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                            Before the
                Federal Communications Commission
                      Washington, D.C. 20554

In the Matter of                )  File No. EB -00-IH-0057
Matrix Telecom, Inc.            )  NAL/Acct. No. X32080022


   Adopted: July 21, 2000               Released:   July 27, 

By the Commission:

                      I.  INTRODUCTION

     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  

                       II.  BACKGROUND

     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 
May 2000. 

                      III.  DISCUSSION

     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 
monthly invoices.

     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 
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 
the full amount  of the proposed forfeiture or  SHALL FILE a 
written statement  seeking reduction or cancellation  of the 
proposed forfeiture.

     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. 
referenced above.  

     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.


                         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 
``Fletcher Companies'').

26  47 U.S.C.  503.

27  47 C.F.R.  1.80.

28  Id. 

29 See 47 C.F.R.  1.1914.