$// N.A.L., Oncor Comm'ns, Inc., File No. ENF 95-04, FCC # 95-127 //$
$/ 47 C.F.R. 64.1100 Verification of orders for LDS generated by telemarketing /$

Before the
Federal Communications Commission
Washington, D.C.

In the matter of:

OPERATOR COMMUNICATIONS, INC. d/b/a ONCOR COMMUNICATIONS, INC. File No. ENF-95-04 Apparent Liability for Forfeiture


Adopted: March 29, 1995; Released: March 31, 1995

By the Commission:


1. By this Notice of Apparent Liability for Forfeiture ("NAL"), we initiate enforcement action against Operator Communications, Inc., d/b/a Oncor Communications, Inc. (hereinafter collectively, "Oncor").(n1) For the reasons discussed below, we find that Oncor has willfully and repeatedly violated Commission rules and orders(n2) by changing the primary interexchange carrier ("PIC") designated by the Metropolitan Transportation Authority of the State of New York ("MTA") for ninety-four (94) of its pay telephone lines without MTA's authorization.(n3) Based on our review of the facts and circumstances surrounding the violations, we find that Oncor is apparently liable for forfeiture in the amount of one million four hundred ten thousand dollars ($1,410,000).


2. In its Allocation Order and subsequent Reconsideration Order and Waiver Order,(n4) the Commission set forth rules and procedures forimplementing equal access(n5) and customer presubscription(n6) to an interexchange carrier ("IXC").(n7) The Commission's original allocation plan required IXCs to have on file a letter of agency ("LOA") signed by the customer before submitting PIC change orders to the local exchange carrier ("LEC") on behalf of the customer.(n8) After considering claims by certain IXCs that this requirement would stifle competition because consumers would not be inclined to execute the LOAs even though they agreed to change their PIC, the Commission later modified the requirement to allow IXCs to initiate PIC changes if they had "instituted steps to obtain signed LOAs."(n9) In 1992, we again revised our rules because the Commission continued to receive complaints about unauthorized PIC changes.(n10) Specifically, while we recognized the benefits of permitting a telephone-based industry to rely on telemarketing to solicit new business, we required IXCs to institute one of the following four confirmation procedures before submitting PIC change orders generated by telemarketing: (1) obtain the consumer's written authorization; (2) obtain the consumer's electronic authorization by use of an 800 number; (3) have the consumer's oral authorization verified by an independent third party; or (4) send an information package, including a prepaid, returnable postcard, within three days of the consumer's request for a PIC change, and wait 14 days before submitting the consumer's order to the LEC, so that the consumer has sufficient time to return the postcard denying, cancelling or confirming the change order.(n11) Hence, our rules and orders require that IXCs either obtain a signed LOA or complete oneof the four above-listed telemarketing verification procedures before submitting PIC change requests to LECs on behalf of consumers.

3. In April 1994, the New York Attorney General's office wrote to Oncor complaining that Oncor had "slammed" numerous pay telephones leased by MTA from New York Telephone Company ("NYT"). The letter alleged that Oncor had submitted to NYT unauthorized PIC change requests substituting Oncor as the operator service provider and PIC for hundreds of MTA's pay telephones.(n12)

4. The Attorney General's office forwarded to the Commission a copy of its letter to Oncor. Thereafter, the Common Carrier Bureau's Enforcement Division directed Oncor to investigate the alleged unauthorized PIC changes and submit its findings to the Commission.(n13) Oncor's initial response to the staff's request provided little indication that Oncor had investigated fully the MTA's allegations. Oncor provided only a cursory, general description of its agents' marketing practices, and stated that the agent could not provide documentation that MTA authorized the PIC changes.(n14) Accordingly, the staff sent a second letter to Oncor, directing the company to provide specific information regarding each MTA pay telephone line allegedly switched to Oncor.(n15)

5. In response to the staff's second request, Oncor reported that two independent Oncor distributors had electronically submitted to Oncor the MTA PIC change requests as part of Oncor's contractual agreement with the distributors to market Oncor's services to public pay-telephone site owners.(n16) According to Oncor, the distributors had obtained the PIC change requests from agents responsible for soliciting customers for Oncor.(n17) Although Oncor described several procedures it typically employs to solicit customers, it has not identified the specific procedures that Oncor or its agents used that led to MTA's PIC changes. For instance, in its response to the staff's first information request, Oncor stated that it utilizes "incentive based commission checks" thatserve as an LOA.(n18) While MTA acknowledged receiving such checks from Oncor, an MTA official has reported that it did not endorse or deposit the checks. Rather, MTA has reported that it returned them to Oncor with a clear statement that it would not accept checks as a method of converting the PIC for its pay telephone lines.(n19) Moreover, in its response to the staff's second information request, Oncor made no mention of the "commission checks" and instead described its customary telemarketing and on-site sales techniques. Thus, while Oncor described its typical sales and verification procedures, it has produced no evidence that it obtained any form of LOA from MTA or specified what, if any, steps it followed to verify telemarketing sales that resulted in the MTA PIC conversions.


6. We have carefully evaluated the information obtained as a result of our investigation, and, based on the foregoing, we conclude that Oncor is apparently liable for forfeiture for willful and repeated violations of the Commission's rules and PIC change requirements.

7. Our review of the MTA allegations as well as Oncor's response and supporting materials has uncovered that between at least November 1993 and at least April 1994, Oncor submitted PIC change requests to NYT that resulted in the conversion of over one hundred pay telephone lines from AT&T, MTA's presubscribed IXC, to Oncor.(n20) Our investigation has revealed that Oncor converted, or caused the conversion of, at least ninety-four (94) different MTA telephone lines on or about April 2, 1994.(n21) Thus, our action here is within the one year limitations period for forfeiture actions.(n22)

8. We find the violations particularly egregious in this case. Oncor has produced no arguments or evidence that counter MTA's claim that it did not authorize or approve any of the PIC changes. Oncor has not submitted evidence of an LOA or other written authorization, electronic authorization through use of an 800 number, verification of oral authorization, or use of an acceptable information package including a cancellation option. Thus, it appears that Oncor failed to secure an LOA or utilize any of the four permissible telemarketing methods for converting a customer's PIC established by the Commission.(n23)

9. In an apparent attempt to explain the unauthorized conversions, Oncor has made the general claim that, through its agents, it sent "commission checks" that were designed to function as an LOA once cashed or deposited by MTA. Even if we condoned Oncor's practice of using commission checks as LOAs,(n24) Oncor has presented no evidence that MTA ever endorsed such checks in connection with the telephone lines at issue here, nor has it provided evidence that the commission checks were otherwise accepted or approved by the MTA. On the contrary, information obtained during the investigation indicates that MTA routinely returned the checks to Oncor with a letter explaining that MTA relies solely on a competitive bidding process to select a PIC for its pay telephones and did not recognize any relationship with Oncor.(n25) Oncor, however, continued to make unauthorized PIC changes to MTA's pay telephones.

10. Oncor's attempt to distance itself from the unlawful PIC changes by pointing to the culpability of its distributors, independent telemarketing agents, or "subagents" is unavailing.(n26) In this instance, the distributors' or agents' actions do not relieve Oncor of its independent obligation to ensure compliance with our rules, nor do they otherwise mitigate Oncor's role in the apparent violations. The Communications Act deems the acts or omissions of an agent or other person acting for a common carrier to be the acts or omissions of thecarrier itself.(n27) Hence, the Act expressly prohibits a carrier from evading the requirements of the Act or the Commission's rules or orders by hiring someone else to engage in conduct that contravenes these requirements.

11. Furthermore, the facts before us reveal that the unauthorized MTA PIC changes followed a consistent pattern (e.g., periodic conversion of large batches of telephone numbers on the same date), and were repeated in the face of prior cancellations by the MTA. For example, of the ninety-four (94) MTA telephone lines that are the subject of this action, sixty-four (64) had been previously switched to Oncor and MTA had quickly thereafter cancelled Oncor's service. Moreover, MTA had also previously notified Oncor that it did not want Oncor service when it returned Oncor's so-called "commission checks." We therefore find no support for a determination that the unauthorized PIC changes were isolated incidents or the result of a "rogue" marketing agent. Based on the number and frequency of the unauthorized conversions and the circumstances surrounding them, we can reasonably conclude that Oncor apparently knew or should have known that MTA had not authorized Oncor to provide service for its pay telephones. Thus, it appears that the unauthorized PIC changes were the result of either deliberate misconduct by Oncor or its reckless disregard for the Commission's rules and orders. For these reasons we find that the facts support a determination that Oncor's apparent violations were willful and repeated.(n28)

12. Section 503(b)(2)(B) of the Communications Act authorizes the Commission to assess a forfeiture of up to one hundred thousand dollars ($100,000) for each violation or each day of a continuing violation up to a statutory maximum of one million dollars ($1,000,000) for a single act or failure to act.(n29) In exercising such authority, the Commission is required to take into account "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."(n30) For purposes of assessing an appropriate forfeiture penalty in this case, we regard the conversion of each of the ninety-four (94) MTA telephone lines(n31) as a separate violation. After weighing the circumstances surrounding the violations, we find Oncor to be apparently liable for a forfeiture of fifteen thousand dollars ($15,000) for each of the unauthorized conversions, resulting in a total forfeiture of one million four hundred ten thousand dollars ($1,410,000) (94 x $15,000). Based on the information obtained during the investigation of this matter, we believe this amount is reasonable relative to Oncor's assets and revenues. Oncor, however, will have the opportunity to submit evidence and arguments in response to this NAL to show that no forfeiture should be imposed or that some lesseramount should be assessed.(n32) In this regard, we note that we have previously held that a licensee's gross revenues are the best indicator of its ability to pay a forfeiture and that use of gross revenues to determine a party's ability to pay is reasonable, appropriate, and a useful yardstick in helping to analyze a company's financial condition for forfeiture purposes.(n33) In PJB Communications, we found that forfeitures of $5,000 and $3,000 assessed against two jointly owned and operated paging companies were not excessive because the total forfeiture amount ($8,000) represented approximately 2.02 percent of the companies' combined gross revenues of $395,469.(n34) We will give full consideration to any financial information provided by Oncor before assessing a final forfeiture amount.


13. We have carefully reviewed the information obtained through our investigation and conclude that on or about April 2, 1994, Oncor apparently converted or caused a local exchange carrier to convert ninety-four (94) MTA telephone lines without MTA's authorization. We further conclude that Oncor thereby willfully and repeatedly violated Commission rules governing changes in long distance carriers, and that its conduct warrants a forfeiture in the amount of one million four hundred ten thousand dollars ($1,410,000).

14. Accordingly, IT IS ORDERED, pursuant to Section 503(b) of Communications Act of 1934, as amended, 47 U.S.C. 503(b), and Section 1.80 of the Commission's rules, 47 C.F.R. 1.80, Oncor Communications, Inc. IS HEREBY NOTIFIED of an Apparent Liability for Forfeiture in the amount of one million four hundred ten thousand dollars ($1,410,000) for its willful and repeated violation of the Commission's PIC change rules and orders, 47 C.F.R. 64.1100; PIC Change Order, 7 FCC Rcd 1038 (1992); Allocation Order, 101 FCC 2d 911 (1985); Waiver Order, 101 FCC 2d 935 (1985).

15. IT IS FURTHER ORDERED, pursuant to Section 1.80 of the Commission's rules, 47 C.F.R. 1.80, that within thirty days of the release of this Notice, Oncor Communications, Inc. SHALL PAY the fullamount of the proposed forfeiture(n35) OR SHALL FILE a response showing why the proposed forfeiture should not be imposed or should be reduced.

16. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability for Forfeiture SHALL BE SENT by certified mail to Counsel for Oncor Communications, Inc., Mitchell F. Brecher, Esq., Donelan, Cleary, Wood & Maser, P.C. Suite 750, 1100 New York Avenue, N.W., Washington, D.C. 20005-3934.


William F. Caton
Acting Secretary

I.  INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II.  BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
III.  DISCUSSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
IV. CONCLUSIONS AND ORDERING CLAUSES. . . . . . . . . . . . . . . . . . . .  13

Footnote 1 Oncor maintains corporate offices at 6707 Democracy Boulevard, Bethesda, Maryland 20817. Ronald J. Haan is the owner, Chairman and Chief Executive Officer of Oncor.

Footnote 2 See 47 C.F.R. 64.1100; Policies and Rules Concerning Long Distance Carriers, 7 FCC Rcd 1038 (1992), recon. denied, 8 FCC Rcd 3215 (1993) (PIC Change Order); Investigation of Access and Divestiture Related Tariffs, 101 FCC 2d 911 (1985) (Allocation Order), recon. denied, 102 FCC 2d 503 (1985) (Reconsideration Order); Investigation of Access and Divestiture Related Tariffs, Phase I, 101 FCC 2d 935 (1985) (Waiver Order).

Footnote 3 The practice of changing a customer's PIC without the customer's authorization is commonly referred to as "slamming."

Footnote 4 See supra, note 2.

Footnote 5 Equal access for interexchange carriers ("IXCs") is that which is equal in type, quality and price to the access to local exchange facilities provided to AT&T and its affiliates. United States v. American Tel. & Tel., 552 F. Supp. 131, 227 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983)(Modification of Final Judgment or "MFJ"). "Equal access allows end users to access facilities of a designated [IXC] by dialing '1' only." Allocation Order, 101 FCC 2d at 911.

Footnote 6 Presubscription is the process by which each customer selects one primary interexchange carrier ("PIC"), from among several available carriers, for the customer's phone line(s). Allocation Order, 101 FCC 2d at 911, 928. Thus, when a customer dials "1" only the customer accesses the primary IXC's services. An end user can also use other IXCs by dialing a five-digit access codes. Id. at 911.

Footnote 7 Pursuant to the MFJ, the Bell Operating Companies (BOCs) were ordered to provide equal access to their customers by September 1986, where technically feasible. Id.

Footnote 8 An LOA is a document, signed by the customer, which states that the customer has selected a particular carrier as that customer's primary long distance carrier. Allocation Order, 101 FCC 2d at 929.

Footnote 9 Waiver Order, 101 FCC 2d at 942.

Footnote 10 PIC Change Order 7 FCC Rcd at 1038-39.

Footnote 11 See 47 C.F.R. 64.1100; PIC Change Order, 7 FCC Rcd at 1045.

Footnote 12 The copy of the letter, which staff deemed as an informal complaint (IC# 94-07922), also alleged that Oncor slammed the phones of Commack Union Free School District. For reasons discussed below, this forfeiture action is not based upon these alleged incidents.

Footnote 13 Letter from Kathie A. Kneff to ITI/Oncor and Bell Communications Research, Inc., dated July 28, 1994.

Footnote 14 Letter from Judith M. deGrandpre to Kathie Kneff, dated August 25, 1994.

Footnote 15 Letter from Kathie A. Kneff to ITI/Oncor and NYNEX-New York, dated December 6, 1994.

Footnote 16 Letter from Elisa Zafrani to Kathie Kneff, dated January 12, 1995.

Footnote 17 Oncor also stated that both "subagents" are companies operated by the same individual. The staff's investigation to date has not revealed whether the subagents have also solicited customers for carriers other than Oncor.

Footnote 18 Letter from Judith M. deGrandpre to Kathie Kneff, dated August 25, 1994.

Footnote 19 Letter from David J. Florio to Heather McDowell, dated February 27, 1995.

Footnote 20 Our authority to assess forfeitures for many of the unauthorized conversions is governed by the one year limitations period in Section 503(b) of the Communications Act. 47 U.S.C. 503(b)(6)(B). This provision states in relevant part that, "No forfeiture penalty shall be determined or imposed against any person under this subsection if . . . the violation charged occurred more than 1 year prior to the date of issuance of the required notice or notice of apparent liability."

Footnote 21 Oncor identified the telephone lines converted, as well as the dates on which Oncor service began and ended, in its response to the staff's second information request. Letter from Elisa Zafrani to Kathie Kneff, dated January 12, 1995.

Footnote 22 47 U.S.C. 503(b)(6)(B). We stress, however, that it appears that Oncor did not comply with the Commission's rules or orders in ordering PIC changes to any of the MTA telephones or a Commack Union Free School District telephone. Indeed, some of the earlier unauthorized changes to MTA telephones, albeit no longer actionable,are an added factor demonstrating that Oncor's violations were willful and repeated. Therefore, while forfeiture penalties based upon conversions that were corrected prior to April 1994 are time barred, we strongly admonish Oncor for its apparently unauthorized conversion of these telephone lines.

Footnote 23 47 C.F.R. 64.1100; PIC Change Order, 7 FCC Rcd at 1045.

Footnote 24 This practice, as well as several other issues relating to unauthorized PIC changes, is under review in a pending rulemaking proceeding. Policies and Rules Concening Unauthorized Changes of Consumers' Long Distance Carriers, Notice of Proposed Rulemaking, 9 FCC Rcd. 6887 (1994), 59 Fed. R. 63750 (December 9, 1994).

Footnote 25 See supra, note 19.

Footnote 26 Oncor also seems to suggest that it should not be held liable for the unauthorized PIC changes because its distributor contract provisions and sales manuals require compliance with Commission statutes, rules, and policies. We find this argument similarly unpersuasive.

Footnote 27 47 U.S.C. 217.

Footnote 28 See id. 503(b)(1)(B).

Footnote 29 Id. 503(b)(2)(B).

Footnote 30 Id. at 503(b)(2)(D).

Footnote 31 See supra note 21.

Footnote 32 See 47 U.S.C. 503(b)(4)(C); 47 C.F.R. 1.80(f)(3).

Footnote 33 PJB Communications of Virginia, 7 FCC Rcd 2088-89 (1992) (PJB Communications).

Footnote 34 Id. at 2089; see also, David L. Hollingsworth d/b/a Worland Services, 7 FCC Rcd 6640 (Com. Car. Bur. 1992) ($6,000 forfeiture representing approximately 1.21 percent of licensee's 1991 gross revenues and approximately 1.34 percent of projected 1992 gross revenues not found to be excessive); Afton Communications Corp., 7 FCC Rcd 6741 (Com. Car. Bur. 1992) ($6,000 forfeiture representing approximately 3.91 percent of 1990 gross revenues and 2.75 percent of projected 1992 gross revenues not found to be excessive).

Footnote 35 The forfeiture amount should be paid by check or money order drawn to the order of the Federal Communications Commission, and should be mailed to Federal Communications Commission, P.O. Box. 73482, Chicago, Illinois 60673-7482.