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                                   Before the

                       Federal Communications Commission

                             Washington, D.C. 20554


                                         )                               
                                                                         
                                         )                               
     In the matter of                        File No. EB-07-IH-4089      
                                         )                               
     Rally Capital, LLC                      NAL Acct. No. 200732080038  
                                         )                               
     Apparent Liability for Forfeiture       FRN No. 0015577208          
                                         )                               
                                                                         
                                         )                               


                  NOTICE OF APPARENT LIABILITY FOR FORFEITURE

   Adopted: September 20, 2007   Released: September 24, 2007

   By the Chief, Investigations and Hearings Division:

   I. INTRODUCTION

    1. In this Notice of Apparent Liability for Forfeiture ("NAL"), we find
       that Rally Capital, LLC ("Rally") apparently willfully or repeatedly
       violated the Commission's rules by consummating unauthorized transfers
       of control. Specifically, we find that Rally apparently violated
       section 214 of the Communications Act of 1934, as amended (the "Act"),
       and sections 63.03 and 63.24 of the Commission's rules by transferring
       control of Telesphere Networks Ltd.'s ("Telesphere's") domestic and
       international section 214 authorizations to Rally without obtaining
       prior Commission approval. Based on our review of the facts and
       circumstances surrounding this matter, we find that Rally is
       apparently liable for a forfeiture of $16,000.

   II. background

    2. Section 214 of the Act requires telecommunications carriers to obtain
       a certificate of public convenience and necessity from the Commission
       before constructing, acquiring, operating or engaging in transmission
       over lines of communications, or before discontinuing, reducing or
       impairing service to a community. In accordance with section 63.03 of
       the Commission's rules, any domestic carrier seeking to transfer
       control of lines or authorization to operate pursuant to section 214
       of the Act must obtain prior approval from the Commission. Similarly,
       pursuant to section 63.24, a transfer of control of an international
       section 214 authorization requires application to and prior approval
       from the Commission. Section 63.24(e) requires that the proposed
       transferee apply to the Commission for approval prior to the
       consummation of the proposed transfer of control. The Commission
       employs a public interest standard under section 214(a) of the Act
       that involves the examination of the positive and negative public
       interest impact of a proposed transaction. 

    3. For a transfer of control of a domestic or international section 214
       authorization, the Commission defines control to include "actual
       working control in whatever manner exercised and is not limited to
       majority stock ownership." "Control" also includes direct or indirect
       ownership or control, such as through intervening subsidiaries. The
       Commission further defines a transfer of control of an international
       section 214 authorization as a transaction in which the authorization
       continues to be held by the same entity, but there is a change in the
       entity or entities that control the authorization holder. A change
       from less than 50 percent ownership to 50 percent or more ownership
       shall always be considered a section 214 transfer of control.

    4. Applicants may file a joint application to the Commission for prior
       approval of a domestic and international section 214 transfers of
       control. Commission action upon those joint applications may be
       effected either through separate actions or through consolidated
       action, as appropriate under the individual circumstances.

    5. Telesphere, a Washington-state corporation based in Arizona, is a
       telecommunications non-dominant carrier holding section 214 authority
       to provide domestic interstate telecommunications as well as global
       facilities-based and resale-based international telecommunications
       services. In particular, Telesphere is an IP Ethernet carrier that
       provides interstate IP-based voice, video and data services. Until
       February 2007, Telesphere also provided wholesale international IP
       services. Telesphere had no controlling shareholders prior to the
       transfer of control.

    6. Rally Capital, LLC ("Rally") is a Washington-state company that
       specializes in communications investments. Rally is the secured and
       only lender of Telesphere. On September 20, 2006, Rally completed an
       accelerated conversion of Telephere debt to equity, acquiring a
       majority stock ownership of 64.9 percent in Telesphere and effectively
       obtaining control of Telesphere. Shortly thereafter on October 4,
       2006, Rally acquired an additional 2.1 percent interest, increasing
       the company's stock ownership in Telesphere to 67 percent.

    7. On October 12, 2006, Rally and Telesphere filed a joint domestic and
       international section 214 application to the Commission for approval
       of the transfers of control. The applicants stated that the
       acquisition of corporate control was necessary to improve immediately
       the financial position of Telesphere. Subsequently on October 24,
       2006, the applicants requested special temporary authority ("STA") for
       Telesphere to continue operating under its domestic and international
       section 214 authorizations pending the Commission's action on the
       joint transfer of control application. The Commission granted the
       international section 214 STA on October 25, 2006 and the domestic
       section 214 STA on October 27, 2006. The Commission processed the
       applicants' domestic section 214 application for transfer of control
       under streamlined procedures and granted the application on November
       30, 2006. The Commission also granted the applicants' application for
       transfer of control of Telesphere's international section 214
       authorization to Rally on December 7, 2006.

    8. On June 15, 2007, the Enforcement Bureau issued a letter of inquiry
       ("LOI") to Rally directing the company to provide information and
       documents regarding, among other things, the nature of the
       unauthorized transfer of control and the applicants' corporate
       affiliation. Rally responded to the LOI on June 29, 2007.

    9. Under section 503(b)(1) 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. 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. 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 and the
       Commission has so interpreted the term in the section 503(b) context.
       The Commission may also assess a forfeiture for violations that are
       merely repeated, and not willful.  "Repeated" means that the act was
       committed or omitted more than once, or lasts more than one day. 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. 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. As we set forth
       below, we conclude under this standard that Rally is apparently liable
       for forfeiture for its apparent willful or repeated violations of
       sections 63.03 and 63.24 of the Commission's rules.

   III. Discussion

   10. The fundamental issue in this case is whether Rally apparently
       willfully or repeatedly violated the Commission's rules by
       consummating its transfer of control of Telesphere's domestic and
       international section 214 authorizations without prior Commission
       approval. We answer this question affirmatively. Based on a
       preponderance of the evidence, we therefore conclude that Rally is
       apparently liable for a forfeiture of $16,000 for apparently willfully
       or repeatedly violating section 63.03 and 63.24 of the Commission's
       rules.

     A. Unauthorized Domestic Section 214 Transfer of Control

   11. We conclude that Rally apparently willfully or repeatedly violated
       section 63.03 of the Commission's rules by failing to obtain
       Commission approval prior to transferring control of Telesphere's
       domestic section 214 authorization to Rally. The facts underlying this
       case are undisputed. Rally acquired a majority stock interest in
       Telesphere on September 20, 2006, resulting in a transfer of control
       without prior Commission approval. Rally did not seek approval for
       this transfer until October 12, 2006. Rally claimed that it needed to
       "improve immediately the financial position of Telesphere" and that
       such "exigent financial circumstances precluded [the company] from
       seeking timely transaction consent from the Commission." Such
       circumstances do not qualify as the type of transactions that section
       63.03 exempts from prior Commission approval. Rally also confirmed
       that it failed to seek or receive a domestic section 214 STA before
       consummating the transfer of control. We therefore find that the
       apparent domestic section 214 unauthorized transfer of control
       violation continued from September 20, 2006 until October 27, 2006,
       when the Commission granted Rally the domestic section 214 STA pending
       the Commission's action on the transfer of control joint application.

     A. Unauthorized International Section 214 Transfer of Control

   12. Similarly, we conclude that Rally apparently willfully or repeatedly
       violated section 63.24 of the Commission's rules by failing to obtain
       Commission approval prior to transferring control of Telesphere's
       international section 214 authorization to Rally. As mentioned above,
       Rally admits that it acquired majority ownership of Telesphere on
       September 20, 2006 without prior Commission approval. In addition,
       Rally confirmed that it did not seek or receive an international
       section 214 STA before consummating the transfer of control. Rally
       does not claim its acquisition of control without approval was excused
       under section 63.24(g) because it was involuntary, nor would the facts
       support any such claim. We find that Rally's apparent violation
       continued from September 20, 2006 until October 25, 2006, when the
       Commission granted Rally the international section 214 STA pending the
       Commission's action on the transfer of control joint application.

     A. Proposed Forfeiture

   13. Section 503(b)(2)(B) of the Act authorizes the Commission to assess a
       forfeiture of up to $130,000 for each violation or each day of a
       continuing violation, up to a statutory maximum of $1,325,000 for a
       single act or failure to act. 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 require."

   14. The Commission's Forfeiture Policy Statement and implementing rules
       prescribe a base forfeiture of $8,000 for unauthorized substantial
       transfers of control. In consideration of the factors enumerated in
       section 503(b)(2)(D) for establishing the forfeiture amount, there is
       no other evidence before us to suggest that the base amount should be
       adjusted in any way. Accordingly, we find that the base forfeiture of
       $8,000 against Rally is appropriate for the unauthorized transfer of
       control of Telesphere's domestic section 214 authorization to Rally.
       Similarly, we find that a proposed base forfeiture in the amount of
       $8,000 against Rally is warranted for the unauthorized transfer of
       control of Telesphere's international section 214 authorization to
       Rally. Based on the facts and circumstances presented, we conclude
       that a proposed forfeiture of $16,000 against Rally is warranted.

   IV. ORDERING CLAUSES

   15. IT IS Further ORDERED THAT, pursuant to section 503(b) of the
       Communications Act of 1934, as amended, 47 U.S.C. S: 503(b), and
       section 1.80 of the Commission's rules, 47 C.F.R. S: 1.80, that Rally
       Capital, LLC is hereby NOTIFIED of its APPARENT LIABILITY FOR A
       FORFEITURE in the amount of $16,000 for willfully or repeatedly
       violating sections 63.03 and 63.24 of the Commission's rules.

   16. IT IS FURTHER ORDERED THAT, pursuant to section 1.80 of the
       Commission's Rules, within thirty days of the release date of this
       NOTICE OF APPARENT LIABILITY, Rally Capital, LLC SHALL PAY the full
       amount of the proposed forfeiture or SHALL FILE a written statement
       seeking reduction or cancellation of the proposed forfeiture.

   17. Payment by check or money order, payable to the order of the "Federal
       Communications Commission," may be mailed to Forfeiture Collection
       Section, Finance Branch, Federal Communications Commission, P.O. Box
       358340, Pittsburgh, PA 15251. Payment by overnight mail may be sent to
       Mellon Client Service Center, 500 Ross Street, Room 670, Pittsburgh,
       PA 15262-0001, Attn: FCC Module Supervisor. Payment by wire transfer
       may be made to: ABA Number 043000261, receiving bank Mellon Bank, and
       account number 911-6229. The payment should note the NAL/Acct. No.
       referenced in the caption.

   18. The response, if any, to this NOTICE OF APPARENT LIABILITY FOR
       FORFEITURE must be mailed to Hillary DeNigro, Chief, Investigations
       and Hearings Division, Enforcement Bureau, Federal Communications
       Commission, 445 12th Street, S.W., Suite 4-C330, Washington, D.C.
       20554 and must include the NAL/Acct. No. referenced above. E-mail
       address: hillary.denigro@fcc.gov.

   19. 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 submitted.

   20. Requests for payment of the full amount of this Notice of Apparent
       Liability for Forfeiture under an installment plan should be sent to:
       Chief, Revenue and Receivables Operations Group, 445 12th Street, SW,
       Washington, DC 20554.

   21. IT IS FURTHER ORDERED that a copy of this NOTICE OF APPARENT LIABILITY
       FOR FORFEITURE shall be sent by certified mail, return receipt
       requested, to Kent D. Bressie, Counsel for Rally Capital, LLC, Harris,
       Wiltshire and Grannis, LLP, 1200 Eighteenth Street, NW, Washington DC
       20036.

   FEDERAL COMMUNICATIONS COMMISSION

   Hillary S. DeNigro

   Chief, Investigations and Hearings Division

   47 U.S.C. S: 214; 47 C.F.R. S:S: 63.03, 63.24.

   See 47 U.S.C. S: 214(a).

   See Implementation of Further Streamlining Measures for Domestic Section
   214 Authorizations, Report and Order 17 FCC Rcd 5517, 5521, P: 5 (2002)
   ("2002 Streamlining Order"); 47 C.F.R. S:S: 63.03. See also id.
   S: 63.03(d)(1) excluding all pro forma transactions, which do not result
   in a change in the carrier's ultimate ownership or control, from the
   domestic section 214 application and approval requirements); id. S:
   63.04(d)(2) (requiring that a post-transaction notice be filed with the
   Commission within 30 days of a pro forma transfer of a domestic section
   214 authorization to a trustee, a debtor-in-possession, or any other party
   pursuant to any applicable chapter of the Bankruptcy Code).

   47 C.F.R. S: 63.24(a).

   See generally 47 C.F.R. S: 63.24(e); see also id. 47 C.F.R. S: 63.24(d)
   (excluding pro forma applications,  or non-substantive assignments and
   transfers of control that do not result in a change in the actual
   controlling party or do not require prior Commission approval). Section
   63.24(g) of the Commission's rules also establishes a narrow exception to
   this application requirement for specified involuntary transfers involving
   bankruptcy, foreclosure action, legal disability or death, for which only
   a post-transaction notification is required. In a case involving
   involuntary assignment or transfer of control to: a bankruptcy trustee
   appointed under involuntary bankruptcy; an independent receiver appointed
   by a court of competent jurisdiction in a foreclosure action; or, in the
   case of death or legal disability, to a person or entity legally qualified
   to succeed the deceased or disabled person under the laws of the place
   having jurisdiction over the estate involved; the transferee must provide
   post-transaction notice no later than 30 days after the event causing the
   involuntary assignment or transfer of control.  See 47 C.F.R. S: 63.24(g).
   But see id. 47 C.F.R. S: 63.03 (categorizing these types of involuntary
   transactions as pro forma assignments or transfers of control for domestic
   section 214 applications).

   See 47 U.S.C. S: 214(a).

   47 C.F.R. S: 63.03 n.1; 47 C.F.R. S: 63.09(b).

   Id.

   47 C.F.R. S: 63.24(c).

   See id;  47 C.F.R. S: 63.03 n.1.

   47 C.F.R. S: 63.04(b).

   2002 Streamlining Order, 17 FCC Rcd at 5524, P: 13.

   The Commission granted Telesphere, formally known as Clear Sky Broadband,
   Inc., section 214 authority to become a facilities based international
   common carrier on September 9, 2005. See Public Notice, "International
   Authorizations Granted, Section 214 Applications (47 C.F.R. S: 63.18);
   Section 310(b)(4) Requests," 20 FCC Rcd 14650 (Int. Bur., rel. September
   15, 2005) ("September 15, 2005 Public Notice"); FCC File No.
   ITC-214-20050824-00344. Telesphere relies on the blanket section 214
   authorization for the provision of domestic interstate telecommunications
   services. Letter from Kent D. Bressie, Harris, Wiltshire & Grannis, LLP,
   Counsel for Rally Capital, LLC, to Ms. Elizabeth Mumaw, Assistant Chief,
   Investigations and Hearings Division, Enforcement Bureau, Federal
   Communications Commission, dated June 29, 2007 ("LOI Response") at Inquiry
   7.

   See Telesphere Networks Ltd., Transferor and Licensee and Rally Capital,
   Transferee, Application for Consent to Provide Global Facilities-Based and
   Global Resale International Telecommunications Services and to Transfer
   Control of Domestic Common Carrier Transmission Lines Pursuant to Section
   214 of the Communications Act of l1934, as Amended, Consolidated
   Application-Streamlined Processing Required, amended October 20, 2006
   ("Section 214 Transfer of Control Joint Application"). See also LOI
   Response at Inquiry 6.

   See LOI Response at Inquiry 5(b).

   See Section 214 Transfer of Control Joint Application at 2; LOI Response
   at 5.

   See id.

   See Section 214 Transfer of Control Joint Application  at 3; LOI Response
   at 5.

   See id.

   See id. Rally has further increased its ownership interest in Telesphere.
   See  LOI Response at 5.

   See generally Section 214 Transfer of Control Joint Application.

   See Section 214 Transfer of Control Joint Application  at 3; LOI Response
   at 5.

   See Telesphere Networks Ltd., Transferor and Licensee and Rally Capital,
   LLC, Transferee, Application for Consent to Transfer Control of a
   Telecommunications Carrier Authorized to provide Global Facilities-Based
   and Global Resale International Telecommunications Services and to
   Transfer Control of Domestic Common Carrier Transmission Lines, Pursuant
   to Section 214 of the Communications Act of 1934, as Amended Request for
   Special Temporary Authority (filed October 24, 2006) ("Joint Application
   for  STA").

   See LOI Response at Exhibit 9(a) (International Bureau granting
   applicants' international section 214 STA on October 25, 2007) and Exhibit
   9(b) (Wireline Competition Bureau granting applicants' domestic section
   214 STA on October 27, 2006).

   Public Notice, "Domestic Section 214 Application Filed for the Transfer of
   Control of Telesphere Networks Ltd. To Rally Capital, LLC, Streamlined
   Pleading Cycle Established, 21 FCC Rcd 12950 (Wir. Comp. Bur., rel.
   October 30, 2006). Under this standard, 47 C.F.R. S: 63.03 prescribes six
   categories of transactions that would not raise public interest concerns
   and thus are presumptively accorded streamlined treatment, which allows
   qualifying domestic telecommunications carriers expedited review of their
   applications. See 47 C.F.R. S: 63.03(b).

   Public Notice, "Notice of Domestic Section 214 Authorizations granted," 21
   FCC Rcd 14080 (Wir. Comp. Bur., rel. November 30, 2006) ("November 30,
   2006  Public Notice").

   Public Notice, "International Authorizations Granted, Section 214
   Applications (47 C.F.R. S: 63.18); Section 310(b)(4) Requests," 21 FCC Rcd
   14186, 14190 (Int. Bur., rel. December 7, 2006) ("December 7, 2006  Public
   Notice"); FCC File No. ITC-T/C-20061012-00465.

   Letter from Trent B. Harkrader, Deputy Chief, Investigations and Hearings
   Division, Enforcement Bureau, Federal Communications Commission, to Dennis
   Weibling, Managing Director, Rally Capital, LLC, dated June 15, 2007
   ("LOI").

   See LOI Response.

   47 U.S.C. S: 503(b)(1)(B); 47 C.F.R. S: 1.80(a)(1); see also 47 U.S.C. S:
   503(b)(1)(D) (forfeitures for violation of 14 U.S.C. S: 1464).

   47 U.S.C. S: 312(f)(1).

   H.R. Rep. No. 97-765, 97th Cong. 2d Sess. 51 (1982).

   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.").

   See, e.g., Callais Cablevision, Inc., Grand Isle, Louisiana, Notice of
   Apparent Liability for Monetary Forfeiture, 16 FCC Rcd 1359, 1362, P: 10
   (2001) ("Callais Cablevision") (issuing a Notice of Apparent Liability
   for, inter alia, a cable television operator's repeated signal leakage).

   Southern California Broadcasting Co., 6 FCC Rcd at 4388, P: 5; Callais
   Cablevision, Inc., 16 FCC Rcd at 1362, P: 9.

   47 U.S.C. S: 503(b); 47 C.F.R. S: 1.80(f).

   See, e.g., SBC Communications, Inc., Apparent Liability for Forfeiture,
   Forfeiture Order, 17 FCC Rcd 7589, 7591, P: 4 (2002) (forfeiture paid).

   47 U.S.C. 47 C.F.R. S:S: 63.03, 63.24.

   47 C.F.R. S:S: 63.03, 63.24.

   LOI Response at 5.

   See 47 C.F.R. S: 63.03(d)(2); LOI Response at 5.

   See Joint Application for  STA.

   See id.

   LOI Response at Inquiry 10.

   47 U.S.C. S: 503(b)(2)(B); see also 47 C.F.R. S: 1.80(b)(2); Amendment of
   Section 1.80(b) of the Commission's Rules, Adjustment of Forfeiture Maxima
   to Reflect Inflation, Order, 19 FCC Rcd 10945 (2004).

   47 U.S.C. S: 503(b)(2)(D).

   See 47 C.F.R. S: 1.80; Forfeiture Policy Statement, 12 FCC Rcd 17087,
   17113 (1997). See also One Call Internet, Inc. Section 214 Transfer of
   Control of Domestic Transmission Lines Requirements, Order adopting
   Consent Decree, 18 FCC Rcd 25718 (2003) (setting the voluntary amount at
   $8,000 for possible unauthorized domestic section 214 transfer of
   control).

   See 47 C.F.R. S: 1.80.

   47 C.F.R. S: 1.1914.

   (Continued from previous page)

                                                               (continued...)

   Federal Communications Commission DA  07-4017

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   Federal Communications Commission DA  07-4017