Click here for Adobe Acrobat version
Click here for Microsoft Word version
This document was converted from Microsoft Word.
Content from the original version of the document such as
headers, footers, footnotes, endnotes, graphics, and page numbers
will not show up in this text version.
All text attributes such as bold, italic, underlining, etc. from the
original document will not show up in this text version.
Features of the original document layout such as
columns, tables, line and letter spacing, pagination, and margins
will not be preserved in the text version.
If you need the complete document, download the
Microsoft Word or Adobe Acrobat version.
Federal Communications Commission
Washington, D.C. 20554
In the Matter of ) File No. EB-05-IH-0158
InPhonic, Inc. ) NAL/Acct. No. 200532080139
Apparent Liability for ) FRN No. 0012-5999-16
NOTICE OF APPARENT LIABILITY
FOR FORFEITURE AND ORDER
Adopted: July 25, 2005 Released: July
By the Commission:
1. In this Notice of Apparent Liability for Forfeiture
(``NAL''), we find that a telecommunications provider, operating
since August 2002 and at least indirectly benefiting from the
federal programs supporting the telecommunications industry since
that time, apparently failed to meet its statutory and regulatory
obligations relating to those programs. Based upon the facts and
circumstances surrounding this matter we conclude that this
company is apparently liable for a total forfeiture of $819,905.
2. We specifically find that InPhonic, Inc. (``InPhonic'')
has apparently violated section 64.1195 of the Commission's rules
by willfully and repeatedly failing to register with the
Commission until January 2005.1 We also find that InPhonic has
apparently violated sections 54.711(a) and 64.604(c)(5)(iii)(B)
of the Commission's rules by failing to submit certain
Telecommunications Reporting Worksheets (``Worksheets'') from
2002 to 2004.2 Finally, we find that InPhonic has apparently
violated section 254(d) of the Communications Act of 1934, as
amended (the ``Act''),3 and sections 54.706(a) and
64.604(c)(5)(iii)(A) of the Commission's rules by willfully and
repeatedly failing to contribute to the Universal Service Fund
(``USF'') and Telecommunications Relay Service (``TRS'') Fund.4
3. The Commission is charged by Congress with regulating
interstate and international telecommunications and ensuring that
providers of such telecommunications comply with the requirements
imposed on them by the Act and our rules.5 The Commission also
has been charged by Congress to establish, administer and
maintain various telecommunications regulatory programs, which
are described in more detail below, and to fund these programs
through assessments on the telecommunications providers that
benefit from them. In order to accomplish these goals, the
Commission established ``a central repository of key facts about
carriers'' through which it could monitor the entry and operation
of interstate telecommunications providers to ensure, among other
things, that they are qualified, do not engage in fraud, and do
not evade oversight.6 Commission rules require that, upon entry
or anticipated entry into interstate telecommunications markets,
telecommunications carriers register by submitting information on
an FCC Form 499-A, also known as the annual Telecommunications
Reporting Worksheet.7 The Commission also requires
telecommunications providers to submit financial information on
annual and, with some exceptions not applicable to InPhonic,
quarterly short-form Worksheets to enable the Commission to
determine and collect the statutorily mandated program
4. The Telecommunications Act of 1996 codified Congress'
historical commitment to promote universal service to ensure that
consumers in all regions of the nation have access to affordable,
quality telecommunications services.9 In particular, section
254(d) of the Act requires, among other things, that ``[e]very
telecommunications carrier [providing] interstate
telecommunications services . . . contribute, on an equitable and
nondiscriminatory basis, to the specific, predictable, and
sufficient mechanisms established by the Commission to preserve
and advance universal service.''10 In implementing this
Congressional mandate, the Commission directed all
telecommunications carriers providing interstate
telecommunications services and certain other providers of
interstate telecommunications to contribute to the Universal
Service Fund based upon their interstate and international end-
user telecommunications revenues.11 Failure by some providers to
pay their share into the Fund skews the playing field by giving
non-paying providers an economic advantage over their competitors
who must shoulder more than their fair share of the costs of the
5. Section 225(b)(1) of the Act, which codifies Title IV
of the Americans with Disabilities Act of 1990, directs the
Commission to ``ensure that interstate and intrastate
telecommunications relay services are available, to the extent
possible and in the most efficient manner, to hearing-impaired
and speech-impaired individuals in the United States.''12 To
that end, the Commission established the TRS Fund to reimburse
TRS providers for the costs of providing interstate
telecommunications relay services.13 Pursuant to section
64.604(c)(5)(iii)(A) of the Commission's rules, every carrier
that provides interstate telecommunications services must
contribute to the TRS Fund based upon its interstate end-user
6. The Commission has established specific procedures to
administer the programs for universal service and
telecommunications relay services. A carrier must file
Worksheets for the purpose of determining its USF, TRS, and other
regulatory fee program payments.15 These periodic filings
trigger a determination of liability, if any, and subsequent
billing and collection by the entities that administer the
regulatory programs. For example, USAC uses the revenue
projections submitted on the quarterly filings to determine each
carrier's universal service contribution amount.16 The TRS
Administrator uses the prior year's revenue information provided
on the annual Worksheet to determine amounts owed for the TRS.17
Carriers are required to pay their monthly USF contribution by
the date shown on their invoice.18 The Commission's rules
explicitly warn contributors that failure to file their forms or
submit their payments potentially subjects them to enforcement
action.19 Further, under the Commission's ``red light rule,''
action will be withheld on any application to the Commission or
request for authorization made by any entity that has failed to
pay when due its regulatory program payments, such as USF
contributions, and if payment or payment arrangements are not
made within 30 days from notice to the applicant, such
applications or requests will be dismissed.20
7. InPhonic, through its wholly-owned subsidiary, Star
Number, Inc., began providing mobile virtual network operator
(``MVNO'') service in August, 2002.21 InPhonic states that
``[t]he Company's MVNO segment provides wireless services for
consumers through wireless airtime service that it purchases
wholesale from Sprint Corp. The Company provides the wireless
resale services under the Company's Liberty Wireless brand
8. In 2004, the Enforcement Bureau (``Bureau'') audit
staff sought to identify resellers of telecommunications service
that failed to register as telecommunications service providers
with the Commission, and, thus, may also have failed to satisfy
various Commission program requirements.23 In order to identify
such resellers, the Bureau audit staff compared lists of
resellers provided by wholesale service providers against the
Commission's central repository of registered telecommunications
service providers with filer identification numbers. If a
reseller did not appear to have an identification number, the
audit staff sent an inquiry to that reseller.
9. On March 30, 2004, the Bureau's audit staff sent a
letter to InPhonic requesting information pertaining to
InPhonic's compliance with section 64.1195 of the Commission's
rules.24 On January 18, 2005, more than nine months after the
March 30, 2004 Audit Letter, InPhonic stated that it still had
not submitted a Form 499-A, but it intended to submit by January
31, 2005 all appropriate filings due since the company's
incorporation in August, 2002.25 On January 28, 2005, InPhonic
untimely filed its Form 499-Q for May 1, August 1 and November 1,
2004. On January 31, 2005, InPhonic finally registered by filing
its 2003 Form 499-A and also untimely filed its 2004 Form 499-
10. On March 2, 2005, the Bureau issued a letter of inquiry
to InPhonic.27 The LOI directed InPhonic, among other things, to
submit a sworn written response to a series of questions relating
to InPhonic's apparent failure to register and file
Telecommunications Reporting Worksheets and to make mandated
federal telecommunications regulatory program payments. On March
18, 2005, InPhonic paid USAC $889,189 for USF contributions it
owed based on its 2002, 2003 and 2004 revenue.28 InPhonic
responded to the LOI on April 8, 2005.29
11. Under section 503(b)(1)(B) of the Act, any person who
is determined by the Commission to have willfully or repeatedly
failed 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 To impose such a
forfeiture penalty, the Commission must issue a notice of
apparent liability and the person against whom the notice has
been issued must have an opportunity to show, in writing, why no
such forfeiture penalty should be imposed.31 The Commission will
then issue a forfeiture if it finds by a preponderance of the
evidence that the person has violated the Act or a Commission
rule.32 As set forth below, we conclude under this standard that
InPhonic is apparently liable for a forfeiture for its apparent
willful and repeated violations of section 254(d) of the Act33
and sections 54.706(a), 54.711(a), 64.604(c)(5)(iii), and 64.1195
of the Commission's rules.34
12. The fundamental issues in this case are whether
InPhonic apparently violated the Act and the Commission's rules
by: (1) willfully or repeatedly failing to register pursuant to
section 64.1195 of the Commission's rules;35 (2) willfully or
repeatedly failing to file Telecommunications Reporting
Worksheets; and (3) willfully or repeatedly failing to make
requisite contributions toward the Universal Service and TRS
Funds. We answer these questions affirmatively. Based on a
preponderance of the evidence, we conclude that InPhonic is
apparently liable for a forfeiture of $819,905 for apparently
willfully and repeatedly violating section 254(d) of the Act,36
and sections 54.706(a), 54.711(a), 64.604(c)(5)(iii), and 64.1195
of the Commission's rules.37
13. Specifically, we propose the following forfeitures for
apparent violations within the last year: (1) $100,000 for
failure to register pursuant to section 64.1195 of the
Commission's rules;38 (2) $100,000 for failure to file two
Telecommunications Reporting Worksheets; (3) $598,626 for failure
to make seven monthly USF contributions on a timely basis; and
(4) $21,279 for failure to timely make its 2004 TRS Fund
contribution. Although we propose forfeitures only for apparent
violations within the last year, we discuss below the history of
InPhonic's noncompliance in prior years as useful background and
to demonstrate the scope of InPhonic's misconduct and the context
of the misconduct that is within the statute of limitations
period and thus covered by this NAL.
A. Registration with the Commission
14. We conclude that InPhonic has apparently violated
section 64.1195(a) of the Commission's rules by failing to
register with the Commission from when it began providing
interstate telecommunications services in 2002 until January 31,
2005.39 InPhonic's failure to register constitutes a clear
violation of a vital Commission rule. Section 64.1195(a) of the
Commission's rules unambiguously requires that all carriers that
provide, or plan to provide, interstate telecommunications
services register with the Commission by submitting specified
information.40 Although InPhonic has been providing interstate
telecommunications services since 2002, it failed to register in
accordance with section 64.1195(a) until January 31, 2005,
approximately 10 months after it received the Bureau's March 30,
2004 Audit Letter. As a result of its misconduct, InPhonic
operated for over two years without participation in any of the
programs tied to registration. As an interstate
telecommunications carrier, InPhonic had a clear and affirmative
duty to apprise itself of, and satisfy, its federal
15. We view InPhonic's apparent failure to register for
over two years as a serious dereliction of its responsibilities
under the Act and our rules. A carrier's compliance with the
Commission's registration requirement is critical to the
administration of the USF and TRS programs, and accomplishment of
Congress' objectives in sections 254(d) and 225(b)(1) of the Act.
As we noted above, a carrier's duty to register upon entry, or
anticipated entry, into interstate telecommunications markets is
essential to the fulfillment of the USF and TRS program missions
because it identifies the company to the various program
administrators and brings the company within the purview and
oversight of those administrators. If a carrier never identifies
itself as a telecommunications provider by properly registering
under the Commission's rules, then neither the Commission nor the
various program administrators can ascertain whether that carrier
has fulfilled other regulatory obligations, including the
requirement that carriers file Worksheets and contribute to USF,
TRS, and other regulatory programs. Moreover, the program
administrators have no basis upon which to invoice the carrier
for contributions. A telecommunications carrier that fails to
register thus can operate outside of the Commission's oversight
and evade its federal obligations to contribute toward the vital
programs linked to registration.
16. The impact of a carrier's failure to register is no
less severe where, as here, a carrier delays its registration for
an extended period of time until after it is identified by Bureau
enforcement efforts. Although InPhonic registered on January 31,
2005, has apparently filed some of the required Worksheets in the
last several months, and ``is prepared to make all future
filings, remit all resulting obligations, and is committed to
remaining fully compliant with the Commission's rules and
regulations,''42 InPhonic took no action until more than nine
months after receiving a letter from the Bureau.43 The
Commission has repeatedly stated that subsequent corrective
measures to address a violation do not eliminate a licensee's
responsibility for the period during which the violation
occurred.44 InPhonic's substantial delay in registering after
receiving the Bureau's letter raises serious questions about its
intention to do so absent threat of Commission action. Based on
a preponderance of the evidence, therefore, we find that InPhonic
apparently has violated section 64.1195(a) of the Commission's
rules by willfully and repeatedly failing to register from 2002
until January 31, 2005.45
B. Submission of Telecommunications Reporting Worksheets
17. We conclude that InPhonic apparently has violated
sections 54.711(a) and 64.604(c)(5)(iii)(B) of the Commission's
rules by willfully and repeatedly failing to file annual and
quarterly Telecommunications Reporting Worksheets, on a timely
basis, from when it began providing telecommunications services
in 2002 through January 31, 2005.46 On January 28, 2005,
InPhonic untimely filed its Form 499-Q for May 1, August 1 and
November 1, 2004. On January 31, 2005, InPhonic finally
registered by filing its 2003 Form 499-A and also untimely filed
its 2004 Form 499-A. InPhonic has apparently not filed any other
Worksheets that were due before January 31, 2005. Within the
past year, InPhonic has failed to file, on a timely basis, the
quarterly Worksheets due August 1 and November 1, 2004.
18. Sections 54.711(a) and 64.604(c)(5)(iii)(B) of the
Commission's rules each clearly establish a carrier's obligation
to file periodic Telecommunications Reporting Worksheets.47 A
carrier's failure to file these Worksheets as required has
serious implications for the USF and TRS programs. As discussed
above, the filing of a Telecommunications Reporting Worksheet
prompts a determination of liability for, and subsequent billing
and collection of, regulatory fees and contributions by the
various administrators of the Universal Service and TRS Funds.
With regard to the federal universal service program in
particular, the failure of a carrier such as InPhonic to abide by
its federal filing obligation has a direct and profound
detrimental impact by removing from the base of USF contributions
telecommunications revenues that otherwise should be included,
thereby shifting to compliant carriers additional economic
burdens associated with the federal universal service program.48
Consequently, a carrier's failure to file required Worksheets
thwarts the very purpose for which Congress enacted section
254(d) - to ensure that every interstate carrier ``contribute, on
an equitable and nondiscriminatory basis, to the specific,
predictable, and sufficient mechanisms established by the
Commission to preserve and advance universal service.''49 Viewed
in this context, the Telecommunications Reporting Worksheet is
not only an administrative tool, but a fundamental and critical
component of the Commission's Universal Service and TRS programs.
19. Based on a preponderance of the evidence, we find that
InPhonic apparently has violated section 254 of the Act50 and
sections 54.711 and 64.604 of the Commission's rules51 by
willfully and repeatedly failing to file required information
with the Commission on multiple occasions since 2002, including
failure to make two filings, on a timely basis, within the last
year, the time period covered by this NAL. The NAL proposes a
forfeiture for InPhonic's failure to file, on a timely basis, the
Worksheets due August 1 and November 1, 2004.
C. Universal Service Contributions
20. We further conclude that InPhonic apparently violated
section 254(d) of the Act and section 54.706 of the Commission's
rules by willfully and repeatedly failing to contribute to
universal service support mechanisms.52 Section 54.706(c) of the
Commission's rules unambiguously directs that ``entities
[providing] interstate telecommunications to the public . . . for
a fee . . . contribute to the universal service support
programs.''53 Although InPhonic has been providing interstate
telecommunications services to end-users since 2002, InPhonic
made no universal service contributions until March 18, 2005.54
During the relevant period, InPhonic was required, pursuant to
section 54.706(b) of the Commission's rules, to contribute to
universal service mechanisms based upon either its historical or
projected revenues.55 As we previously have stated,
[c]arrier nonpayment of universal service
contributions undermines the efficiency and
effectiveness of the universal service support
mechanisms. Moreover, delinquent carriers may
obtain a competitive advantage over carriers
complying with the Act and our rules. We consider
universal service nonpayment to be a serious threat
to a key goal of Congress and one of the
Commission's primary responsibilities.56
Based on a preponderance of the evidence, we find that InPhonic
apparently has violated sections 254(d) of the Act and 54.706 of
the Commission's rules by willfully and repeatedly failing to
make its monthly universal service contribution payments for a
period of years, including seven such failures within the past
D. Telecommunications Relay Service Contributions
21. We also find that InPhonic apparently has violated
section 64.604(c)(5)(iii)(A) of the Commission's rules by failing
to make required contributions to the interstate TRS Fund.57 As
an interstate telecommunications carrier, InPhonic was obligated
to contribute to the TRS Fund on the basis of its interstate and
international end-user telecommunications revenues.58 A
carrier's contribution to the TRS Fund is based upon its subject
revenues for the prior calendar year and a contribution factor
determined annually by the Commission.59 Subject carriers must
make TRS contributions on an annual basis, with certain
exceptions that are not applicable to InPhonic.60
22. InPhonic made its first TRS Fund payment of $22,455.04
on April 25, 2005,61 approximately nine months after its 2004 TRS
contribution became due on July 26, 2004, and 13 months after it
first received a letter from the Bureau regarding its compliance
with the Commission's rules.62 Based on a preponderance of the
evidence, we therefore find that InPhonic apparently has violated
section 64.604 of the Commission's rules by willfully and
repeatedly failing to pay its TRS contributions when due,
including its failure to make on a timely basis the payment due
on July 26, 2004.
E. Proposed Forfeiture
23. Section 503(b)(1)(B) of the Act provides 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.63 For the apparent violations in this case,
section 503(b)(2)(B) of the Act authorizes the Commission to
assess a forfeiture of up to $120,000 for each violation or each
day of a continuing violation, up to a statutory maximum of $1.2
million for a single act or failure to act before September 7,
2004, and up to $130,000 for each violation or each day of a
continuing violation, up to a statutory maximum of $1.325 million
for a single act or failure to act for violations occurring on or
after September 7, 2004.64 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
24. Under section 503(b)(6) of the Act, we may only propose
forfeitures for apparent violations that occurred within one year
of the date of this NAL.66 Nevertheless, section 503(b) does not
bar us from assessing whether InPhonic's conduct prior to that
time period apparently violated the Act or our rules in
determining the appropriate forfeiture amount for those
violations within the statute of limitations.67 Therefore,
although we find that InPhonic apparently violated the Act and
our rules for over two years, we propose forfeitures here only
for violations that occurred within the last year.
25. In contrast to previous cases in which we have taken
enforcement action for failure to satisfy universal service
obligations,68 this case involves a carrier's failure both to
register and submit any Telecommunications Reporting Worksheets
from the time it commenced providing telecommunications services
until after it received a letter from the Bureau - in this case,
a period of over two years. We find InPhonic's failure to
discharge its federal reporting obligations to be particularly
egregious. As we stated above, the registration and filing of
Telecommunications Reporting Worksheets are fundamental to the
implementation of our central repository of carriers and to the
administration of multiple statutorily-derived programs -
including the USF and the TRS Fund. Where, as here, a carrier
ignores its obligations by wholly failing to register -- thereby
affecting the time and manner in which these important federal
programs are funded -- it undermines the programs and thwarts the
purposes for which Congress and the Commission established them.
26. The Commission's Forfeiture Policy Statement and
implementing rules prescribe a base forfeiture of $3,000 for
failure to file required forms or information.69 In the past, we
have held that a substantial upward adjustment to $50,000 is
warranted for a carrier's failure to file its Telecommunications
Reporting Worksheets for revenue reporting purposes. 70 We find
that failure to register is an even more egregious violation. By
ignoring its registration obligation, InPhonic not only has
violated our rules with significant ramifications for federal
telecommunications policies, but has also hampered efficient and
effective Commission enforcement by delaying detection of, and
action against, its behavior. Moreover, carriers' failure to
register imposes a substantial burden on the Commission, which
can only identify such carriers through compliance review
programs that require significant amounts of staff time and
resources. This egregious behavior strikes at the core of our
ability to implement and enforce the Act and our rules
effectively, thus warranting a substantial forfeiture. Taking
into account all of the factors enumerated in section
503(b)(2)(D) of the Act, we conclude that a proposed forfeiture
of $100,000 is warranted.
27. In the past, we have held that a substantial forfeiture
of $50,000 is warranted for a carrier's failure to file a
Telecommunications Reporting Worksheet for revenue reporting
purposes. We find that InPhonic's willful and repeated failure
to file periodic Telecommunications Reporting Worksheets is
egregious. As we noted above, a carrier's obligation to file
these Worksheets is directly linked to, and thus has serious
implications for, administration of the USF, TRS, and other
regulatory programs. By ignoring its reporting obligations,
InPhonic has unilaterally shifted to compliant carriers and their
customers the economic costs associated with the universal
service, TRS, and other regulatory programs. Therefore, we find
that InPhonic is apparently liable for a $100,000 forfeiture for
its failure to file, on a timely basis, two Worksheets within the
last year; i.e., those due August 1 and November 1, 2004.
28. Based on the facts above, it also appears that InPhonic
has failed to make the requisite contributions into the Universal
Service Fund for a period of over two years. Again, nonpayment
of universal service contributions is an egregious offense that
bestows on delinquent carriers an unfair competitive advantage by
shifting to compliant carriers the economic costs and burdens
associated with universal service. A carrier's failure to make
required universal service contributions hampers realization of
Congress' policy objective in section 254(d) of the Act to ensure
the equitable and non-discriminatory distribution of universal
service costs among all telecommunications providers.71 The
Commission has established a base forfeiture amount of $20,000
for each month in which a carrier has failed to make required
universal service contributions.72 Consequently, we find
InPhonic apparently liable for a base forfeiture of $140,000 for
its willful and repeated failure to make seven universal service
contributions within the past year.
29. In the past, we have calculated upward adjustments to
forfeitures for failure to make USF and TRS payments based on
half of the company's unpaid contributions.73 On March 15, 2005,
InPhonic owed $917,251.59 for USF contributions.74 Therefore,
taking into account all of the factors enumerated in section
503(b)(2)(D) of the Act, we propose an upward adjustment of
$458,626 -- half the amount InPhonic paid for outstanding USF
contributions on March 18, 2005 -- for InPhonic's apparent
failure to make universal service contributions. We thus find
InPhonic liable for a total proposed forfeiture of $598,626 for
its apparent willful and repeated failure to make contributions
into the Universal Service Fund.
30. We also find that InPhonic apparently has failed to
make any TRS contributions from 2003 until April, 2005.75
InPhonic's 2004 TRS obligation was due on July 26, 2004, and
InPhonic made this payment in April, 2005 only after it received
Bureau inquiries into its compliance with the related rules.
Where a carrier fails to satisfy its TRS obligations for an
extended period of time, it thwarts the purpose for which
Congress established section 225(b)(1) of the Act and its
implementing regulations -- to ensure that telecommunications
relay services ``are available to the extent possible and in the
most efficient manner, to hearing-impaired and speech-impaired
individuals in the United States.''76
31. The Commission has established a base forfeiture amount
of $10,000 for each instance in which a carrier fails to make
required TRS contributions.77 In light of InPhonic's failure to
pay timely its TRS obligation for the 2004-2005 funding period,
we find it apparently liable for a base forfeiture in the amount
of $10,000. For the reasons discussed above regarding InPhonic's
failure to make universal service contributions and generally
consistent with Commission precedent,78 we find that an upward
adjustment, in an amount approximately one-half of the carrier's
estimated unpaid TRS contributions ($22,557)79 at the time it
made its first payment in April, 2005, is appropriate for
InPhonic's apparent failure to make TRS contributions. Taking
into account the factors enumerated in section 503(b)(2)(D) of
the Act, we conclude that an upward adjustment of $11,279 is
reasonable. Consequently, we find InPhonic liable for a total
proposed forfeiture of $21,279 for its willful and repeated
failure to satisfy its TRS obligations for the 2004-2005 funding
32. In light of the seriousness, duration and scope of the
apparent violations, and to ensure that a company with
substantial revenues such as InPhonic does not consider the
proposed forfeiture merely ``an affordable cost of doing
business,''80 we find that a proposed forfeiture in the amount of
$819,905 is warranted. As discussed above, this proposed
forfeiture amount includes: (1) a total proposed penalty of
$100,000 for failing to register pursuant to section 64.1195 of
the Commission's rules;81 (2) a total proposed penalty of
$100,000 for failing to file two Telecommunications Reporting
Worksheets within the past year; (3) a total proposed penalty of
$598,626 for failing to make seven monthly universal service
contributions within the past year; and (3) a proposed total
penalty of $21,279 for failing to make its 2004 TRS program
contribution when due.
33. We caution that additional violations of the Act or the
Commission's rules could subject InPhonic to further enforcement
action. Such action could take the form of higher monetary
forfeitures and/or possible revocation of InPhonic's operating
authority, including disqualification of InPhonic's principals
from the provision of any interstate common carrier services
without the prior consent of the Commission.82 In addition, we
note that, to the extent InPhonic is ever found to be delinquent
on any debt owed to the Commission (e.g., has failed to pay all
of its USF contributions), the Commission will not act on, and
may dismiss, any application or request for authorization filed
by InPhonic, in accordance with the agency's ``red light''
V. ORDERING CLAUSES
34. ACCORDINGLY, IT IS ORDERED THAT, pursuant to section
503(b) of the Communications Act of 1934, as amended,84 and
section 1.80 of the Commission's rules,85 that InPhonic is hereby
NOTIFIED of its APPARENT LIABILITY FOR A FORFEITURE in the amount
of $819,905 for willfully and repeatedly violating the Act and
the Commission's rules.
35. IT IS FURTHER ORDERED THAT, pursuant to section 1.80 of
the Commission's Rules,86 within thirty days of the release date
of this NOTICE OF APPARENT LIABILITY, InPhonic SHALL PAY the full
amount of the proposed forfeiture or SHALL FILE a written
statement seeking reduction or cancellation of the proposed
36. Payment of the forfeiture must be made by check or
similar instrument, payable to the order of the Federal
Communications Commission. The payment must include the
NAL/Acct. No. and FRN No. referenced above. Payment by check or
money order may be mailed to Federal Communications Commission,
P.O. Box 358340, Pittsburgh, PA 15251-8340. Payment by overnight
mail may be sent to Mellon Bank /LB 358340, 500 Ross Street, Room
1540670, Pittsburgh, PA 15251. Payment by wire transfer may be
made to ABA Number 043000261, receiving bank Mellon Bank, and
account number 911-6106.
37. The response, if any, to this NOTICE OF APPARENT
LIABILITY must be mailed to William H. Davenport, Chief,
Investigations and Hearings Division, Enforcement Bureau, Federal
Communications Commission, Room 4-A237, 445 12th Street, S.W.,
Washington, D.C. 20554 and must include the NAL/Acct. No.
38. The Commission will not consider reducing or canceling
a forfeiture in response to a claim of inability to pay unless
the petitioner submits: (1) federal tax returns for the most
recent three-year period; (2) financial statements prepared
according to generally accepted accounting practices (GAAP); or
(3) some other reliable and objective documentation that
accurately reflects the petitioner's current financial status.
Any claim of inability to pay must specifically identify the
basis for the claim by reference to the financial documentation
39. Requests for payment of the full amount of this NAL
under an installment plan should be sent to Chief, Credit and
Management Center, 445 12th Street, S.W., Washington, D.C.
40. IT IS FURTHER ORDERED that a copy of this NOTICE OF
APPARENT LIABILITY AND ORDER shall be sent by certified mail,
return receipt requested, to Darius B. Withers, Esq., Kelley Drye
& Warren, LLP, 1200 19th Street, N.W., Suite 500, Washington,
D.C. 20036; and Aaron Daniels, Senior Vice-President and
Corporate Treasurer, InPhonic, Inc., 1010 Wisconsin Avenue, N.W.,
Suite 600, Washington, D.C. 20007.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
147 C.F.R. § 64.1195.
247 C.F.R. §§ 54.711(a), 64.604(c)(5)(iii)(B).
347 U.S.C. § 254(d).
447 C.F.R. §§ 54.706(a), 64.604(c)(5)(iii)(A).
5See, e.g., 47 U.S.C. § 151.
6See Implementation of the Subscriber Carrier Selection
Provisions of the Telecommunications Act of 1996, Third Report
and Order and Second Order on Reconsideration, 15 FCC Rcd 15996,
16024 (2000) (``Carrier Selection Order'').
747 C.F.R. § 64.1195.
8See 47 U.S.C. §§ 225(d)(3); 254(d). In 1999, to streamline the
administration of the programs and to ease the burden on
regulatees, the Commission consolidated the information filing
requirements for multiple telecommunications regulatory programs
into the annual Telecommunications Reporting Worksheet. See 1998
Biennial Regulatory Review, Report and Order, 14 FCC Rcd 16602
(1999). The next year the Commission revised the
Telecommunications Reporting Worksheet slightly to collect the
additional information necessary to achieve its goal of
establishing a central repository for interstate
telecommunications providers by the least provider-burdensome
method. Carrier Selection Order, 15 FCC Rcd at 16026.
9The Telecommunications Act of 1996 amended the Communications
Act of 1934. See Telecommunications Act of 1996, Pub. L. No.
104-104, 110 Stat. 56 (1996).
1047 U.S.C. § 254(d).
1147 C.F.R. § 54.706(b). Beginning April 1, 2003, carrier
contributions were based on a carrier's projected, rather than
historical, revenues. Id. The Commission has appointed the
Universal Service Administrative Company (``USAC'') as permanent
administrator of federal universal service support mechanisms and
has made it responsible for billing and collection of USF
contributions. 47 C.F.R. §§ 54.701(a), 54.702(b).
1247 U.S.C. § 225(b)(1).
13See Telecommunications Relay Services and the Americans with
Disabilities Act of 1990, Third Report and Order, 8 FCC Rcd 5300,
5301, ¶ 7 (1993). Telecommunications relay services enable
persons with hearing and speech disabilities to communicate by
telephone with persons who may or may not have such disabilities.
Such services provide telephone access to a significant number of
Americans who, without it, might not be able to make or receive
calls from others. See Telecommunications Relay Services and
Speech-to-Speech Services for Individuals with Hearing and Speech
Disabilities, Report and Order, 15 FCC Rcd 5140, 5143, ¶ 5
(2000). NECA currently is responsible for administering the TRS
1447 C.F.R. § 64.604(c)(5)(iii)(A).
15Upon submission of a Form 499-A registration, the carrier is
issued a filer identification number by USAC. The filer
identification number is then to be included on all further
filings by the company and is used by the Commission and its
administrators to track the carrier's contributions and invoices.
With certain exceptions that do not apply to InPhonic, interstate
telecommunications carriers must file FCC Form 499-Q quarterly,
reporting revenue information by February1, May 1, August 1 and
November 1 of each year, and FCC Form 499-A annually, by April 1
of each year. See Instructions for Completing the Worksheet for
Filing Contributions to Telecommunications Relay Service,
Universal Service, Number Administration and Local Number
Portability Support Mechanisms, FCC Form 499, April 2004, at 9.
16Individual universal service contribution amounts that are
based upon quarterly filings are subject to an annual true-up.
See Federal-State Joint Board on Universal Service, Petition for
Reconsideration filed by AT&T, Report and Order and Order on
Reconsideration, 16 FCC Rcd 5748 (2001); 47 C.F.R. § 54.709(a).
17See 47 C.F.R. § 64.604(c).
18See Globcom, Inc., Notice of Apparent Liability for Forfeiture
and Order, 18 FCC Rcd 19893, 19896, ¶ 5 (2003); 47 C.F.R. §
54.711(a) (``The Commission shall announce by Public Notice
published in the Federal Register and on its website the manner
of payment and the dates by which payments must be made.'').
See, e.g., ``Proposed Third Quarter 2003 Contribution Factor,''
Public Notice, 18 FCC Rcd 11442 (WCB 2003) (``Contribution
payments are due on the date shown on the [USAC] invoice.'') The
Act and our rules, however, do not condition payment on receipt
of an invoice or other notice from USAC. See 47 U.S.C. § 254(d);
47 C.F.R. § 54.706(b). A carrier that does not file may fail to
receive an invoice from USAC, but is nonetheless required to
contribute to the universal service fund, unless its revenues are
considered de minimus. Globcom, Inc., 18 FCC Rcd at 19896, ¶ 5 &
n.22. The instructions for the Telecommunications Reporting
Worksheet include tables for carriers to determine their annual
contributions. InPhonic does not qualify for the de minimus
1947 C.F.R. § 54.713.
2047 C.F.R. § 1.1910. The rule went into effect on November 1,
2004. See ``FCC Announces Brief Delay in Enforcement of Red
Light Rule,'' Public Notice, 19 FCC Rcd 19452 (2004).
21InPhonic Inc.'s Response to the Enforcement Bureau's March 2,
2005 Inquiry Regarding Federal Regulatory Fee Payments, EB-05-IH-
0158 at 1 (``LOI Response''). InPhonic also provides ``wireless
information services and activation'' and ``data services.'' Id.
23See 47 C.F.R. § 64.1195(a).
24See Letter from Hugh Boyle, Chief Auditor, Investigations and
Hearings Division, Enforcement Bureau, to InPhonic dated March
30, 2004 (``March 30, 2004 Audit Letter''). The audit staff
followed up the March 30, 2004 Audit Letter on August 9, 2004
with an information request concerning InPhonic's FCC Form 499-A
25Letter from Karly E. Baraga, Esq., Kelly Drye & Warren, LLP,
counsel to InPhonic, Inc., to Hugh L. Boyle, Chief Auditor,
Investigations & Hearings Division, Enforcement Bureau, Federal
Communications Commission, dated January 18, 2005.
26On April 1, 2005, InPhonic filed its 2005 Form 499-A on a
timely basis. InPhonic provided the Bureau no other Form 499-A
or Form 499-Q filings. InPhonic stated however that it filed its
Form 499-Q for February 1, 2005 in a timely manner. LOI Response
27Letter from Hillary S. DeNigro, Deputy Chief, Investigations
and Hearings Division, Enforcement Bureau, Federal Communications
Commission, to Darius B. Withers, Esq., Kelley Drye & Warren,
LLP, counsel to InPhonic, Inc., dated March 2, 2005 (``LOI'').
28LOI Response, Exhibit I. According to USAC, InPhonic owed
$917,251.59 for USF contributions, which was due on March 15,
29See supra note 21.
3047 U.S.C. § 503(b)(1)(B); 47 C.F.R. § 1.80(a)(1). Section
312(f)(1) of the Act defines willful as ``the conscious and
deliberate commission or omission of [any] act, irrespective of
any intent to violate'' the law. 47 U.S.C. § 312(f)(1). The
legislative history to section 312(f)(1) of the Act clarifies
that this definition of willful applies to both sections 312 and
503(b) of the Act, H.R. Rep. No. 97-765, 97th Cong. 2d Sess. 51
(1982), and the Commission has so interpreted the term in the
section 503(b) context. See, e.g., Application for Review of
Southern California Broadcasting Co., Memorandum Opinion and
Order, 6 FCC Rcd 4387, 4388 (1991) (``Southern California
Broadcasting Co.''). The Commission may also assess a forfeiture
for violations that are merely repeated, and not willful. See,
e.g., Callais Cablevision, Inc., Grand Isle, Louisiana, Notice of
Apparent Liability for Monetary Forfeiture, 16 FCC Rcd 1359
(2001) (issuing a Notice of Apparent Liability for, inter alia, a
cable television operator's repeated signal leakage).
``Repeated'' means that the act was committed or omitted more
than once, or lasts more than one day. Callais Cablevision,
Inc., 16 FCC Rcd at 1362, ¶ 9; Southern California Broadcasting
Co., 6 FCC Rcd at 4388, ¶ 5.
3147 U.S.C. § 503(b); 47 C.F.R. § 1.80(f).
32See, e.g., SBC Communications, Inc., Forfeiture Order, 17 FCC
Rcd 7589, 7591, ¶ 4 (2002) (``SBC Forfeiture Order'') (forfeiture
3347 U.S.C. § 254(d).
3447 C.F.R. §§ 54.706(a), 54.711(a), 64.604(c)(5)(iii), 64.1195.
3547 C.F.R. § 64.1195.
3647 U.S.C. § 254(d).
3747 C.F.R. §§ 54.706(a), 54.711(a), 64.604(c)(5)(iii), 64.1195.
3847 C.F.R. § 64.1195.
3947 C.F.R. § 64.1195(a).
40Id. The Commission adopted the registration requirement in
section 64.1195(a) after finding that such a requirement would
enable it to better monitor the entry of carriers into the
interstate telecommunications market and any associated increases
in slamming activity, and, among other things, would enhance the
Commission's ability to take appropriate enforcement action
against carriers that have demonstrated a pattern or practice of
slamming. See Carrier Selection Order, 15 FCC Rcd at 16024 ¶ 62.
41See The Commission's Forfeiture Policy Statement and Amendment
of Section 1.80 of the Commission's Rules, Report and Order, 12
FCC Rcd 17087, 17099, ¶ 22 (1997) (``Forfeiture Policy
Statement''), recon. denied, 15 FCC Rcd 303 (1999) (``[t]he
Commission expects, and it is each licensee's obligation, to know
and comply with all of the Commission's rules.'')
42LOI Response at 3.
43See March 30, 2004 Audit Letter. Further, InPhonic made no
apparent efforts to pay its long overdue USF obligations until
after receiving a second letter from the Bureau.
44AT&T Wireless Services, Inc., Forfeiture Order, 17 FCC Rcd
21866, 21870-71, (2002); America's Tele-Network Corp., Order of
Forfeiture, 16 FCC Rcd 22350, 22355, ¶ 15 (2001); Coleman
Enters., Inc. d/b/a/ Local Long Distance, Inc., Order of
Forfeiture, 15 FCC Rcd 24385, 24388, ¶ 8 (2000).
45The proposed forfeitures in this NAL relate only to the portion
of that period within a year of release of this NAL.
4647 C.F.R. §§ 54.711(a), 64.604(c)(5)(iii)(B).
47See 47 C.F.R. §§ 54.711(a), 64.604(c)(5)(iii)(B).
48Sixty days prior to the start of each quarter, USAC is required
to provide the Commission with a projection of the high cost, low
income, schools and libraries, and rural health care funding
requirements for the following quarter. See
www.universalservice.org/overview/filings. Based on USAC's
projection of the needs of the USF, and revenue projections from
the registered carriers subject to universal service
requirements, the Commission establishes a specific percentage of
interstate and international end-user revenues that each subject
telecommunications provider must contribute toward the USF. This
percentage is called the contribution factor. The contribution
factor, and, consequently, the amount owed to the USF by each
affected telecommunications company, changes each quarter,
depending on the needs of the USF and carrier-provided revenue
projections. See www.fcc.gov/wcb/universal_service/quarter.
Thus, in cases where a carrier, such as InPhonic, fails to file
required Worksheets reporting its revenue projections in a timely
fashion, its revenues are excluded from the contribution base
from which universal assessments are derived, and the economic
burden of contributing falls disproportionately on carriers that
have satisfied their reporting obligations.
4947 U.S.C. § 254(d).
5047 U.S.C. § 254.
5147 C.F.R. §§ 54.711, 64.604.
5247 U.S.C. § 254(d); 47 C.F.R. § 54.706.
5347 C.F.R. § 54.706(c).
54See LOI Response at 2.
55See 47 C.F.R. § 54.706(c).
56Globcom, Inc., Notice of Apparent Liability for Forfeiture and
Order, 18 FCC Rcd 19893, 19903, ¶ 26 (2003).
5747 C.F.R. § 64.604(c)(5)(iii)(A).
58Id. Each subject carrier must contribute at least $25 per
year. Carriers whose annual contributions are less than $1,200
must pay the entire amount at the beginning of the contribution
period. 47 C.F.R. § 64.604(c)(5)(iii)(B). Otherwise, carriers
may divide their contributions into equal monthly payments. Id.
5947 C.F.R. § 64.604(c)(5)(iii)(B).
61NECA, the TRS Fund Administrator, has stated that the Company
still owes $102 for a finance charge and late fee on its April
25, 2005 payment.
62See March 30, 2004 Audit Letter.
6347 U.S.C. § 503(b)(1)(B); see also 47 C.F.R. § 1.80(a)(2).
6447 U.S.C. § 503(b)(2)(B); see also 47 C.F.R. § 1.80(b)(2).
6547 U.S.C. § 503(b)(2)(D); see also Forfeiture Policy Statement,
12 FCC Rcd at 17100, ¶ 27; 47 C.F.R. § 1.80(b).
6647 U.S.C. § 503(b)(6)(B); see also 47 C.F.R. § 1.80(c)(3).
67See, e.g., Globcom, Inc., 18 FCC Rcd at 19903; Roadrunner
Transp., Inc., Forfeiture Order, 15 FCC Rcd 9669, 9671 (2000);
Liab. of E. Broad. Corp., Memorandum Opinion and Order, 10 F.C.C.
2d 37 (1967).
68Cf., Globcom, Inc., 18 FCC Rcd 19893; America's Tele-Network
Corp., Notice of Apparent Liability for Forfeiture, 15 FCC Rcd
20903 (2000); Matrix Telecom, Inc., Notice of Apparent Liability
for Forfeiture, 15 FCC Rcd 13544 (2000); ConQuest Operator
Services Corp., Order of Forfeiture, 14 FCC Rcd 12518 (1999).
Each carrier in these cases had registered and filed
Telecommunications Reporting Worksheets prior to the Commission's
inquiry and, in some cases, had paid contributions in part.
69See 47 C.F.R. § 1.80(b)(4).
70In the Globcom NAL, the Commission proposed a $50,000
forfeiture for each instance within the statute of limitations
that Globcom failed to file a required Worksheet. Globcom, Inc.,
18 FCC Rcd at 19905, ¶ 32. We note, however, that, unlike
InPhonic, Globcom had registered with the Commission and
submitted multiple Worksheets prior to our investigation.
71See 47 U.S.C. § 254(d).
72See Globcom, Inc., 18 FCC Rcd at 19903-19904, ¶¶ 25-27.
73See, e.g., id.
74See supra note 28.
75InPhonic stated on April 8, 2005 that it was ``processing'' its
TRS Fund payment. LOI Response at 8.
7647 U.S.C. § 225(b)(1).
77See Globcom, Inc., 18 FCC Rcd at 19904, ¶ 29.
79See LOI Response at 8.
80Forfeiture Policy Statement, 12 FCC Rcd at 17099; see also 47
C.F.R. § 1.80(b)(4).
8147 C.F.R. § 64.1195.
82See Business Options, Inc., Consent Decree, 19 FCC Rcd 2916
(2003); NOS Communications, Inc., Affinity Network Incorporated
and NOSVA Limited Partnership, Consent Decree, 2003 WL 22439710
8347 C.F.R. § 1.1910.
8447 U.S.C. § 503(b).
8547 C.F.R. § 1.80.
86See 47 C.F.R. § 1.80(f)(3).
87See 47 C.F.R. § 1.1914.