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Federal Communications Commission
Washington, D.C. 20554
In the Matter of ) File No. EB -00-IH-0057
Matrix Telecom, Inc. ) NAL/Acct. No. X32080022
NOTICE OF APPARENT LIABILITY FOR FORFEITURE
Adopted: July 21, 2000 Released: July 27,
By the Commission:
1. In this Notice of Apparent Liability for Forfeiture
("NAL"), we find that Matrix Telecom, Inc. has apparently
violated Section 254(d) of the Communications Act of 1934,
as amended (the ``Act''), and Section 54.706 of the
Commission's rules by willfully and repeatedly failing to
make required contributions to universal service support
programs. 1 Based on our review of the facts and
circumstances in this case, we conclude that Matrix is
apparently liable for a forfeiture in the amount of
2. In 1996, Congress amended the Act to require that:
Every telecommunications carrier that provides
interstate telecommunications services shall
contribute, on an equitable and nondiscriminatory
basis, to the specific, predictable, and
sufficient mechanisms established by the
Commission to preserve and advance universal
In implementing Section 254, the Commission authorized the
Universal Service Administrative Company (``USAC'') to
administer universal service support mechanisms and to
perform billing and collection functions.3 As to these
matters, the Commission directed USAC to distribute, receive
and process the Universal Service Worksheet (now the
Telecommunications Reporting Worksheet) (``Worksheet''),
which is used to report certain categories of revenue for
the purpose of calculating a carrier's universal service
contribution, and to adjust carriers' contributions in
accordance with factors established by the Commission.4 In
addition, the Commission gave USAC the authority to bill
carriers monthly, starting in February 1998.5 In order to
foster compliance with universal service requirements, the
Commission's rules provide that a carrier's failure ``to
submit the required . . . contributions may subject the
contributor to the enforcement provisions of the Act and any
other applicable law.''6
3. Matrix, a provider of interstate telecommunication
services, does not appear to dispute its liability for
universal service contributions and has paid a portion of
the amount it owes for universal service. USAC's records
reflect that since January 1999, Matrix has made over
fourteen payments to USAC, totaling more than $1.3 million.
During that period, however, Matrix has missed eight monthly
payments and failed to cure its arrearages. As a result,
USAC's records indicate that, as of April 17, 2000, Matrix
owed over $1 million in universal service payments.
4. In February 2000, the Enforcement Bureau sent a
letter to Matrix explaining that Matrix was the subject of a
potential enforcement action. 7 In its response, Matrix
states that it ``wishes to ensure full compliance with the
Commission's Rules and seeks to retire its outstanding
universal service obligation as soon as practicable.''8 In
a follow-up letter, Matrix explained that Platinum Equity
Holdings, LLC acquired Matrix from Netlojix Communications,
Inc. (formerly Avtel) on November 30, 1999 and a new
management team is now in place.9 Also in that letter,
Matrix reported that it had presented USAC with a payment
plan designed to cure its current arrearage in thirty-six
months. Matrix represented that each month it will pay an
amount equal to its current monthly obligation and an
additional $21,500 toward the amount it is in arrears.
Matrix has been making payments pursuant to this plan since
5. We conclude that Matrix is apparently liable for
forfeiture for willful and repeated violations of Section
254 of the Act and the Commission's rules governing
universal service contributions. Since early 1999, Matrix
has paid only a portion of its universal service
obligations. As noted above, Section 254(d) of the Act and
Sections 54.706 and 54.709 of the Commission's rules require
that interstate telecommunications carriers make universal
service contributions in the amount calculated by USAC. 10
We find that Matrix's failure to make the required
contributions is both willful and repeated. The term
``willful'' means that the violator knew that it was taking
the action in question, irrespective of any intent to
violate the Commission's rules,11 and ``repeated'' means
more than once.12 Considering the record before us, it
appears that Matrix knowingly failed to make universal
service payments in the full amounts set forth in USAC's
6. Section 503(b)(1)(B) of the Act provides that any
person who willfully or repeatedly fails to comply with the
Act or the Commission's rules shall be liable for a
forfeiture penalty.13 Section 503(b)(2)(B) of the Act
authorizes the Commission to assess a forfeiture of up to
$110,000 for each violation, or each day of a continuing
violation, up to a statutory maximum of $1,100,000 for a
single act or failure to act.14 In assessing a forfeiture,
we take into account the statutory factors set forth in
Section 503(b)(2)(D) of the Act, which include 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.15
7. Although Matrix's delinquency has continued
since early 1999, we limit the scope of this NAL to Matrix's
apparent failures to make the contributions assessed in USAC
invoices for November and December 1999,16 each of which
sought a monthly contribution of $149,614 for the universal
service programs. Although, in the past, we have sanctioned
carriers for failure to make the required universal service
contributions for only one month of a continuing violation,
we expressly stated that:
[I]n light of the accumulating record of non-
compliance, we are prepared to impose
substantially greater forfeitures in the future. .
. . [O]ur future notices likely will cover
greater periods of non-payment than a single month
. . . [and] will be based on some variant of [our]
formula, which includes, as a component of the
forfeiture, one half of the unpaid contribution
amount for the period in question.17
8. Taking into account the factors listed in
Section 503(b)(2)(D) of the Act,18 as well as Commission
precedent, we find Matrix apparently liable for a forfeiture
of $113,000. This forfeiture consists of three components.
First, we have assessed a base figure of $40,000 as a
general fixed penalty of $20,000 for each of the two
violations at issue.19 As we noted in the Conquest
Forfeiture Order, it is necessary to set a base figure
designed to deter delinquencies regardless of their
amount.20 Second, consistent with the ConQuest Forfeiture
Order, we have added to the base amount of $40,000 an amount
equal to one half of the unpaid $299,228 universal service
contributions for the months of November and December1999,
or an addition of $149,614.21 We have imposed this
component of the forfeiture to illustrate that a delinquent
carrier's culpability and the consequential damage it causes
to the goal of universal service may vary with the size of
the contributions it fails to make.22
9. Finally, for the reasons explained below, we have
applied a downward adjustment of $76,614, approximately 40%
of the sum of the first two components. The Act and the
Commission's rules provide a framework for adjusting the
forfeiture amounts imposed depending on the facts and
circumstances of the particular case.23 Although Matrix
has repeatedly failed to pay in full outstanding balances
when due, Matrix has acknowledged its liability for the
amounts assessed, and has made significant efforts to
rectify its failure to make required universal service
contributions. As noted, since January 1999, Matrix has
made over fourteen payments totaling over $1.3 million
toward its universal service obligations. Further, Matrix
has submitted a plan designed to cure its arrearage. We
consider Matrix's significant efforts to pay to be a factor
warranting a downward adjustment of the amount of the
forfeiture. We also consider its submission of a plan to
cure its outstanding balance and commencement of payments on
that plan to be an additional factor warranting a downward
10. Although Matrix's failure to make payment in
other months represents separate violations of the Act and
our rules, we are not imposing any sanction for these
apparent violations at this time. Nevertheless, we note
that these violations could form the basis for additional
notices of apparent liability.24 If Matrix continues to
violate our universal service rules, such violations could
result in future NALs proposing substantially greater
forfeitures, or could result in issuance of a show cause
order to revoke Matrix's operating authority.25
IV. ORDERING CLAUSES
11. Accordingly, IT IS ORDERED THAT, pursuant to
Section 503(b) of the Act,26 and Section 1.80 of the
Commission's rules,27 Matrix Telecom, Inc. is hereby
NOTIFIED of its APPARENT LIABILITY FOR A FORFEITURE in the
amount of one hundred thirteen thousand dollars ($113,000)
for violating the Act and the Commission's rules requiring
regular contributions for universal service.
12. IT IS FURTHER ORDERED THAT, pursuant to Section
1.80 of the Commission's rules,28 within thirty days of this
NOTICE OF APPARENT LIABILITY Matrix Telecom, Inc. SHALL PAY
the full amount of the proposed forfeiture or SHALL FILE a
written statement seeking reduction or cancellation of the
13. Payment of the forfeiture may be made by credit
card through the Commission's Credit and Debt Management
Center at (202) 418-1995 or 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.
14. The response, if any, must be mailed to the
Federal Communications Commission, Enforcement Bureau,
Investigations and Hearings Division, 445 12th Street, S.W.,
Washington, D.C. 20554 and MUST INCLUDE THE NAL/Acct. No.
15. The Commission will not consider reducing or
canceling a forfeiture in response to a claim of inability
to pay unless the respondent 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
respondent's current financial status. Any claim of
inability to pay must specifically identify the basis for
the claim by reference to the financial documentation
16. Requests for payment of the full amount of this
Notice of Apparent Liability under an installment plan
should be sent to: Chief, Credit and Debt Management Center,
445 12th Street, S.W., Washington, D.C. 20554.29
17. IT IS FURTHER ORDERED THAT a copy of this NOTICE
OF APPARENT LIABILITY shall be sent by Certified Mail Return
Receipt Requested to Thomas K. Crowe, Esq. counsel for
Matrix Telecom, Inc., 2300 M Street, N.W. Suite 800,
Washington, D.C. 20037.
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
1 47 U.S.C. § 254(d); 47 C.F.R. § 54.706.
2 47 U.S.C. § 254(d).
3 See Amendment of Parts 54 and 69 - Changes to Board of
NECA, Inc., 12 FCC Rcd 18400, 18415 (1997) (``NECA Changes
Order''); 47 C.F.R. § 54.702(b).
4 See NECA Changes Order, 12 FCC Rcd at 18424-25; 47 C.F.R.
§§ 54.709(a)(1-3), 54.711(a).
5 See Amendment of Part 54 - Universal Service, 12 FCC Rcd
22423, 22425 (1997); 47 C.F.R. §§ 54.709(a)(4), 54.709(d).
6 47 C.F.R. § 54.713.
7 Letter from David H. Solomon, Chief, Enforcement Bureau,
to Matrix Telecom, Inc. dated February 16, 2000.
8 Letter from Thomas K. Crowe, Esq., counsel for Matrix to
David H. Solomon, Chief, Enforcement Bureau, dated March 10,
9 Letter from Todd Murcer, Manager of Business Development,
Matrix Telecom, Inc. to Suzanne M. Tertrault, Assistant
Chief, Enforcement Bureau, dated May 30, 2000.
10 47 U.S.C. 254(d); 47 C.F.R. §§ 54.706, 54.709.
11 See Jerry Szoka, 14 FCC Rcd 9857, 9865 (1999); Southern
California Broadcasting Co., 6 FCC Rcd 4387 (1991).
12 See Hale Broadcasting Corp., 79 FCC 2d 169, 171 (1980).
13 47 U.S.C. § 503(b)(1)(B); 47 C.F.R. § 1.80(a)(2).
14 47 U.S.C. § 503(b)(2)(B); 47 C.F.R. § 1.80(b)(2).
15 47 U.S.C. § 503(b)(2)(D). See also The Commission's
Forfeiture Policy Statement and Amendment of Section 1.80 of
the Rules to Incorporate the Forfeiture Guidelines, 12 FCC
Rcd 17087, 17100-01 (1997), recon. denied, 15 FCC Rcd 303
(1999) (``Forfeiture Guidelines'').
16 According to USAC's records, Matrix's November universal
service contribution was due on December 16, 1999 and its
December contribution was due on January 14, 2000.
17 ConQuest Operator Services Corp., 14 FCC Rcd 12518, 12528
(1999) (``ConQuest Forfeiture Order'').
18 47 U.S.C. § 503(b)(2)(D).
19 See ConQuest Forfeiture Order, 14 FCC Rcd at 12527 (The
Commission determined that $20,000 should be the general
penalty for failure to pay the assessed universal service
contribution in a timely manner).
20 See id.
21 Id. See also Operator Communications, Inc., 13 FCC Rcd
16082, 16087 (1998)
22 See Conquest Forfeiture Order, 14 FCC Rcd at 12,527, ¶
23 See 1.80(b)(4) of the Commission's rules and
accompanying note, 47 C.F.R. 1.80(b)(4). See also
Forfeiture Guidelines, 12 FCC Rcd at 17100-01 (``[T]he
adjustment factors we evaluate in considering the actions of
the violator include egregious misconduct, ability or
inability to pay, intentional violations, prior violation of
the same or other requirements, good faith or voluntary
disclosure, and history of overall compliance. 47 U.S.C. §
503(b)(2)(D). In sum, although the base amount is the
starting point in assessing a forfeiture, the forfeiture may
be decreased below the base amount or increased to the
statutory maximum when the adjustment criteria are
considered based on the facts of the case'').
24 ConQuest Forfeiture Order, 14 FCC Rcd at 12527.
25 See CCN, Inc. et al., 12 FCC Rcd 8547 (1997) (the
26 47 U.S.C. § 503.
27 47 C.F.R. § 1.80.
29 See 47 C.F.R. § 1.1914.