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Federal Communications Commission
Washington, D.C. 20554
In the matter of )
Kenneth Kiefer, )
Complainant, ) File No. EB-00-TC-F-002
Paging Network, Inc. d/b/a/ )
MEMORANDUM OPINION AND ORDER
Adopted: October 12, 2001 Released: October 18,
By the Commission:
1. In this Order, we deny a formal complaint filed by
Kenneth Kiefer against Paging Network, Inc.1 (PageNet) pursuant
to section 208 of the Communications Act of 1934, as amended (the
Act).2 The United States District Court for the Eastern District
of Michigan, Southern Division (District Court) referred this
case to the Commission under the doctrine of primary
jurisdiction. We find that Mr. Kiefer has not demonstrated that
PageNet's assessment of a late payment fee violates section
201(b) and deny the complaint with prejudice. 3
2. In November 1991, Mr. Kiefer entered into a
Service/Lease Agreement with PageNet-Michigan to receive paging
services in Michigan. PageNet subsequently notified Mr. Kiefer
via a billing invoice that he would be subject to a late fee of
$5 or 1.5% of the past due balance for payment received beyond
the due date.4 After failing to pay his paging bill by the
specified due date, Mr. Kiefer was charged a $5.00 late fee.5 On
August 28, 1998, Mr. Kiefer filed a class action lawsuit against
PageNet in Michigan State Court that sought recovery of the late
fee charges that he and other subscribers had incurred. PageNet
subsequently removed Mr. Kiefer's complaint to the United States
District Court for the Eastern District of Michigan, Southern
Division.6 The District Court thereafter granted PageNet's
request to refer the case to the Commission based on the doctrine
of primary jurisdiction,7 determining that Mr. Kiefer's complaint
asserted issues of reasonableness under section 201(b) of the Act
that are within the Commission's jurisdiction. The District
Court stayed its proceedings and denied PageNet's request to
dismiss Mr. Kiefer's suit without prejudice. 8
3. In the above-captioned complaint, filed on April 5,
2000, Mr. Kiefer argues that PageNet's assessment of the $5.00
late fee is an unreasonable charge because it is excessive,
``bear[s] no relationship to its actual losses resulting from
late payments and does not represent a reasonable estimate of
such losses.''9 Mr. Kiefer states that the time period within
which subscribers must pay their bills is unreasonably short.10
Additionally, Mr. Kiefer asserts that PageNet's practice of
assessing a late fee if payment is not received within ``ten days
of the billing date indicated on a typical billing statement is
an unreasonable practice, because its truncated billing period is
designed to induce late payments whereby PageNet's customers will
incur unreasonably high late fees.''11 PageNet responds that its
business practices are the product of competitive market forces
and are not unreasonable and that customers are provided with a
grace period before a late fee is assessed.12 Mr. Kiefer also
alleges in his complaint that PageNet's assessment of a $5.00
late fee violated section 201(b) of the Act, which requires that
all charges must be just and reasonable. Mr. Kiefer claims that
PageNet's late fees were assessed after an unreasonably truncated
billing period, are unlawful penalties, constitute liquidated
damages that are ``disproportionate to the estimated probable
loss or harm caused to PageNet by the late receipt of a monthly
payment,''13 and contravene state law.14
II.A.1. Whether PageNet's Late Fee Is Unjust and
4. Under section 201(b) of the Act, ``all charges,
practices, classifications and regulations for and in connection
with'' communication services offered by common carriers must be
just and reasonable.15 Mr. Kiefer argues that PageNet's
assessment of a late fee violates section 201(b) of the Act
because the fee is not cost-based, does not reflect actual losses
resulting from late payments, and does not represent a reasonable
estimate of such losses. PageNet argues that its late fee policy
was implemented to offset expenses due to customers' late
payments.16 Additionally, PageNet states that it provided Mr.
Kiefer with a grace period and did not assess a late fee unless
payment was not received by the end of its billing cycle.17
PageNet further states that it mailed billing statements to Mr.
Kiefer prior to the invoice date and that Keifer was notified in
October 1994 that a late fee would be assessed for late
payments.18 PageNet also argues that the paging market is highly
competitive and that ``market forces ensure that a carrier's
rates, terms and conditions are reasonable.''19
5. At the outset, we note that the Commission has
regulated CMRS, such as those offered by PageNet, through
competitive market forces. In doing so, the Commission has not
imposed specific cost-based rate regulations on CMRS providers.
This does not mean, however, that section 201(b) has no meaning.
If a charge is unjust or unreasonable, even in an unregulated
market, we will find a violation. In this case, however, beyond
his bald assertions, we find that Mr. Kiefer has failed to cite
any authority or present any evidence requiring PageNet's late
fee to be based on an estimate of its actual losses. Mr. Kiefer
has also failed to persuade us that PageNet has violated any
specific Commission regulation regarding its assessment of a late
6. In Southwestern Bell Mobile Systems, Inc., the
Commission stated its general preference that the competitive
market, rather than government regulation, govern the Commercial
Mobile Radio Service (CMRS) industry. 20 There, Southwestern
Bell Mobile Systems (``Southwestern'') had asked the Commission
to issue six specific declaratory rulings that would assist in
the resolution of numerous class action suits filed in state and
federal courts. Among other things, Southwestern requested that
we declare that the Commission's general preference is that
competitive forces instead of governmental regulations govern the
CMRS marketplace.21 The Commission granted Southwestern's first
requested ruling and stated that congressional policy also
favored competition over regulation. The Commission noted that
it is directed by the Act to forbear from applying any regulation
or provision of the Act where the enforcement of the regulation
is not required to protect the public and is inconsistent with
the public interest. The Commission further noted that in
considering whether forbearance is within the public interest, it
is required to determine whether forbearance will promote
competitive market forces.22
7. We adhere to the views expressed by the Commission in
SBMS and other proceedings,23 that market forces should generally
govern the rates and charges assessed by CMRS providers. We note
however, that in a competitive market, certain industry practices
will not necessarily ``be lawful under Section 201(b) of the Act
and without regard to other contractual, service, and marketing
practices of the CMRS provider.''24 Nonetheless, we find that
the existence of a competitive market should be considered in
determining the existence of a section 201(b) violation. 25 We
further note that late fees have been routinely used by other
industries regulated by the Commission.26 In this instance, the
facts do not warrant that we find that the $5.00 late fee
violates section 201(b).
II.A.2. Whether PageNet's Bill Payment Period Is
8. Mr. Kiefer states that PageNet's billing period is
unreasonably short and therefore violates section 201(b).27 Mr.
Kiefer asserts that PageNet mailed its billing statement on the
first of the month, specified that payment was due on the 10th
day of the month and reminded subscribers to allow 5 to 7 days
for mailing.28 Mr. Kiefer specifically states that ``from the
date PageNet mailed its billing statements, subscribers were
generally provided at most, five (5) days within which to make
payment and ensure its receipt by PageNet, without incurring the
unreasonably high late fee penalty.''29
9. PageNet argues that its billing period policy is
reasonable under Section 201(b) of the Act.30 PageNet states
that the time period within which subscribers are required to pay
their bill is not unreasonably short because the billing date is
the first day of the service month with payment due by the 10th
of the month and that subscribers are given a grace period to pay
their bills without incurring a late fee.31 PageNet states that
this grace period is 10-13 days long, ``running from the 11th of
the current billing month through the printing of the next
billing cycle.''32 PageNet further argues that Mr. Kiefer
subscribed to its services for over eight years, was given notice
of the late fee and billing policy, and agreed in writing to the
subscription agreement. PageNet notes that Mr. Kiefer chose to
continue subscribing to PageNet's services even after being
assessed the late fees.33
10. Mr. Kiefer has failed to demonstrate that the time
period during which PageNet's subscribers are required to pay
their bill is unreasonably short. Mr. Kiefer was given notice of
the 10-day billing period in his signed 1991 and 1995
Service/Lease Agreements with PageNet. Furthermore, customers
are given an additional 10-13 day grace period before a late fee
is assessed. Mr. Kiefer further received billing statements
indicating when payment was due. Mr. Kiefer further acknowledges
that he received notice of the late fee on billing statements.34
In this context, we decline to find that PageNet's late fee is
unjust and unreasonable under section 201(b) of the Act. 35
11. We find that Mr. Kiefer has not demonstrated that
PageNet's assessment of the $5.00 late fee violates section
201(b) of the Act. We therefore deny with prejudice the instant
formal complaint filed by Kenneth Kiefer against Paging Network,
IV. ORDERING CLAUSE
12. Accordingly, IT IS ORDERED, pursuant to sections 1,
4(i), 4(j), 201(b), and 208 of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 151, 154(i), 154(j), 201(b), and 208, that
the complaint filed by Kenneth Kiefer is DENIED.
13. IT IS FURTHER ORDERED that Kenneth Kiefer's request
for waiver of section 1.721(a)(8) of the Commission's rules, 47
C.F.R. § 1.721(a)(8), is GRANTED.
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
1 Paging Network, Inc. provides paging services to subscribers
in the United States, U.S. territories and Canada. PageNet, Inc.
is the parent and holding company of PageNet Michigan.
2 47 U.S.C. § 208.
3 Section 201(b) states in pertinent part: ``All 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 . . .
.'' 47 U.S.C. § 201(b). Mr. Kiefer also argues that the late
fee at issue here should be considered a ``term and condition''
under section 332 of the Act. In construing the scope of the
complaint before us we note that although it is not entirely
clear, the Court appears to have addressed Mr. Kiefer's claim
under section 332. Kenneth Kiefer v. Paging Network Inc., 50
F.Supp. 2d 681, 685 (E.D. Mich. 1999) (``District Court Order'').
At the same time, the District Court's primary jurisdiction
referral is limited to a determination of the late fee's
lawfulness under Section 201(b) of the Act. "Regardless of the
semantic label Plaintiff uses to dress his Section 201(b) claims,
he cannot disguise the fact that they question the reasonableness
of Defendant's uniform late payment charges, and the Sixth
Circuit has determined that such questions should be determined,
in the first instance, by the FCC." District Court Order, 50
F.Supp. 2d 681, 685-6 (1999). Given these circumstances, we find
it appropriate to exercise our authority to address the complaint
before us by limiting our ruling to the issues raised under
section 201(b) of the Act.
4 Joint Statement at 3.
5 Mr. Kiefer does not specify the number of occasions for which
he was charged and paid a late fee. PageNet states that Kiefer
was assessed a late fee on six occasions. See Reply at 2.
6 Kenneth Kiefer v. Paging Network of Michigan, Inc. et al.,
Case No. 98-008669-CP (Mich. Cir. Ct., Oakland County).
7 Citing Far East Conference v. United States, 342 U.S. 570,
574-75 (1952), the District Court stated that the doctrine of
primary jurisdiction ``is properly invoked when enforcement of a
claim in court would require resolution of issues that have
already been placed within the special competence of an
administrative body.'' District Court Order, 50 F.Supp. 2d at
8 Id. at 682.
9 Complaint at 16.
10 Id. at 15-16.
11 Id. at 7.
12 Answer, Tab D, at 14-16.
13 Complaint at 7.
14 The District Court stayed its proceedings and will address
these issues after the Commission rules on the reasonableness of
PageNet's $5.00 late fee. District Court Order, 50 F.Supp. 2d at
15 47 U.S.C. § 201(b).
16 Answer, Tab D, at 5.
17 Id. at 5-7.
19 Id. at 12.
20 Southwestern Bell Mobile Systems, Inc., Petition for a
Declaratory Ruling regarding the Just and Reasonable Nature of,
and State Challenges to, Rates Charged by CMRS Providers when
Charging for Incoming Calls and Charging for Calls in Whole-
Minute Increments, Memorandum Opinion and Order, 14 FCC Rcd 19898
21 Southwestern also requested that we declare that: (1) that
charging for CMRS calls in whole-minute increments and charging
for incoming calls were not unjust or unreasonable practices in
violation of section 201(b) of the Act; (2) the term "call
initiation" in the CMRS industry refers to a cellular customer
activating his or her phone both to place an outgoing call and to
accept an incoming call; (3) the definition of the term "rates
charged" in Section 332(c)(3) of the Communications Act, includes
at least the elements of a CMRS provider's choice of which
services to charge for and how much to charge for these services;
(4) challenges to the "rates charged" to end users by a CMRS
provider, including charges for incoming calls and charges in
whole-minute increments, are exclusively governed by federal law
under section 332(c)(3) of the Communications Act; and (5) state-
law claims directly or indirectly challenging the "rates charged"
by CMRS providers are barred by Section 332(c)(3).
22 SBMS, 14 FCC Rcd at 19902 n.17.
23 Id. at 19902 (Competitive market forces best govern the
relationship between CMRS providers and their customers).
24 Id. at 19905; see also Petition for Declaratory Ruling On
Issues Contained In Count I of White v. GTE, Memorandum Opinion
and Order, WT Docket No. 00-164, 20001 WL 561271 (May 25, 2001)
25 The factors that are considered in assessing a section 201(b)
violation include ``the relationship of carrier costs to billing
charges or practices, consumers' expectation based on their
wireline experience, and the role of competitive markets.''
White, WT Docket No. 00-164, 20001 WL 561271 at 5 (May 25, 2001).
26 See Falcon Cablevision, Memorandum Opinion and Order, 11 FCC
Rcd 1051, 10525 (1996).
27 Complaint at 15-16.
28 Complaint at 5.
30 Answer, Tab D, at 16-18.
32 Id. at 15-16.
33 PageNet states that Mr. Kiefer was only assessed a late fee
for six of his fifty late payments. PageNet claims that the sum
of these six late fees amounts to $30.00. Id. at 18-20.
34 Complaint at 5.
35 In addition, we note that Mr. Kiefer had the option to
discontinue his relationship with PageNet and subscribe to paging
service from other providers in Michigan. PageNet states that
from 1991 through 2000, there were an average of over 90
companies providing paging services in Kiefer's billing area.
Answer, Tab D, at 24.