Communications Act without ever conducting a rulemaking to 
establish the contours of that provision's applicability to 
common carrier advertising.  Moreover, as I have explained 
before, section 201(b) does not empower the Commission to 
regulate common carrier advertising.  This enforcement action is 
therefore illegal, and I urge the affected parties to seek 
judicial review of this decision.

     Background.  Although section 201(b) has been on the books 
for upwards of sixty-five years, the Commission first applied 
this provision to common carrier advertising in 1998.  In a 
notice of apparent liability issued against a long-distance 
carrier that had slammed customers, the Commission concluded - 
without citing a single precedent - that a company's 
representations regarding its product also constituted ``unjust 
and unreasonable practices'' under section 201(b).  See Business 
Discount Plan, Inc., Notice of Apparent Liability for Forfeiture, 
14 FCC Rcd 340 [¶ 29] (1998).  The Commission decided that the 
company ``knowingly misrepresented both its identity as a 
reseller and the nature of its service offering in an effort to 
[intentionally] mislead small business customers, who relied, to 
their detriment, on BDP's misrepresentations of these material 
facts.''  Id. [¶ 34].36  Beyond reciting the facts of that case, 
the Commission did not explain what it meant by the terms 
``knowing misrepresentation,'' ``detrimental reliance,'' or 
``material facts.''

     The Commission followed up its action in Business Discount 
Plan with a policy statement entitled ``Joint FCC/FTC Policy 
Statement for the Advertising of Dial-Around and Other Long-
Distance Services to Consumers,'' 15 FCC Rcd 8654 (Mar. 1, 2000) 
(hereinafter ``Policy Statement'').  There, the Commission acted 
though it had for years regulated common carrier advertising 
practices under section 201(b), when in fact it had only ever 
explicitly addressed that issue in the Business Discount Plan 
dockets.37  See id. [¶ 4].  Borrowing from the FTC's truth-in-
advertising rules, the Policy Statement explained if an 
advertisement makes an ``implied or express objective claim'' 
that ``conveys a material representation to reasonable 
consumers,'' the advertiser must make sure the representation is 
true and be able to substantiate it.  Id. [¶ 11].  Advertisements 
that might be ``misleading in the absence of qualifying or 
limiting information'' must contain ``any necessary 
disclosures,'' which must be ``clear and conspicuous.''  Id. 
[¶ 12].

     The Commission went on to set out what amounts to a detailed 
set of rules interpreting this standard and provided examples of 
advertisements that would be deceptive.  Compliance with all of 
these requirements is mandatory:

     (1)  ``[A]dvertisers should exercise the greatest care in 
       ensuring the accuracy of their claims related to price, 
       including the clear and conspicuous disclosure of 
       information such as minimum per-call charges, monthly 
       fees, fees for additional minutes beyond the initial 
       calling period, and other information that significantly 
       affects the total charge of a particular call or calling 
       plan or service,'' id. [¶ 13];
     (2)  ``[A]ny significant conditions or limitations on the 
       availability of the advertised rates should also be 
       clearly and conspicuously disclosed,'' id. [¶ 14];
     (3)  ``[T]he advertiser should clearly and conspicuously 
       disclose whether the advertised service includes in-state 
       calls, and the fact that such calls are charged at a 
       higher rate if such is the case,'' id. [¶ 15];
     (4)  ``Advertisers should . . . exercise care to adequately 
       explain phrases such as `basic rates' in their ads. . . .  
       [W]hen making claims using such terms as `basic rates' or 
       `regular rates,' advertisers should be mindful that those 
       terms will be evaluated from the point of view of the 
       reasonable consumer, and may be deceptive,'' id. [¶ 16];
     (5)  ``By representing a competitor's rates, an advertiser 
       is making an implied claim that these rates are 
       reasonably current.  As in the case of any other 
       objective claim, the advertiser must have a reasonable 
       basis for this representation,'' id. [¶ 17];
     (6)  ``The fact that information about significant 
       limitations or restrictions on advertised prices may be 
       available by calling a toll-free number or a clicking on 
       a Web site is generally insufficient to cure an otherwise 
       decptive price claim in advertising,'' id. [¶ 18];
     (7)  ``To ensure that disclosures are effective, advertisers 
       should use clear and unambiguous language, avoid small 
       type, place any qualifying information close to the claim 
       being qualified, and avoid making inconsistent statements 
       or using distracting elements that could undercut or 
       contradict the disclosure,'' id. [¶ 20];
     (8)  ``Disclosures that are large in size, are emphasized 
       through a sharply contrasting color, and, in the case of 
       television advertisements, remain visible and/or audible 
       for a sufficiently long duration are likely to be more 
       effective than those lacking such prominence,'' id. 
       [¶ 28];
     (9)  ``[T]he proximity and placement of disclosures are 
       important factors in determining whether they are clear 
       and conspicuous. . . The placement of qualifying 
       information away from the triggering representation . . . 
       reduces the effectiveness of the disclosure.  
       Furthermore, when significant qualifying information 
       about the cost of a long-distance plan or service is 
       necessary to prevent the ad from misleading consumers, 
       the user of an asterisk will generally be considered 
       insufficient to draw a consumer's attention to a 
       disclosure placed elsewhere in an ad,'' id. [¶30];
     (10)        ``Even if a disclosure is large in size and long 
       in duration, other elements of an advertisement may 
       distract consumers so that they may fail to notice the 
       disclosure. . . . Advertisers should take care not to 
       undercut the effectiveness of disclosures by placing them 
       in competition with other arresting elements of the 
       ad,'' id. [¶ 31]; and 
     (11)        ``[C]onsiderations specific to television ads 
       include volume, cadence, and placement of any audio 
       disclosures.  Disclosures generally are more effective 
       when they are made in the same mode (visual or oral) in 
       which the claim necessitating the disclosure is 
       presented,'' id. [¶32].

     Today, the Commission applies section 201(b) for the second 
time to a common carrier's advertising practices.  In contrast to 
the facts in Business Discount Plan, however, there are no 
allegations of slamming in this case.  Rather, the Commission 
bases its finding solely on its conclusion that the common 
carriers here used rate calculations that were ``complicated and 
confusing,'' see Notice of Apparent Liability ¶ 7, and that 
disclosures the carriers made regarding their promotional rates 
were inadequate, id. ¶ 13.  Based on these determinations, the 
Commission concludes that each company is apparently liable for 

     The Commission's advertising rules have not been promulgated 
in accordance with the APA.  Even assuming that common carrier 
advertising were an appropriate concern of the Commission, the 
agency's rules regarding this issue have not been promulgated in 
accordance with the Administrative Procedure Act.  The Commission 
came up with a brand-new rule in a 1998 enforcement case, greatly 
expanded on that rule in a so-called ``policy statement,'' and 
now appears prepared to apply this expanded set of standards 
against common carriers generally.  Affected parties have never 
had an opportunity to weigh in on the matter.  I explain below 
why the APA does not permit the Commission to apply section 
201(b) to common carrier advertising without first conducting a 

     1.  As an initial matter, it was inappropriate for the 
Commission to apply section 201(b) to common carrier advertising 
for the first time in an adjudication, as it did in Business 
Discount Plan.  The APA distinguishes between ``rules'' and 
``orders.''  A ``rule'' is ``an agency statement of general or 
particular applicability and future effect designed to implement, 
interpret, or prescribe law or policy or describing the 
organization, procedure, or practice requirements of an agency.''  
5 U.S.C. § 551(4).  Rulemaking is the ``agency process for 
formulating, amending, or repealing a rule,'' id. at §551(5), and 
the APA requires agencies to give public notice of a proposed 
rulemaking and give interested parties an opportunity to submit 
comments on the proposal, id. at § 553(b).   An ``order,'' by 
contrast, is the ``whole or part of a final disposition . . . of 
an agency in a matter other than rulemaking,'' and it is 
formulated through ``adjudication.''  Id. at § 551(6), (7).  
Notice and comment are not required.  Id. at § 554.  (Also exempt 
from the APA's notice and comment requirements are ``interpretive 
rules'' and ``general statements of policy.''  Id. at 
§ 553(d)(2).)

     The distinction between rulemaking and adjudication is 
fundamental:  ``[T]he entire Act is based upon a dichotomy 
between rule making and adjudication. . . . Rule making is agency 
action which regulates the future conduct of either groups of 
persons or a single person; it is essentially legislative in 
nature, not only because it operates in the future but also 
because it primarily concerned with policy considerations. . . . 
Conversely, adjudication is concerned with 
the determination of past and present rights and liabilities.''  
Attorney General's Manual on the Administrative Procedure Act 13-
13 (1947).

     Section 201(b) imposes on common carriers the immensely 
broad requirement that their ``charges, practices, 
classifications, and regulations'' be ``just and reasonable.''  
47 U.S.C. § 201(b).  But the provision, by its plain language, 
does not authorize the Commission to define the scope of a common 
carrier's section 201(b) obligations through ad hoc adjudicatory 
proceedings.  Rather, it directs the Commission to ``prescribe 
such rules and regulations as may be necessary in the public 
interest to carry out the provisions of this Act.''  Id. 
(emphasis added).  In other words, to support an action against a 
carrier based on an expanded or new understanding of section 
201(b), the plain language of the statute requires the Commission 
first to promulgate a rule, which can be adopted only after 
public notice and comment.  See American Mining Congress v. Mine 
Safety & Health Administration, 995 F.2d 1106, 1109 (D.C. Cir. 
1993) (noting that the Securities and Exchange Act of 1934 
``forbids nothing except acts or omissions to be spelled out by 
the Commission in `rules or regulations,''' and that ``clearly 
some agency creation of a duty is a necessary predicate to any 
enforcement against an [mine] operator [under 30 U.S.C. § 813(h)] 
for failure to keep records'').

     Even if the Commission were not precluded by section 
201(b)'s plain language from adopting new interpretations of the 
provision in an adjudication, policy reasons required it to 
define the contours of a common carrier's section 201(b) 
advertising obligations in a rulemaking.  As the Supreme Court, 
the federal appeals courts, and this agency itself have 
recognized, adjudication is most appropriate when an agency seeks 
incrementally to develop the law, rather than fundamentally 
change it.  For that reason, the Supreme Court has held that 
``rulemaking is generally a better, fairer, and more effective 
method'' of announcing a new rule than ad hoc adjudication.  See 
Community Television of Southern California v. Gottfried, 459 
U.S. 498, 511 (1983); see also Shell Offshore Inc. v. Babbitt, 
238 F.3d 622, 627-28 (5th Cir. 2001); Pfaff v. Department of 
Housing & Urban Development, 88 F.3d 739, 748 (9th Cir. 1996) 
(``The disadvantage to adjudicative procedures is the lack of 
notice they provide to those subject to the agency's authority.  
While some measure of retroactivity is inherent in any case-by-
case development of the law, and is not inequitable per se, this 
problem grows more acute the further the new rule deviates from 
the one before it.  Adjudication is best suited to incremental 
developments to the law, rather than great leaps forward.''); 
Curry v. Block, 738 F.2d 1556, 1563 (11th Cir. 1984); First 
Bancorporation v. Board of Governors, 728 F2d 434, 438 (10th Cir. 
1984); National Small Shipment Traffic Conf. v. I.C.C., 725 F.2d 
1442, 1447- 48 (D.C. Cir. 1984) (``Trial-like procedures are 
particularly appropriate for retrospective determination of 
specific facts . . . [while] [n]otice-and-comment procedures . . 
. are especially suited to determining legislative facts and 
policy of general, prospective applicability.'').  Even where an 
agency has discretion to announce a new rule in an adjudication, 
there are limits to this discretion.  ``Such a situation may 
present itself where the new standard, adopted by adjudication, 
departs radically from the agency's previous interpretation of 
the law, where the public has relied substantially and in good 
faith on the previous interpretation, where fines or damages are 
involved, and where the new standard is very broad and general in 
scope and prospective in application.''  See Pfaff, 

88 F.3d at 748 (citing NLRB v. Bell Aerospace Co., 416 U.S. at 
267, 295 (1974)) (emphasis added).

     The Commission itself has recognized that ``issues of 
general applicability are more suited to rulemaking than to 
adjudication,'' and numerous occasions it has refused to develop 
broad new rules in an adjudicatory context.  See Application of 
Alton Rainbow Corp. and Cox Radio, Memorandum Opinion & Order, 
1999 WL 566130 [18] (1999) (``It is generally inappropriate to 
address this argument in a restricted adjudicatory proceeding, 
``where third parties, including those with substantial stakes in 
the outcome, have had no opportunity to participate, and in which 
we, as a result, have not had the benefit of a full and well-
counseled record.''); Application of Great Empire Broadcasting, 
Inc. and Journal Broadcast Corp., Memorandum Opinion and Order, 
14 FCC Rcd 11145 [¶ 8] (1999) (same); Rulemaking to Amend Parts 
1, 2, 21, and 25 Of the Commission's Rules to Redesignate the 
27.5-29.5 Ghz Frequency Band, to Reallocate the 29.5-30.0 Ghz 
Frequency Band, to Establish Rules and Policies for Local 
Multipoint Distribution Service and for Fixed Satellite Services, 
Second Report and Order, Order on Reconsideration, and Fifth 
Notice of Proposed Rulemaking, 12 FCC Rcd 12545 [¶¶ 388-90] 
(1997); Stockholders of Renaissance Communications Corp. and 
Tribune Co., Memorandum Opinion & Order, 12 FCC Rcd. 11866, 
11887-88 [¶ 50] (1997); Formulation of Policies And Rules 
Relating to Broadcast Renewal Applicants, Competing Applicants, 
and Other Participants to the Comparative Renewal Process and to 
the Prevention of Abuses of the Renewal Process, Second Further 
Notice of Inquiry and Notice of Proposed Rulemaking, 3 FCC Rcd 
5179 (1988) (``[I]t is generally the view that such decisions are 
better left to the rulemaking process where all interested 
parties can participate.  `Rulemaking,' as the Supreme Court and 
the Court of Appeals have recognized, `is generally a better, 
fairer, and more effective method of implementing a new 
industrywide policy than is the uneven application of conditions 
in isolated renewal proceedings.'''); Nextel Communications Inc., 
Order, 14 FCC Rcd 11678 [¶ 31] (WTB 1999) (declining to proceed 
through adjudication because to do so would be to establish 
spectrum policies of general applicability).

     In light of these principles, what the Commission did in 
Business Discount Plan was illegitimate.  In an enforcement 
action against a single carrier, it set forth a broad new 
understanding of section 201(b), generally applicable on a going-
forward basis to all common carrier advertising.  But section 
201(b)'s plain language required it to conduct a rulemaking 
before it imposed this new obligation on a carrier.  And even 
assuming the agency had some discretion to apply a new 
interpretation of section 201(b) in an enforcement action, that 
discretion is not unbounded.  Where fines and damages are 
involved, and the new standard is a broad from an agency's 
previous regulatory position, as was the case in Business 
Discount Plan, courts have held that adjudication is not a proper 
vehicle for announcing new law.

     2.  Not only was the Commission wrong in adopting a new rule 
regarding common carrier advertising in Business Discount Plan, 
it compounded the problem by expanding on that rule in what it 
labeled a ``policy statement.''  The agency's detailed 
description of the kinds of advertising practices that will 
violate section 201(b) is not a policy statement at all, but 
rather amounts to a set of substantive new rules, which are 
subject to the APA's notice and comment requirements.  Its 
attempt to enforce these rules here is therefore improper.

     The APA exempts ``policy statements'' and ``interpretive 
rules'' from the statute's notice and comment requirements, 5 
U.S.C. § 553 (b)(A), while all other rules - which the courts 
have often called ``substantive'' or ``legislative'' rules - are 
subject to these provisions.  A quick review of these statutory 
distinctions is helpful.

     Although the precise difference between policy statements 
and interpretive rules is the subject of some dispute, see 
Appalachian Power Co. v. Environmental Protection Agency, 208 
F.3d 1015, 1021 n.13 (D.C. Cir. 2000), courts have observed that 
a policy statement ``does not seek to impose or elaborate or 
interpret a legal norm,'' but rather ``represents an agency 
position with respect to how it will treat - typically enforce - 
the governing legal norm.''  Syncor International Corp. v. 
Shalala, 127 F.3d 90, 94 (1997) (emphasis added).  ``By issuing a 
policy statement, an agency simply lets the public know its 
current enforcement or adjudicatory approach. . . . Policy 
statements are binding on neither the public, nor the agency.''  
Id. (citations omitted); see also United States Telephone Ass'n 
v. FCC, 28 F.3d 1232, 1234 (D.C. Cir. 1994) (``[T]he paradigm of 
a policy statement [is] an indication of an agency's current 
position on a particular regulatory issue.'').

     An interpretive rule, on the other hand, ``typically 
reflects an agency's construction of a statute that has been 
entrusted to the agency to administer.''  Id.  ``The legal norm 
is one that Congress has devised; the agency does not purport to 
modify that norm, in other words, to engage in lawmaking. . . . 
Instead, it is construing the product of congressional lawmaking 
`based on specific statutory provisions.'''  Id.  For these 
reasons, ```[t]he distinction between an interpretative and 
substantive rule . . . likely turns on how tightly the agency's 
interpretation is drawn linguistically from the actual language 
of the statute.'''  Id.  (citing Paralyzed Veterans of American 
v. D.C. Arena L.P., 117 F.3d 579, 588 (D.C. Cir. 1997).

      Substantive rules, in contrast to both interpretive rules 
and policy statements, modify or add to a legal norm, based on 
the agency's own authority.  Id. at 95.  ``That authority flows 
from a congressional delegation to promulgate substantive rules, 
to engage in supplementary lawmaking.''  Id.  Because the agency 
is engaged in lawmaking, the APA requires it to comply with 
notice and comment.  Id.

     In determining whether an agency's exercise of regulatory 
authority qualifies as a substantive rule, courts begin with an 
examination of the applicable statute.  Where the authorizing 
statute is ``very general, using terms like `equitable' or 
`fair,' and the `interpretation' really provides all the 
guidance, then the latter will more likely be a substantive 
regulation, because then the agency's rule gives content to the 
legal norm in question.''  Id. at 94 n.6 (citing Paralyzed 
Veterans, 117 F.3d at 588).  As the Seventh Circuit has 

     When Congress authorizes an agency to create standards, it 
     is delegating legislative authority, rather than itself 
     setting forth a standard which the agency might then 
     particularize through interpretation.  Put differently, when 
     a statute does not impose a duty on the persons subject to 
     it but instead authorizes (or requires - it makes no 
     difference) an agency to impose a duty, the formulation of 
     that duty becomes a legislative task entrusted to the 
     agency.  Provided that a rule promulgated pursuant to such a 
     delegation is intended to bind, and not merely to be a 
     tentative statement of the agency's view, which would make 
     it just a policy statement, and not a rule at all, the rule 
     would be the clearest possible example of a legislative 
     rule, as to which the notice and comment procedure . . . is 

Hoctor v. United States Dep't of Agriculture, 82 F.3d 165, 169-70 
(7th Cir. 1996) (emphasis added).

     Also important to the determination whether an agency 
publication amounts a substantive rule is whether it prescribes 
mandatory requirements.  See Syncor, 127 F.3d at 95 (holding that 
an agency's decision is substantive if it uses language that is 
``consistent only with the invocation of its general rulemaking 
authority to extend its regulatory reach.'').  In Syncor, for 
example, the court concluded that a ``notice'' issued by the Food 
and Drug Administration announcing that a certain category of 
radioactive drugs should comply with various statutory 
requirements was substantive.  Although the agency described this 
notice as a ``policy statement'' and as ``guidance,'' the court 
ruled that the agency's statement that it had ``concluded'' that 
these drugs ``should be regulated'' amounted to fundamentally new 
regulation, which must be informed by notice and comment 
rulemaking.  Id.; see also Appalachian Power Co., 208 F.3d at 
1023 (``[T]he entire Guidance, from beginning to end, reads like 
a ukase.  It commands, it requires, it orders, it dictates.  
Throughout the guidance, EPA has given the States their `marching 
orders' and EPA expects the States to fall into line . . ..''); 
Sweet v. Sheahan, 235 F.3d 80, (2d Cir. 2000) (``Legislative 
[i.e., substantive] rules can impose obligations on members of 
the public distinct from, and in addition to, those imposed by 
statute.''); United States v. Picciotto, 875 F.2d 345, 348 (D.C. 
Cir. 1989) (holding that rules that ``impose obligations'' are 
substantive, whereas rules that ``merely restate existing 
duties'' are interpretive).
     Applying these principles here, it is clear that the 
advertising guidelines set out in the Commission's so-called 
policy statement are substantive rules.  First, section 201(b) is 
a classic example of a congressional delegation to an agency of 
lawmaking authority.  The provision requires only that a 
carrier's  ``charges, practices, classifications, and 
regulations'' be ``just and reasonable,'' leaving it to the 
agency to supply content to these enormously broad terms.  
Despite what the Commission might say, it is certainly not 
obvious from the text of the statute that a carrier's 
``practices'' necessarily include advertising.  Indeed, the word 
``practices,'' standing alone, is so broad that it could include 
virtually any corporate practice.  Nor does the statute, on its 
face, tell us what ``just'' or ``reasonable'' mean.

     In its ``policy statement,'' the Commission gave new meaning 
to these terms, and in doing so, acted in its lawmaking capacity.   
The agency informed carriers that their advertising practices 
would not meet the ``just and reasonable'' standard unless they 
ensured the accuracy of their price-related claims, including 
information regarding minimum per-call charges, monthly fees, 
fees for additional minutes beyond the initial calling period, 
geographic restrictions on rates, and comparative price claims.  
Policy Statement ¶ 12-15.  The Commission also concluded that 
section 201(b)'s ``just and reasonable'' standard required 
advertisers ``clearly and conspicuously'' to disclose ``qualifying information,'' and it 
explained in detail the form such disclosures should take.  See 
id.  ¶ 20-32. 

     These are plainly new requirements.  Even assuming that 
Business Discount Plan legitimately announced a new rule (which 
it did not), that case dealt only with a carrier's 
misrepresentations in the slamming context.  The carrier there 
told customers that it was a consolidated billing service and 
misled them into changing their long-distance carrier.  The most 
one may make of that case is that section 201(b) applies to a 
carrier's illegal slamming conduct, precluding a carrier from 
misrepresenting to customers the type of service the carrier 
offers and from fraudulently inducing them to change their long-
distance carrier.  Business Discount Plan said nothing about the 
accuracy of price-related advertising or the need for ``clear and 
conspicuous'' disclosures, or any of the other issues the 
Commission addressed in its policy statement.

     A second sign that the Commission's ``policy statement'' is 
actually a set of substantive rules is the mandatory nature of 
these new requirements.  Section B, for example, is entitled 
``Material Information that Should Be Disclosed in Advertisements 
for Long-Distance Calling Services.''  Each paragraph in Section 
B states that carriers ``should'' disclose specific pieces of 
pricing information, and carriers are informed that they 
``should'' also ensure that these disclosures are ``clear and 

     In short, the Commission's  so-called policy statement is  a 
substantive rule in masquerade.  The agency created a new  regime 
governing common carrier advertising, with legal consequences for 
common carriers.  It went far beyond whatever rule it created  in 
Business Discount Plan.   The  statement simply does not  qualify 
as a mere interpretation  of an existing rule  or a statement  of 
policy regarding  the  enforcement of  governing  law.  It  is  a 
substantive change  in the  law.  As  such, it  should have  been 
promulgated in  compliance  with  the APA's  notice  and  comment 
rulemaking procedures.  It was  not, and this enforcement  action 
is therefore illegal.

     The Commission Lacks Jurisdiction to Regulate Common Carrier 
Advertising Under Section 201(b).  As I have written before, I do 
not believe Congress intended to  delegate to the Commission  the 
authority to  regulate common  carrier advertising.   See,  e.g., 
Commission on the Verge of  a Jurisdictional Breakdown:  The  FCC 
and Its Quest to Regulate  Advertising, 8 CommLaw Conspectus  219 
(2000); Dissenting Statement, Joint FCC/FTC Policy Statement  for 
the Advertising of Dial-Around  and Other Long Distance  Services 
to Consumers, 15 FCC Rcd 8654 (2000).  By specifically giving the 
Federal  Trade  Commission  authority  to  regulate  pay-per-call 
service advertising in the 1992 Telephone Disclosure and  Dispute 
Resolution Act, Congress  indicated that  it did  not think  this 
Commission possessed  general  jurisdiction  to  regulate  common 
carrier advertising.  In  the preemption  context, moreover,  the 
federal courts have  indicated that the  Communications Act  does 
not impose a duty on common carriers regarding advertising.   For 
these  reasons,  it  is  my   view  that  the  Commission   lacks 
jurisdiction to regulate advertising.

                               * * * *

     Although it apparently thinks otherwise, this agency does 
not have unlimited authority to enforce against parties any 
standard of conduct it might think is appropriate.  If the 
Commission wishes to regulate common carrier advertising under 
section 201(b), it must put its proposed position out for comment 
and be prepared to justify whatever rule it fashions to the 
public and to
the courts.  It has not done this here, and this enforcement 
action is therefore unlawful.  I dissent from this decision.


1    NOS, is a Maryland  corporation, whose principal address  is 
     4380  Boulder  Highway,  Las  Vegas,  NV  89121.   NOS  also 
     conducts  business  under  the  following  business   names: 
     International  Plus,  O11,  INETBA  (or  Internet   Business 
     Association),  and   I-Vantage.    ANI   is   a   California 
     corporation,  whose  principal  address  is  3660   Wilshire 
     Boulevard, Suite  400,  Los  Angeles, CA  90010.   ANI  also 
     conducts  business  under  the  business  names   HorizonOne 
     Communications     (``HorizonOne'')     and      QuantumLink 
     Communications  (``QuantumLink'').   All  of  the   entities 
     identified herein have in common either the same  principals 
     or officers.  For purposes of this NAL, the term ``NOS''  or 
     the term ``ANI''  (collectively ``companies'') includes  all 
     of NOS's and ANI's respective identified entities, including 
     any of their respective successors or assigns. 

2         47 U.S.C. § 201(b).  

3    According to  NOS and  ANI, the  limited residential  plans, 
     sold under the International Plus and O11 company names,  do 
     not employ  the  call  unit rate  structure  but  are  sold, 
     tariffed, and  billed as  cents per  minute offerings.   For 
     this reason, the  International Plus and  O11 service  plans 
     will not  be  addressed in  this  NAL.  See  NOS  and  ANI's 
     September 14, 2000 joint response to our September 28,  2000 
     letter of inquiry, Attachment B, page 1 (``Response'').

     NOS and  ANI  requested confidential  treatment  of  certain 
     information they submitted in  response to written  requests 
     from the  Enforcement  Bureau.   On November  3,  2000,  the 
     Bureau released an Order denying the request for failing  to 
     comply with the standards set  forth in section 0.459(b)  of 
     the Commission's rules.   NOS Communications,  Inc., DA  00-
     2479 (Enf. Bur., Nov. 3, 2000), citing 47 C.F.R. § 0.459(b).  
     On November 9, 2000,  NOS and ANI  filed an Application  for 
     Review of  the Order.   Because, in  this NAL,  we use  only 
     materials submitted  by complainants  and make  no  specific 
     reference to information provided by NOS and Affinity  under 
     their request  for  confidential treatment,  we  decline  to 
     address the merits  of the pending  Application for  Review.  
     The Application for Review will be addressed separately.

4    The  call  unit  may  equal  a  minute  under  very  limited 
     circumstances,  such  as  for  facsimile  calls  and  during 
     certain limited promotional periods.

5    See footnote 29, infra.  

6    See e.g, Informal Complaint No. G2000010809, filed  December 
     8, 1999; Informal Complaint No. P-20826, filed June 6, 2000; 
     Informal Complaint No. G2000017422, filed February 23, 2000; 
     Informal Complaint No. G2000009619, filed December 3,  1999; 
     Informal Complaint  No.  00-G6806, filed  August  22,  2000; 
     Informal Complaint No. G2000015040, filed February 2,  2000; 
     and Informal Complaint No.  G2000010163, filed December  17, 

7    See e.g, Informal Complaint No. G2000016345, filed  February 
     1, 2000 (``I  am at my  wits end.  I  cannot take trying  to 
     communicate with these people.   I believe they are  trained 
     to lie  and  deceive.'); Informal  Complaint  No.  00-G6806, 
     filed August 22, 2000 (``Affinity always said they  couldn't 
     figure out how the  rate kept going up.   It was always  the 
     same song and dance.  A  credit was issued after many  phone 
     calls to clarify the problem  and after months had gone  by.  
     Sometimes they would offer us a discounted rate if we  would 
     excuse their errors.''); Informal Complaint No. G2000009619, 
     filed December 3, 1999; and Informal Complaint No. 00-G6806, 
     filed August 22, 2000.

8    See e.g, Informal Complaint No. G2000005500, filed  November 
     12, 1999 (``They are virtually holding my toll free  numbers 
     hostage.  My only  choice seems  to be to  pay the  disputed 
     invoice at  these exhorbitant  rates or  lose my  toll  free 
     numbers that  I have  had for  so many  years.'');  Informal 
     Complaint No. 00-G943, filed May 24, 2000 (``I was also told 
     my 800 number  has been taken  over by NOS.   They will  not 
     allow me to  have MCI World  Com take over  until I pay  the 
     entire bill.''); Informal  Complaint No. G2000000524,  filed 
     November 15, 1999 (``I had made several attempts with MCI to 
     have all  our lines  switched to  MCI but  somehow  Affinity 
     would not let go of our 800 numbers.''); Informal  Complaint 
     No. P5493, filed  January 18,  2000 (``They have  sent me  a 
     letter threatening legal action since I only paid 75% of  my 
     Nov. 18,  1999  invoice as  told  to do  by  their  customer 
     service  representative.'');  and  Informal  Complaint   No. 
     G2000016345, filed February  1, 2000 (``I  then received  my 
     first threatening  letter from  NOS .  . .  telling me  they 
     would shut off my service if I did not pay . . . and send me 
     to collections.  The  frustrating thing is  that everyone  I 
     spoke to in  the company  directed me  NOT to  pay the  bill 
     until the credit was applied.')

9    See e.g., Informal Complaint No. 00-G372, filed May 24, 2000 
     (``NOS refused  to  switch  me  back  to  my  previous  long 
     distance provider . . . and local toll provider . . . when I 
     was not satisfied with its services.''); Informal  Complaint 
     No. G2000016321,  filed February  1,  2000 (``I  have  asked 
     repeatedly to have my long distance service terminated,  but 
     to date they have not terminated my service.  I can't find a 
     way to get away from the company.''). 

10   See footnote 3, supra.

11   47 U.S.C. § 201(b). 

12   Business Discount Plan,  Inc., Order of  Forfeiture, 15  FCC 
     Rcd 14461  (2000)  (``BDP''),  recon. granted  in  part  and 
     denied in part, FCC 00-424  (2000); AT&T Corp., 71 RR2d  775 
     (1992); Telecommunications  Research and  Action Center  and 
     Consumer Action,  4 FCC  Rcd 2157  (Com.Car.Bur. 1989);  see 
     also Joint FCC/FTC Policy  Statement For the Advertising  of 
     Dial-Around And Other  Long-Distance Services To  Consumers, 
     15 FCC Rcd 8654 (2000).

13   This opinion is reflected in many of the consumer complaints 
     received by the  Commission.  One  complainant writes:  ``It 
     took me about 2 hours  to simplify their `magic formula'  (I 
     am a software  engineer with a  strong math background).   I 
     didn't like it, because  it looked to me  as a good way  for 
     confusing and cheating customers.''  Informal Complaint  No. 
     00-G372, filed  May 24,  2000.  Another  complainant  writes 
     that NOS's  call unit  rate structure  ``turns out  to be  a 
     convoluted  formula   constructed  to   gouge   customers.''  
     Informal Complaint No. G2000017422, filed February 23, 2000.  
     Another writes, ``[T]he  Total Calling  Unit, which  doesn't 
     easily translate to  cost per minute  charges but serves  to 
     confuse the customer into thinking that costs are less  than 
     they are.''  Informal Complaint No. P13117, filed March  20, 
     2000.  Still, another complains: ``Upon review we noticed we 
     were not being  billed in minutes,  but in `TCU's'.   What's 
     that?  Who  can  calculate  it?''   Informal  Complaint  No. 
     G2000009309, filed December 8, 1999.

14   Although NOS and ANI represent that they widely  disseminate 
     documents similar to this  one to customers and  prospective 
     customers, they have requested  that we afford  confidential 
     treatment to those  they have submitted  in response to  our 
     requests.  See supra,  footnote 3.  Since  we obtained  this 
     document not from NOS or ANI, but from a consumer  complaint 
     file, the companies'  request for  confidentiality does  not 
     pertain  to  this  document.   See  Informal  Complaint  No. 
     G2000007824, filed November 26, 1999.

15   The example states ``5 ICUs/1  MCU = $0.0754.''  It  appears 
     that the sum of the product has been divided by 10 and  that 
     certain numbers have been transposed in error, as $0.149 x 5 
     ICUs equals $0.745 and not $0.0754.  

16   The example states ``85 ICUs = $1.2665.''  Again, the sum of 
     the product appears to have been divided by 10 to arrive  at 
     $1.2665, instead of $12.665.

17   The example states ``95 ECUs  = $1.4155.''  Once again,  the 
     sum of the  product appears to  have been divided  by 10  to 
     arrive at $1.4155, instead of $14.155.

18   The example states that  the sum of  the charges ($0.0754  +  
     $1.2665 + $1.4155) equals $2.7574.  

19   We divided by 10 to bring our calculation in conformity with 
     the example.
20   NOS's and  ANI's customer  invoices detail  the duration  of 
     each call, not in  minutes, but in  total call units.   From 
     the foregoing example,  the call  duration in  minutes is  a 
     necessary   component   for   performing   the    conversion 
     calculation.  Thus, without  the call  duration in  minutes, 
     the customer is unable to perform the conversion calculation 
     and  unable  to  verify  the  accuracy  of  the  amount,  or 
     determine the cent per minute  rate, being billed per  call.  
     One complainant writes that  ``[s]ince the invoice does  not 
     indicate the amount of time utilized on each call it is  not 
     possible  to  calculate  the  precise  charge.''    Informal 
     Complaint No. P-16219, filed April  10, 2000 .  Yet  another 
     complains that ``[t]he billing  was not understandable in  a 
     clear and  simple  manner  because it  was  based  on  `call 
     units', and not minutes.''  Informal Complaint No.  P-20826, 
     filed June 6, 2000.

21   We are continuing to review NOS's and ANI's current plan 
     offerings for compliance with section 201(b) and will not 
     hesitate to take further action if deemed necessary.

22   Although NOS and ANI represent that they widely  disseminate 
     documents similar to this  one to customers and  prospective 
     customers, they have requested  that we afford  confidential 
     treatment to the ones they have submitted in response to our 
     requests.  See supra,  footnote 3.  Since  we obtained  this 
     document  not  from  the  companies,  but  from  a  consumer 
     complaint file, their request  for confidentiality does  not 
     pertain  to  this  document.   See  Informal  Complaint  No. 
     G2000014881, filed February 1, 2000.
23   In other examples  of the  rate sheet submitted  by NOS  and 
     ANI, the  purportedly  limiting  or  qualifying  information 
     directs the consumer to a ``Welcome Package'' for additional 
     information.  We  believe  that  the  fact  that  additional 
     information might be available elsewhere is insufficient  to 
     form the required disclosure.

24   The  materials   submitted   by   NOS  and   ANI   under   a 
     confidentiality  request  include  additional  rate  sheets.  
     Those rate sheets appear similarly to mislead consumers.

25   Although NOS and ANI represent that they widely  disseminate 
     documents similar to this  one to customers and  prospective 
     customers, they have requested  that we afford  confidential 
     treatment to the ones they have submitted in response to our 
     requests.  See supra,  footnote 3.  Since  we obtained  this 
     document, not  from  the  companies,  but  from  a  consumer 
     complaint file, their request  for confidentiality does  not 
     pertain  to  this  document.   See  Informal  Complaint  No. 
     G2000016321, filed February 1, 2000.

26   47 CFR § 64.1160.

27   Id. at  (a).

28   Id. at (b).
29   We also find  that NOS  and ANI  did not  cure the  apparent 
     violations  of   section  201(b)   by  verbal   disclosures.  
     Although NOS and ANI, in  their Response, allege that  sales 
     representatives  make  required  verbal  disclosures  during 
     telemarketing calls that the pricing offered is in cents per 
     call unit,  such disclosures  appear  only relevant  to  the 
     companies' current plan  offerings, which do  not include  a 
     cents-per-minute rate.   Additionally,  consumer  complaints 
     further suggest  that verbal  disclosures did  not cure  the 
     apparent  defects.    See   e.g.  Informal   Complaint   No. 
     G2000009619, filed December 19, 1999 (``I do not recall ever 
     being told  by anyone  at ANI  that this  was a  promotional 
     rate, which would last for 2 months only. . . I also do  not 
     recall anyone telling me about ANI's policy of automatically 
     converting `minutes' to  `total call units'  (TCU's) on  the 
     third month.'');  Informal Complaint No. G2000010809,  filed 
     December 8, 1999 (``My decision  to switch to ANI was  based 
     on their advertised rate.  This was further supported during 
     phone conversations.  . .  during which  the 7.9  cents  per 
     minute rate was confirmed. . .'); and Informal Complaint No. 
     G2000006122,  filed  November  17,  1999  (``From  my  first 
     conversation with NOS, the cost per minute for long-distance 
     has been discussed. . . Always I received a response with no 
     correction as to the `per minute' term.'').

30   47 U.S.C. §503(b)(1)(B); see also 47 C.F.R. § 1.80(a)(2).

31   47 U.S.C. §  503(b)(2)(B); see also  47 C.F.R. §  1.80(b)(2) 
     (Amendment of Section 1.80 of the Commission's Rules, Order, 
     12   FCC   Rcd    1038   (1997)(inflation   adjustment    to 
     $100,000/$1,100,000); Amendment  of Section  1.80(b) of  the 
     Commission's Rules and  Adjustment of  Forfeiture Maxima  to 
     Reflect Inflation, Order, 15 FCC Rcd 18,221 (2000)(inflation 
     adjustment to $120,000/$1,200,000)).

32   15 FCC Rcd 14461 at 14471-72.

33   The total volume of rate  sheets submitted by the  companies 
     appears to number  in the hundreds.   At the total  proposed 
     forfeiture amount of $500,000 per company, this would  equal 
     just 12.5 violations per company  if the Commission were  to 
     impose a forfeiture of $40,000 per violation.

34   See CCN, Inc. et al., 12 FCC Rcd 8547 (1997). 

35   Payment of the forfeiture  amount may be  made by mailing  a 
     check or  similar instrument  payable to  the order  of  the 
     Federal  Communications   Commission,  to   the   Forfeiture 
     Collection Section, Finance  Branch, Federal  Communications 
     Commission, P.O.  Box 73482,  Chicago, Illinois  60673-7482.  
     The payment  should note  the  "NAL/ Acct.  No."  referenced 
     above.  The response, if any, must be mailed to Catherine W. 
     Seidel,  Chief,   Telecommunications   Consumers   Division, 
     Enforcement Bureau, Federal  Communications Commission,  445 
     12th Street S.W., Room 3-C365, Washington, D.C., 20554,  and 
     must include the "NAL/Acct. No." referenced above.

36 The Commission issued an order of forfeiture in the matter 
last July, 15 FCC Rcd 14,461 (2000), and denied a petition for 
reconsideration in December, 2000 WL 1785129 (Dec. 7, 2000). 
37 The Commission cited AT&T Card Issuer Identification Cards., 
Letter, 7 FCC Rcd. 7529 (1992), as standing for the proposition 
that it had previously ``found unfair and deceptive marketing 
practices by common carriers constitute unjust and unreasonable 
practices under section 201(b).''  But that case did not squarely 
raise the section 201(b) issue.  It concerned statements that 
AT&T had made in literature sent to card holders, telling them 
that ``government requirements'' required the company to issue 
new cards and asking them to destroy their old cards.  The 
Commission staff determined that the language might lead 
customers to destroy cards issued by companies affiliated with 
AT&T, and it sent a letter of admonishment to AT&T.  But it never 
actually addressed the section 201(b) question, and the 
Commission's suggestion that the case supports its regulation of 
common carrier advertising under section 201(b) is disingenuous.