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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of ) File No. EB 00-IH-0054
) TRS Company Code: 815576
North American Telephone Network, LLC ) NAL/Acct. No.
x32080026
FORFEITURE ORDER
Adopted: February 28, 2001 Released: March 2,
2001
By the Chief, Enforcement Bureau:
I. INTRODUCTION
1. In this Forfeiture Order, we find that North
American Telephone Network, LLC (``NATN'') has violated 47
U.S.C. § 254(d) and 47 C.F.R. § 54.706 by willfully and
repeatedly failing to make required contributions to
universal service support programs. Based on our review of
the facts and circumstances of this case and after
considering NATN's response to our Notice of Apparent
Liability (``NAL'') in this matter,1 we conclude that NATN
is liable for a forfeiture in the amount of fifty-five
thousand dollars ($55,000), the amount proposed in the NAL.
II. BACKGROUND
2. In the NAL, we briefly described the universal
service program, including the mechanisms established by the
Commission in response to Congress' 1996 amendments to the
Communications Act (the ``Act'') creating the universal
service program. In particular, Section 254(d) of the Act
requires 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
service.2
In implementing that section, the Commission authorized the
Universal Service Administrative Company (``USAC'') to
administer universal service support mechanisms and to
perform billing and collection functions.3 The Commission
gave USAC the authority to bill carriers monthly, starting
in February 1998, for their contributions.4
3. In accordance with its authority, USAC began
billing NATN in 1998. Notwithstanding its receipt of
monthly bills and despite repeated contacts from USAC, NATN
had paid less than 20 percent of the amount billed by USAC
through January 2000.5 In February 2000, the Enforcement
Bureau sent a letter to NATN explaining that it was
potentially the subject of an enforcement action.6 On March
1, 2000, NATN made a payment of $100,000. In its response
to the Bureau's letter, NATN noted that it recently had made
this payment and stated that it was working with USAC ``to
set up a reasonable payment plan and to address any
incorrect information.''7 Although NATN subsequently made
three additional payments of $30,000 each in April, May and
June 2000, it did not establish a payment plan designed to
eliminate its arrearage. Accounting for the referenced
payments, USAC's records indicated that NATN still owed more
than $800,000 as of July 2000.
4. We concluded in the NAL that NATN had apparently
violated the Act and our rules by willfully and repeatedly
failing to pay universal service contributions. We further
concluded that NATN's apparent violations warranted a
forfeiture.8
5. In its response to the NAL, NATN contends that it
is not liable for a forfeiture because the universal service
contributions it made in the year 2000 exceeded the invoiced
amounts for December 1999 and January 2000. NATN further
states that its revenues decreased by approximately two-
thirds following the sale of its customer base in September
1999, and it requests that the Bureau recalculate its
universal service liability based on actual revenues
collected during the relevant time periods. NATN also
states that it was unable to meet its universal service
obligations because it had not collected universal service
fees from its customers and its level of uncollectible
revenues rose. Finally, although NATN asserts that USAC
incorrectly calculated NATN's universal service obligations,
it did not attempt to show that the cited invoices were
calculated other than in accordance with the Commission's
rules and the applicable contribution factors.
III. DISCUSSION
·
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.9 If the violator is a common carrier,
47 U.S.C. § 503(b)(2)(B) 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.10 In
assessing a forfeiture, we are required by 47 U.S.C. §
503(b)(2)(D) to consider 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.11
7. The NAL proposed a forfeiture of $55,000, based on
two components. The first component consisted of a base
figure of $40,000 as a general penalty of $20,000 each for
the two violations at issue. The second component, which we
added to the base amount of $40,000, was an amount equal to
approximately one-half of the contributions due for the
months of December 1999 and January 2000, or $15,000. After
carefully considering the record and NATN's arguments, we
conclude that NATN is liable for the full amount of the
forfeiture as proposed. As discussed below, the record
reveals that NATN has willfully and repeatedly failed to
make the required contributions, and there is nothing before
us suggesting that the invoiced amounts are incorrect.
Further, we find nothing that warrants a downward adjustment
to the forfeiture.
8. Prior to its receipt of our February 2000 letter,
NATN had paid less than 20 percent of the total amount
billed by USAC during the preceding 24 months. NATN's
repeated failures to pay the invoiced amounts occurred
despite numerous requests from USAC for payment and despite
NATN's sale of its LEC-billed customer base in September
1999. In this regard, although NATN's income declined, the
company did not explain why it ignored USAC prior to that
sale, nor does it explain why none of the sale proceeds were
applied to its universal service obligations. After
receiving our February 2000 letter, NATN contributed another
$190,000, which USAC credited to the oldest outstanding
invoices.12 Consequently, at the time of the NAL, NATN had
failed to pay the December 1999 and January 2000 invoices.
Those invoices remain unpaid, and NATN's current liability
for universal service contributions exceeds hundreds of
thousands of dollars. In the meantime, NATN has made no
payments to USAC between June 2000 and February 2001 and has
not yet unequivocally committed to pay off its arrearage.13
We have considered NATN's other arguments regarding its
difficulties in meeting its universal service obligations,
and we conclude that they do not mitigate its failures to
pay the cited invoices, nor do they provide a basis for
reducing or eliminating the forfeiture. The Commission's
rules and policies currently require carriers to pay
universal service based on their prior year revenues,14 and
the Commission recently declined a carrier's petition for
forbearance from those rules.15 There is no basis for
treating NATN differently. Finally, although NATN's recent
contacts with USAC and apparent resumption of payments may
bode well for the future, they are not equivalent to the
``significant efforts'' cited by the Commission in the
Notices of Apparent Liability issued to Intellicall and
Matrix, which supported the downward adjustments made to the
proposed forfeitures. In both instances, the carriers
submitted plans to eliminate their universal service debts
to USAC and commenced paying down their arrearages prior to
issuance of their respective Notices of Apparent Liability.
IV. ORDERING CLAUSES
9. Accordingly, IT IS ORDERED THAT, pursuant to 47
U.S.C. § 503(b) and 47 C.F.R. § 1.80(f)(4), North American
Telephone Network, LLC is LIABLE FOR A FORFEITURE in the
amount of fifty-five thousand dollars ($55,000) for
willfully and repeatedly violating 47 U.S.C. § 254(d) and
47 C.F.R. § 54.706.
10. Payment of the forfeiture shall be made in the
manner provided for in 47 C.F.R. § 1.80 within thirty days
of the release of this Forfeiture Order. If the forfeiture
is not paid within the period specified, the case may be
referred to the Department of Justice for collection
pursuant to 47 U.S.C. § 504(a). North American Telephone
Network, LLC may pay the forfeiture by mailing a check or
money order, 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. A request
for payment of the full amount of this Forfeiture Order
under an installment plan should be sent to: Chief, Revenue
and Receivables Operations Group, 445 12th Street, S.W.,
Washington, D.C. 20554.16
11. IT IS FURTHER ORDERED THAT a copy of this
Forfeiture Order shall be sent by Certified Mail Return
Receipt Requested to North American Telephone Network, LLC
in care of Timothy J. Cooney, Esq., Wilkinson, Barker,
Knauer, LLP, 2300 N Street, N.W., Washington, D.C. 20037, and to North American Telephone Network, 4151
Ashford Dunwoody, #675, Atlanta, Georgia 30319, attention:
Hans Kasper.
FEDERAL COMMUNICATIONS COMMISSION
David H. Solomon
Chief, Enforcement Bureau
_________________________
1 North American Telephone Network, LLC, 15 FCC Rcd 14022
(Enf. Bureau 2000) (``NAL'').
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 Amendment of Part 54 - Universal Service, 12 FCC Rcd
22423, 22425 (1997); 47 C.F.R. § 54.709(a)(4-5).
5 NATN paid approximately $186,000 in universal service
contributions in 1998 but nothing further until March 2000.
According to USAC, NATN's total liability through January
2000 exceeded $1.1 million.
6 Letter from David H. Solomon, Chief, Enforcement Bureau,
to North American Telephone Network dated February 16, 2000
(``February 2000 letter'').
7 Letter from Kay P. Shihata, CPA, Accounting Manager,
North American Telephone Network to James W. Shook,
Investigations and Hearings Division, Enforcement Bureau,
dated March 8, 2000.
8 See America's Tele-Network Corp., 15 FCC Rcd 20903 (2000)
(Notice of Apparent Liability); Intellicall Operator
Services, 15 FCC Rcd 13539 (2000) (Notice of Apparent
Liability); Matrix Telecom, Inc., 15 FCC Rcd 13544 (2000)
(Notice of Apparent Liability).
9 47 U.S.C. § 503(b)(1)(B). See also 47 C.F.R. §
1.80(a)(2). Recently, the Commission amended section
1.80(b) of its rules to increase the maximum penalties that
may be imposed. For a common carrier, the forfeiture limit
for each violation is now $120,000, with a maximum potential
forfeiture of $1,200,000 for a continuing violation
involving a single act or failure to act. See Amendment of
Section 1.80(b) of the Commission's Rules, 15 FCC Rcd 18221
(2000).
10 See also 47 C.F.R. § 1.80(b)(2).
11 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).
12 See Intellicall Operator Services, 15 FCC Rcd 21771,
21772-73 (2000) (Forfeiture Order). As discussed therein,
USAC's practice, prior to May 2000, was to credit payments
made towards the oldest outstanding invoice unless the
carrier requested different treatment. Because NATN had not
requested that its payments be applied to any particular
invoice, USAC credited payments made in March and April 2000
to invoices issued in 1998. Moreover, beginning in May
2000, USAC uniformly credits payments to the oldest
outstanding invoice. See Intellicall Forfeiture Order, 15
FCC Rcd at 21772 n. 8. Thus, USAC credited NATN's payments
in May and June 2000 to 1998 invoices.
13 By letter from Barry P. Miller, Esquire to Scott Barasch
at USAC, dated January 10, 2001, NATN proposed to pay off
its indebtedness, as recalculated by it, in 36 monthly
installments. Subsequently, NATN advised that it made a
payment equal to its January 2001 contribution as billed by
USAC on February 22, 2001.
14 47 C.F.R. § 54.711, provides that ``[c]ontributions
shall be calculated and filed in accordance with the
Telecommunications Reporting Worksheet.'' That worksheet
(and its predecessor, the Universal Service Worksheet)
requires carriers to report revenue for the prior year.
USAC then calculates the carrier's contribution based on
that reported revenue. See NECA Changes Order, 12 FCC Rcd
at 18424, 18442, 18501-02; 1998 Biennial Regulatory Review -
Parts 1, 52, 54 and 64, 14 FCC Rcd 16602 (1999). See also
Federal - State Joint Board on Universal Service (Petitions
for Waiver or Reconsideration of Sections 54.706, 54.709
and/or 54.711 of the Commission's Rules), 15 FCC Rcd 20769
(1999).
15 See Federal - State Joint Board on Universal Service
(Petition for Forbearance from Enforcement of Sections
54.709 and 54.711 of the Commission's Rules by Operator
Communications, Inc. d/b/a Oncor Communications), FCC 01-51,
released February 13, 2001 (``Oncor MO&O''). Currently, the
Commission is considering changes to the universal service
contribution methodology for all telecommunications
carriers. See Oncor MO&O, at ¶ 14, citing Federal - State
Joint Board on Universal Service, 15 FCC Rcd 19947 (2000)
(Further Notice of Proposed Rulemaking and Order).
16 See 47 C.F.R. § 1.1914.