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FEDERAL COMMUNICATIONS COMMISSION
Washington, DC 20554
In the Matter of ) File No.
) Acct. No.
Verizon Telephone Companies ) FRN No.
1. 1. The Federal Communications Commission (the
``Commission'' or the ``FCC'') and the Verizon Telephone
Companies (``Verizon'') hereby enter into this Consent
Decree for the purpose of terminating an informal Bureau
investigation into whether Verizon provided, marketed or
sold in-region, interLATA services prior to its receipt of
authorization pursuant to section 271 of the Communications
Act of 1934 (``the Act''), as amended. As part of this
investigation, the Bureau has examined Verizon's compliance
with section 272(g)(2) of the Act, 47 U.S.C. § 272(g)(2),
which prohibits a Bell Operating Company (``BOC'') from
marketing or selling in-region interLATA services provided
by an affiliate in states where it has not received
authorization to provide such services pursuant to section
271 of the Act.1
2. 2. For purposes of this Consent Decree, the
following definitions shall apply.
(a) ``FCC'' or the ``Commission'' means the
Federal Communications Commission and all of its
bureaus and offices.
(b) ``Bureau'' means the Enforcement Bureau of the
Federal Communications Commission.
(c) ``Verizon'' means the Verizon Telephone Companies,
which include Verizon Delaware Inc., Verizon
Maryland Inc., Verizon New England Inc., Verizon
New Jersey Inc., Verizon New York Inc., Verizon
Pennsylvania Inc., Verizon Virginia Inc., Verizon
Washington, DC Inc., Verizon West Virginia Inc.,
Bell Atlantic Communications, Inc. d/b/a Verizon
Long Distance, NYNEX Long Distance Company d/b/a
Verizon Enterprise Solutions, and Verizon Select
Services Inc., and their successors and assigns.
(d) ``Parties'' means Verizon and the Bureau.
(e) ``In-region state'' is defined at 47 U.S.C. §
271(i)(1), and for Verizon includes Maine, New
Hampshire, Connecticut, Vermont, Massachusetts,
Rhode Island, New York, New Jersey, Pennsylvania,
Delaware, Maryland, West Virginia, Virginia and the
District of Columbia.
(f) ``Order'' or ``Adopting Order'' means an order of
the FCC adopting the terms of this Consent Decree
without change, addition, or modification.
(g) ``Final Order'' means an order that is no longer
subject to administrative or judicial
reconsideration, review, appeal, or stay.
(h) ``Investigation'' means the investigation
commenced by the Bureau on July 9, 2002 into
allegations that Verizon provided, marketed or sold
in-region, interLATA services prior to its receipt
of authorization pursuant to section 271 of the Act
during the period from January 1, 1999 to June 30,
(i) ``Effective Date'' means the date on which the
Commission adopts the Adopting Order.
4. 3. Verizon is prohibited from providing
interLATA services originating in a particular in-region
state (other than incidental interLATA services and certain
services permitted under the Modification of Final Judgment)
until it has received authorization to provide such services
in such state pursuant to section 271 of the Act. To obtain
authorization to provide in-region interLATA services under
section 271, a Verizon BOC must show, among other things,
that it has fully implemented a ``competitive checklist''
designed to give competitors nondiscriminatory access and
interconnection to its network. 47 U.S.C. § 271(d)(3)(A).
5. 4. Section 272(g)(2) of the Act prohibits a BOC
from marketing or selling in-region interLATA services
provided by an affiliate before it has satisfied the
requirements of section 271. In particular, section
272(g)(2) states that ``[a BOC] may not market or sell
interLATA service provided by an affiliate required by this
section within any of its in-region States until such
company is authorized to provide interLATA services in such
State under section 271(d).''2
6. 5. Prior to June 30, 2002, Verizon had received
authorization pursuant to section 271 of the Act to provide
long distance services in six of its in-region states.
Verizon also provided long distance services in a number of
out-of-region states that are not subject to the
requirements of section 271. To ensure compliance with
sections 271 and 272, Verizon states that it had established
specific procedures to govern the introduction of its long
distance services in its in-region states. In particular,
Verizon states that it had controls in place for each aspect
of the long distance process - marketing, sales, ordering,
and provisioning - and states that these applied to Verizon
as well as to the third-party vendors and suppliers.
7. 6. In connection with its New Jersey section 271
application, Verizon voluntarily disclosed to the Commission
four incidents in which, according to Verizon, it
inadvertently marketed or sold long distance service in New
Jersey, Connecticut, and Virginia. Once these incidents
were identified, Verizon states that it immediately took
steps to correct these problems and initiated an internal
review to identify the causes of the errors. Among other
steps, Verizon states that it imposed a moratorium on all
advertising, direct mail, bill media, and outbound
telemarketing in the former Bell Atlantic states, including
states in which Verizon had section 271 approval, in order
to ensure that all appropriate safeguards were in place.
Verizon also states that marketing was phased in gradually
only after Verizon completed a review of its practices and
controls. As described below, Verizon states that it also
adopted a series of additional controls.
8. 7 Following these disclosures, on July 9, 2002,
the Bureau began its Investigation. During the course of the
Investigation, in a sworn response to the Bureau LOI,
Verizon disclosed evidence of additional unrelated incidents
it discovered during an internal review in which it had
potentially marketed, sold or provisioned in-region,
interLATA services in nine in-region states prior to
receiving section 271 authorization for those states. The
Bureau's investigation included review of the following
9. (a) Washington, D.C. Area Cable Television
Advertisements. In February and March 2002, prior to
receipt of section 271 authorization in Washington, D.C.,
Maryland, Virginia and West Virginia, Verizon ran a 30-
second cable television advertisement campaign targeted to
business customers on several Washington, D.C. area cable
channels. During the ad, the phrase ``Long Distance
Savings'' appeared on the screen for several seconds.
Verizon indicates that this ad could have reached a total of
approximately 660,000 viewers. Verizon maintains that this
campaign ran in five media markets, Tampa, Boston,
Philadelphia, New York, and Washington, D.C., and by mistake
the text that mentioned long distance was not removed from
the ad that ran in the Washington, D.C. area. Verizon also
maintains no Washington, D.C. area customers received or
paid for long distance service as a result of the ad.
10. (b) Bill Inserts. In June 2002, prior to receipt
of section 271 authorization in New Jersey, Verizon
announced the launch of Verizon long distance service by
placing bill inserts in the bills of approximately 554,000
residential customers in New Jersey, which represents
roughly 17% of Verizon's residential subscriber base in the
state. These bill inserts, which advertise Verizon's
``Timeless Long Distance Plan,'' state that ``Verizon Long
Distance is available in New Jersey.'' The bill insert also
invites prospective customers to call a toll-free number to
``sign up'' for service. Verizon maintains that the bill
inserts were distributed inadvertently as a result of a
change in the launch date for Verizon long distance in New
Jersey. When it became clear that the Commission was not
going to approve Verizon's application on an accelerated
schedule, as Verizon had originally anticipated after the
Commission set an expedited pleading cycle, Verizon moved
the date that it planned to launch its New Jersey long
distance service but states that it inadvertently failed to
send the appropriate notice to the personnel who managed the
bill insertion process. Shortly thereafter, Verizon states
that it sent a Western Union mailgram to each customer who
received the bill insert stating that Verizon was not
authorized to provide long distance services in New Jersey.
Verizon also maintains that no customers received or paid
for long distance service as a result of receiving the bill
11. (c) Local Service ``Winback'' Letters. Between
March and June 2002, prior to receipt of section 271
authorization in the relevant nine states, Verizon sent
local service ``winback'' letters to approximately 20,000
former business customers in New Jersey, Virginia,
Washington, D.C., Maryland, West Virginia, Delaware, Maine,
New Hampshire, and Vermont which reference, among other
types of services, Verizon's long distance services.
Approximately 15,000 of these letters did not include a
disclaimer stating that not all services may be available in
all areas. Verizon maintains that it inadvertently failed to
include these disclaimers and that no customers in non-
section 271 authorized states received or paid for long
distance service as a result of these letters.
12. (d) Virginia Business Solicitations. On May 1 and
May 9, 2002, prior to receipt of section 271 authorization
in Virginia, Verizon Enterprise Solutions sent direct mail
solicitations for Verizon long distance services to a total
of approximately 2,250 business customers in Virginia. The
letters offered certain customers ``[a] discounted 7 cents
per minute rate on all direct-dialed, state-to-state long
distance calls,'' and invited interested customers to call a
toll-free number. Verizon maintains that it intended to
exclude from this mailing customers in Virginia, but the
software program written to pull these customer names failed
to exclude some former GTE small business customers in
Virginia to whom Verizon provided local service. Shortly
thereafter, Verizon states that it mailed a first class
letter to each of these customers explaining that Verizon
was not authorized to provide long distance services in
Virginia. Verizon maintains that none of these customers
received or paid for long distance service as a result of
13. (e) Exton BPC Correspondence. During some time
period between January and July 2002, prior to receipt of
section 271 authorization in New Jersey, an account manager
in Verizon's Exton Business Partnership Channel (``Exton
BPC'') (a center which manages accounts for certain small
business customers in various in-region states) sent
correspondence to approximately 400 New Jersey business
customers which stated that Verizon long distance services
were either ``coming soon'' or ``coming in March.'' Verizon
maintains that the letters were sent in error and that no
customers received or paid for long distance service as a
result of these letters.
8. In or after June 2002, Verizon states that it
adopted a series of additional controls for each aspect of
the long distance process, including marketing, sales,
ordering and provisioning. Verizon states that these
controls include the following measures: (1) creation of a
compliance team that reviews the processes and controls for
marketing and provisioning long distance service; (2)
additional training for service representatives on the
requirements of sections 271 and 272; (3) adoption of
enhanced controls on direct mail and bill media advertising;
and (4) a June 2002 comprehensive review of telemarketing
vendors operating in the former Bell Atlantic states.
Verizon asserts that it will maintain these procedures until
it receives authorization to provide interLATA services in
all of its in-region states in accordance with section 271
of the Act.
14. 9. The Parties agree and acknowledge that this
Consent Decree shall constitute a final settlement between
Verizon and the Commission of the Investigation. In
consideration for the termination of this Investigation in
accordance with the terms of this Consent Decree, Verizon
agrees to the terms, conditions, and procedures contained
15. 10. Verizon admits that, with respect to the
incidents enumerated in paragraphs 7(a) to (e), supra,
Verizon violated section 272(g)(2).
16. 11. Verizon maintains that these violations
occurred as a result of mistakes and were not deliberate.
Verizon does not admit any noncompliance, violations, or
liability associated with or arising from any alleged
actions or failures, including any problems or failures
described in the letters of inquiry, ex partes, or other
information the Commission received on or before the
Effective Date of this Consent Decree other than as stated
in paragraph 7(a) to (e), supra.
17. 12. In express reliance on the covenants and
representations contained herein, the Commission agrees to
terminate the Investigation.
18. 13. As noted in paragraph 8, supra, Verizon
represents that it has instituted a number of measures
designed to improve controls in each aspect of the long
distance process, including marketing, sales, ordering and
provisioning. Verizon agrees that it will maintain these
procedures until it receives authorization to provide
interLATA services in all of its in-region states in
accordance with section 271 of the Act.
19. 14. Verizon will make a voluntary contribution to
the United States Treasury in the amount of $5.7 million
within 10 calendar days after the Commission Order adopting
this Consent Decree becomes final. Verizon must make this
payment by check, wire transfer or money order drawn to the
order of the Federal Communications Commission, and the
check, wire transfer or money order should refer to ``Acct.
No. 20033208000'' and ``FRN No. 0003708500.'' If Verizon
makes this payment by check or money order, it must mail the
check or money order to: Forfeiture Collection Section,
Finance Branch, Federal Communications Commission, P.O. Box
73482, Chicago, Illinois, 60673-7482. If Verizon makes this
payment by wire transfer, it must wire such payment in
accordance with Commission procedures for wire transfers.
20. 15. The Commission agrees that, in the absence of
new evidence relating to incidents that Verizon has not
disclosed to the Bureau through the Effective Date of this
Consent Decree, it will not use the facts developed in this
Investigation, or the existence of this Consent Decree, to
institute, on its own motion, any new proceedings, formal or
informal, or to take any actions on its own motion against
the Company concerning the matters that were the subject of
the Investigation. The Commission also agrees that, in the
absence of new evidence relating to incidents that Verizon
has not disclosed to the Bureau through the Effective Date
of this Consent Decree, it will not use the facts developed
in the Investigation to institute on its own motion any
proceeding, formal or informal, or take any action against
Verizon with respect to its basic qualifications, including
its character qualifications, to be a Commission licensee.
Consistent with the foregoing, nothing in this Consent
Decree limits the Commission's authority to consider and
adjudicate any formal complaint that may be filed pursuant
to sections 208 or 271 of the Communications Act, as
amended, and to take any action in response to such formal
21. 16. Verizon waives any and all rights it may have
to seek administrative or judicial reconsideration, review,
appeal or stay, or to otherwise challenge or contest the
validity of this Consent Decree and the Order adopting this
Consent Decree, provided the Order adopts the Consent Decree
without change, addition, or modification.
22. 17. Verizon's decision to enter into this Consent
Decree is expressly contingent upon issuance of an Order
that is consistent with this Consent Decree, and which
adopts the Consent Decree without change, addition, or
23. 18. In the event that this Consent Decree is
rendered invalid by any court of competent jurisdiction, it
shall become null and void and may not be used in any manner
in any legal proceeding.
24. 19. If either party (or the United States on
behalf of the Commission), brings a judicial action to
enforce the terms of the Adopting Order, neither Verizon nor
the Commission shall contest the validity of the Consent
Decree or Adopting Order, and Verizon will waive any
statutory right to a trial de novo.
25. 20. Any violation of the Consent Decree or the
Adopting Order will constitute a separate violation of a
Commission order, entitling the Commission to exercise any
rights and remedies attendant to the enforcement of a
26. 21. The Parties also agree that if any provision
of the Consent Decree conflicts with any subsequent rule or
order adopted by the Commission (except an order
specifically intended to revise the terms of this Consent
Decree to which Verizon does not consent) that provision
will be superseded by such Commission rule or order.
27. 22. This Consent Decree may be signed in
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Michael E. Glover
Senior Vice-President and Deputy General Counsel
1 See Letter from Maureen F. Del Duca, Deputy Chief,
Investigations and Hearings Division, Enforcement Bureau,
to Gordon R. Evans, Vice President, Federal Regulatory,
Verizon, and Dee May, Assistant Vice President, Federal
Regulatory, Verizon, dated July 9, 2002 (``LOI'').
2 The legislative history for section 272(g)(2) includes
the statement that ``the ability to bundle
telecommunications, information and cable services into a
single package to create `one-stop shopping' will be a
significant competitive marketing tool. As a result, and
to provide for parity among competing industry sectors, the
Committee has included restrictions on joint marketing. . .
.'' S. Rep. No. 23, 104th Cong., 1st Sess. 22 (1995).