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Before the
Federal Communications Commission
Washington, D.C. 20554
)
)
) File No. EB-05-IH-0158
In the Matter of
) NAL/Acct. No. 200532080139
InPhonic, Inc.
) FRN No. 0012-5999-16
)
)
ORDER OF FORFEITURE AND FURTHER NOTICE
OF APPARENT LIABILITY FOR FORFEITURE
Adopted: April 18, 2007 Released: May 3, 2007
By the Commission:
I. INTRODUCTION
1. In this Order of Forfeiture and Further Notice of Apparent Liability
for Forfeiture, we both impose a forfeiture of $819,905 ("Order of
Forfeiture"), and propose a new forfeiture of $100,000 ("Further
Notice of Apparent Liability"), against InPhonic, Inc. ("InPhonic").
The Order of Forfeiture follows a Notice of Apparent Liability we
issued on July 25, 2005. Herein we find that InPhonic willfully and
repeatedly violated: (1) section 64.1195 of the Commission's rules by
failing to register with the Commission until January 2005; (2)
sections 54.706(a) and 64.604(c)(5)(iii)(B) of the rules by failing to
submit certain Telecommunications Reporting Worksheets ("Worksheets")
from 2002 to 2004; (3) section 254(d) of the Communications Act of
1934, as amended (the "Act"), and 54.711(a) of the rules by failing to
contribute to the Universal Service Fund ("USF"); and (4) section
64.604(c)(5)(iii)(A) of the rules by failing to contribute to the
Telecommunications Relay Service ("TRS") Fund. The Further Notice of
Apparent Liability for Forfeiture finds that InPhonic apparently is in
violation of section 214(a) of the Act, and section 63.18 of the
Commission's rules, by failing to apply for and obtain authorization
to provide international telecommunications service.
2. InPhonic's failures to pay its Congressionally-mandated USF and TRS
Fund contributions strike at the core of the Commission's mission to
promote access to affordable, quality telecommunications services for
all Americans. As such, they are especially serious. In section 254 of
the Act, Congress codified the historical commitment to universal
service for consumers in all regions of the nation. In section 225 of
the Act, Congress directed the Commission to ensure the availability
of TRS to hearing- and speech-impaired individuals. Both programs are
supported by mandatory contributions from telecommunications carriers
providing interstate telecommunications services. The Commission also
requires certain providers of interstate telecommunications, including
interconnected Voice over Internet Protocol (VoIP), to contribute to
the USF. Congress similarly directed the Commission to establish the
regulatory fee program and to collect fees from its regulatees,
including telecommunications carriers, to support certain regulatory
functions. To achieve Congress' goals, carriers subject to
contribution requirements must provide certain necessary information
and contribute their equitable share to support these programs.
Failure to do so threatens the integrity and viability of these
Congressional mandates. The Commission cannot and will not tolerate
any carrier's failure to participate in these programs as required by
our rules, and we will use our forfeiture authority to penalize and
deter violations such as those committed by InPhonic.
3. Furthermore, the Commission requires that providers of international
telecommunications service, including resellers and wireless
telecommunications carriers, must affirmatively apply for and obtain
authorization from the Commission pursuant to section 214 of the Act
and related Commission rules before providing such service. The
Commission has explained that policy considerations, including
national security, law enforcement, and foreign and trade policy,
necessitate Commission review prior to a carrier's provision of
international service. By providing unauthorized service, InPhonic is
also violating the conditions applicable to international section 214
authorizations. InPhonic's apparent violation of these requirements
demonstrates a disregard for these important interests. The Commission
cannot tolerate such violations, and must take action to ensure
carrier compliance.
II. BACKGROUND
4. The facts and circumstances upon which the Order of Forfeiture is
based are set forth in the InPhonic NAL, and need not be reiterated
here at length. InPhonic incorporated in 1997, and began providing
"mobile virtual network operator," or "MVNO," service in August 2002.
MVNO service is resold wireless telecommunications service. To provide
this service, InPhonic purchases airtime from Sprint Corp. at
wholesale rates, and then resells the time to end-users or third
parties that, in turn, resell the time to end-users under their own
brand names. InPhonic sells its MVNO service through Star Number,
Inc., a subsidiary, and under the "Liberty Wireless" brand name ("Viva
Liberty" in Spanish). Its service has both interstate and
international components.
A. Requirements to Register, File Periodic Revenue Information, and
Contribute to USF and TRS Funds
5. Both the Act and Commission rules impose a number of obligations on
providers of interstate telecommunications services, including
resellers and wireless telecommunications carriers. Pursuant to
section 64.1195(a) of the Commission's rules and pursuant to
Commission Order, all carriers that provide, or plan to provide,
interstate telecommunications services and certain other providers of
interstate telecommunications must register with the Commission by
submitting certain information on FCC Form 499-A, the annual
"Telecommunications Reporting Worksheet." The Commission created this
requirement to establish "a central repository of key facts about
carriers" in order to monitor the entry and operation of such
providers to ensure that, among other things, they are qualified, do
not engage in fraud, and do not evade oversight. Likewise, unless
their revenues are de minimis, Commission rules require providers of
interstate telecommunications services to file revenue information on
both an annual and quarterly basis, using FCC Form 499-A and FCC Form
499-Q, respectively. The purpose of these reporting requirements is to
provide the information necessary to calculate the amount that a
provider of interstate telecommunications must contribute to certain
regulatory programs.
6. The information reported on the Telecommunications Reporting Worksheet
is needed to administer and fund the universal service and TRS
programs. Unless specifically exempt, section 54.706(a) requires all
providers of interstate telecommunications services, including those
that provide "mobile radio services" and "resale of interstate
services," to contribute to the USF. Section 64.604(c)(5)(iii)(A)
requires carriers and certain other providers of interstate
telecommunications to contribute to the TRS Fund on the basis of their
interstate end-user telecommunications revenues. The Universal Service
Administrative Company ("USAC") administers the USF, and the National
Exchange Carriers Association ("NECA") administers the TRS Fund. USAC
bills contributors monthly, based on the information they report on
FCC Form 499-Q, with an annual "true-up," based on the information
they report on FCC Form 499-A. NECA bills contributors annually.
B. Requirement to Apply for Authorization to Provide International
Telecommunications Service
7. Section 214(a) of the Act prohibits any carrier from constructing,
extending, or operating any line, and from engaging in transmission
through any such line, "unless and until there shall first have been
obtained from the Commission a certificate that the present or future
public convenience and necessity" require, or will require, the
construction, extension, or operation of the line. While the
Commission has granted "blanket" authority to carriers providing
domestic service, meaning that such carriers need not apply to the
Commission for such authority before providing domestic service, the
Commission has not done the same for providers of international
telecommunications services. Rather, section 63.18 of the Commission's
rules requires that any carrier that seeks section 214 authority "for
provision of common carrier communication services between the United
States, its territories or possessions, and a foreign point shall
request such authority by application." Through this process the
applicant provides the Commission with, among other things, contact
information, ownership information, information on any affiliations it
may have with foreign carriers, certification that it will comply with
Commission rules, and certification that the applicant is not subject
to denial of Federal benefits pursuant to the Anti-Drug Abuse Act of
1988. The application requirement applies to carriers that resell the
service of another authorized carrier, and to domestic providers of
wireless telecommunications service that also provide international
telecommunications service.
C. The Commission's Investigation
8. In 2004, the Enforcement Bureau ("Bureau") sought to identify
resellers of telecommunications service that had failed to register as
telecommunications service providers with the Commission as well as
satisfy other Commission program requirements. To this end, on March
30 and August 9, 2004, the Bureau's audit staff sent letters to the
company requesting information pertaining to InPhonic's compliance
with section 64.1195 of the Commission's rules. On January 18, 2005,
InPhonic stated that it still had not registered, but it intended to
submit by January 31, 2005, all appropriate filings due since the
company's incorporation in August 2002. On January 28, 2005, InPhonic
filed three FCC Form 499-Qs, which had been due on May 1, August 1,
and November 1, 2004. On January 31, 2005, InPhonic finally registered
by filing its 2003 Form 499-A, and also filed its 2004 Form 499-A.
9. On March 2, 2005, the Bureau issued a letter of inquiry ("LOI") to
InPhonic. The LOI directed InPhonic to, among other things, submit a
sworn, written response to a series of questions relating to
InPhonic's apparent failure to register, file Telecommunications
Reporting Worksheets, and make mandated federal telecommunications
regulatory program payments. On March 18, 2005, InPhonic paid USAC
$889,189 for USF contributions it owed based on its 2002, 2003 and
2004 revenue. InPhonic responded to the LOI on April 8, 2005. InPhonic
made its first TRS Fund payment of $22,455.04 on April 25, 2005,
approximately nine months after its 2004 TRS contribution became due
on July 26, 2004.
10. Under section 503(b)(1)(B) 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.
11. On July 25, 2005, we released the InPhonic NAL. We proposed a
forfeiture of $819,905 against InPhonic for its apparent violations of
(1) section 64.1195 of the Commission's rules by failing to register
with the Commission; (2) sections 54.711 and 64.604(c)(5)(iii)(B) of
the Commission's rules by failing to file Telecommunications Reporting
Worksheets; (3) section 54.706(a) of the Commission's rules by failing
to contribute to the USF; and (4) section 64.604(c)(5)(iii)(A) of the
Commission's rules by failing to contribute to the TRS Fund.
12. InPhonic filed its response to the NAL on August 24, 2005. InPhonic
does not deny that it engaged in each of the violations described in
the NAL, or that it deliberately, intentionally, and repeatedly
engaged in the acts that constitute its violations; indeed, it
acknowledges that "it was late in complying with its regulatory and
universal service obligations." Yet, InPhonic argues that the
forfeiture proposed in the NAL must be eliminated or reduced for
several reasons. First, InPhonic argues that the NAL was unlawful
because InPhonic does not hold, and is not an applicant for, an
authorization from the Commission, and in such instances, section
503(b)(5) of the Act requires the Commission to issue a citation
before it can impose a notice of apparent liability for forfeiture.
Second, InPhonic asserts that the statute of limitations has run on
its failure to make timely TRS Fund payments. Third, InPhonic asserts
that the proposed forfeitures for each of its violations are
arbitrary, capricious and excessive, and do not comply with the
Administrative Procedures Act. Finally, InPhonic asserts that proposed
penalties in the NAL are disproportionate to the Commission's
treatment of other carriers and are therefore discriminatory.
13. Since InPhonic filed its response to the NAL, the Bureau has also
investigated whether the company has obtained formal authorization
required by section 214 of the Act to provide international
telecommunications service, given InPhonic's claim that it is immune
from forfeiture because it does hold and is not an applicant for a
Commission-issued authorization. In fact, the Bureau has learned that
InPhonic apparently does not hold, and has never held, such required
authorization.
III. ORDER OF FORFEITURE
14. We find by a preponderance of the evidence that InPhonic willfully and
repeatedly engaged in the violations described in the NAL. More
specifically, we find that InPhonic willfully and repeatedly violated
(1) section 64.1195 of the Commission's rules by failing to register
with the Commission; (2) sections 54.706(a) and 64.604(c)(5)(iii)(B)
of the Commission's rules by failing to file Telecommunications
Reporting Worksheets on multiple occasions; (3) section 254(d) of the
Act and section 54.711(a) of the Commission's rules by failing to
contribute to the USF on a timely basis on multiple occasions; and (4)
section 64.604(c)(5)(iii)(A) of the Commission's rules by failing to
contribute to the TRS Fund on a timely basis on multiple occasions.
15. Section 503(b)(2)(B) of the Act authorizes the Commission to assess a
forfeiture of up to $120,000 for each violation or each day of a
continuing violation, up to a statutory maximum of $1.2 million for a
single act or failure to act before September 7, 2004, and up to
$130,000 for each violation or each day of a continuing violation, up
to a statutory maximum of $1.325 million for a single act or failure
to act for violations occurring on or after September 7, 2004. 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."
16. In Globcom, we issued a forfeiture against a carrier for willful and
repeated violations of section 254(d) of the Act and sections
54.706(a), 54.711(a), and 64.604 of the Commission's rules. We issued
a total forfeiture of $806,861, as follows:
o for Globcom's apparent failure to pay universal service contributions,
we applied a base forfeiture amount of $20,000 for 12 months of nonpayment
and added one-half of the total unpaid universal service contributions
($340,918) to the base forfeiture of $240,000, for a proposed forfeiture
of $580,918;
o for Globcom's apparent failure to pay TRS fund contributions, we applied
a base forfeiture amount of $10,000 for each of the two violations and
added one-half of the total unpaid balance ($5,943), for a proposed
forfeiture of $25,943;
o for Globcom's apparent filing of an inaccurate Annual Worksheet, we
applied a forfeiture of $50,000; and
o for Globcom's apparent failure to submit Quarterly and Annual
Worksheets, we applied a forfeiture of $50,000 for three occasions when
Globcom failed to file the revenue information, for a total forfeiture of
$150,000.
17. In the InPhonic NAL, we proposed a forfeiture of $819,905. We arrived
at this amount as follows:
* for InPhonic's apparent failure to register with the Commission, we
proposed a forfeiture of $100,000;
* for InPhonic's apparent failures to submit Telecommunications
Reporting Worksheets, we proposed a forfeiture of $50,000 for two such
failures within the one-year period preceding the issuance of the NAL,
for a total proposed forfeiture of $100,000;
* for InPhonic's apparent failure to pay universal service
contributions, we proposed a base forfeiture amount of $20,000 per
month for seven months of nonpayment within the one-year period
preceding the issuance of the NAL, and added an upward adjustment of
one-half of the total unpaid universal service contributions
($458,626) to the base forfeiture of $140,000, for a total proposed
forfeiture of $598,626; and
* for InPhonic's apparent failure to pay TRS Fund contributions, we
proposed a base forfeiture amount of $10,000 and added an upward
adjustment of one-half of the carrier's estimated unpaid TRS Fund
contributions ($11,279), for a total proposed forfeiture of $21,279.
As explained below, we reject each of InPhonic's arguments that we should
either cancel the entire forfeiture, or cancel or reduce certain
components of the forfeiture, and we therefore impose the forfeiture of
$819,905 proposed in the NAL.
A. Commission Authority to Issue the Proposed Forfeitures
18. InPhonic first argues that the InPhonic NAL is unlawful and must be
cancelled because the company does not hold, and is not applying for,
any kind of authorization issued by the Commission. As such, inPhonic
argues that pursuant to section 503(b)(5) of the Act, the Commission
must issue it a citation and provide an opportunity for a personal
interview before issuing a notice of apparent liability.
19. Significantly, InPhonic does not quote the pertinent sentence in
section 503(b)(5) of the Act, to wit: "This paragraph shall not apply,
however, if the person involved is engaging in activities for which a
license, permit, certificate, or other authorization is required...."
Thus, although an entity that has not applied for and does not hold an
FCC authorization must ordinarily receive a citation before becoming
subject to forfeiture, that entity is subject to forfeiture if it is
engaged in an activity that requires FCC authorization. As discussed
above and below, InPhonic provides international telecommunications
service, and is required to apply for and obtain authorization to do
so from the Commission. Therefore, the fact that InPhonic is required
to have such authorization but has not in fact applied for it does not
preclude the Commission from issuing the NAL and proceeding with this
Order of Forfeiture pursuant to section 503(b).
B. Statute of Limitations on the TRS Violation
20. InPhonic next argues that the one-year statute of limitations for
InPhonic's failure to timely pay its TRS Fund contributions has
expired. InPhonic explains that the NAL was mailed on July 27, 2005,
but its failure to contribute to the TRS Fund that was the subject of
the NAL occurred on July 26, 2004.
21. Section 503(b)(6) of the Act provides that the Commission cannot
impose a forfeiture penalty against a carrier "if the violation
charged occurred more than 1 year prior to the date of issuance of the
required notice or notice of apparent liability." Thus, the statute
does not require service by mail of the NAL on InPhonic within one
year of its failure to contribute to the TRS Fund, but rather issuance
of the NAL. The date of issuance of a notice of apparent liability is
the date of its public notice, which may or may not coincide with the
date of service. Under Commission rules, the date of public notice of
non-rulemaking documents, like the InPhonic NAL, is the date the
Commission releases the document. The Commission released the NAL on
July 25, 2005 by making the full text of the document available to the
public at Commission headquarters on that date, and thus issued the
document within one year of the company's failure to make its TRS Fund
contribution on July 26, 2004. In addition, although not legally
required to do so, on the same date the Commission issued the NAL,
the Bureau also served the document by facsimile on the counsel who
had represented the company in connection with the investigation that
led to the InPhonic NAL, providing actual notice to InPhonic's counsel
in the investigation.
22. In its response to the InPhonic NAL, the company admits that "a copy
of the NAL was faxed at 4:47 pm on July 25, 2005 to Darius Withers of
the law firm of Kelley Drye & Warren LLP," but claims that the firm is
only "one of a handful of law firms that represents InPhonic," and was
"never authorized to represent InPhonic with regard to the NAL ...."
InPhonic's attempt to distance itself from its lawyers is meritless,
and we find that the company was actually served through Mr. Withers
on July 25, 2005. The InPhonic NAL arises out of Commission File No.
EB-05-IH-0158, the same file number carried by the InPhonic LOI.
InPhonic's response to the LOI was submitted over the signature of Mr.
Withers and other lawyers at Kelley Drye, identifying themselves as
"Counsel to InPhonic, Inc." The LOI Response was supported by
affidavits from InPhonic's General Counsel, Senior Vice President and
Corporate Treasurer, and Chief Financial Officer. Prior to release of
the InPhonic NAL in the investigation, the Commission received no
notice that Kelley Drye and/or Mr. Withers no longer represented
InPhonic. Therefore, we find that service on Mr. Withers constituted
service on InPhonic for purposes of the InPhonic NAL.
C. Administrative Procedure Act and Section 503(b)(2)(D)
23. InPhonic also argues that the forfeitures for each of its violations
must be reduced because, it claims, we did not consider our forfeiture
guidelines, which are in effect binding rules, and we did not explain
why InPhonic's conduct in particular justified a higher penalty than
the amounts set forth in the guidelines. For example, with respect to
the $100,000 forfeiture we proposed for InPhonic's registration
violation, InPhonic states that we should have begun our calculation
with the base forfeiture of $3,000 for "failure to file required forms
or information" set forth in our forfeiture guidelines. InPhonic
acknowledges that the Commission can deviate from the guidelines as
warranted by consideration of the criteria set forth in section
503(b)(2)(D), but it claims that we did not apply these factors to
InPhonic's situation. As a result, InPhonic claims that the amounts of
the forfeitures we proposed for its various violations do not comply
with the Administrative Procedure Act or section 503(b)(2)(D) of the
Act.
24. As a preliminary matter, InPhonic is simply wrong that the Commission
has ignored the base forfeiture amounts specified in our guidelines.
The base forfeitures in the guidelines are preceded by explicit
statements that "[t]he Commission and its staff may use these
guidelines in particular cases[, and] retain the discretion to issue a
higher or lower forfeiture than provided in the guidelines, to issue
no forfeiture at all, or to apply alternative or additional sanctions
as permitted by the statute." The base forfeitures in the guidelines
are then followed by the criteria that the Commission may use to
adjust a forfeiture upward or downward. InPhonic itself acknowledges
that the base forfeiture amounts specified in the guidelines are not,
in fact, binding rules that the Commission must follow when it
concedes that the Commission may deviate from the guidelines in
accordance with the criteria set forth in section 503(b)(2)(D). In any
event, the Commission's established methodologies for determining the
amount of the forfeiture for the particular violations at issue here
do take into account the base forfeiture amounts, as well as the
upward and downward adjustment criteria, specified in section 1.80 of
the Commission's rules. The Commission followed this methodology
exactly in the InPhonic NAL.
25. Next, with respect to section 503(b)(2)(D), InPhonic is wrong that we
did not comply with the Act because the forfeiture was not
sufficiently tied to InPhonic in particular. For example, with respect
to the registration violation, InPhonic states that instead of "a
particularized Section 503(b)(2)(D) analysis, the FCC proceeds to a
generic discussion of the importance of registering and of how failing
to do so can undermine the universal service system." It thus claims
that "there is no analysis provided in support of any upward
adjustment, much less the extraordinary upward adjustment in this
case."
26. InPhonic's position misrepresents both the statute and our analysis.
InPhonic suggests that our "generic discussion of the importance of
registering" is irrelevant to determining the amount of a forfeiture
for violation of section 64.1195 of the Commission's rules. This
construction of section 503(b)(2)(D) ignores the fact that the statute
directs the Commission to consider certain factors about the violation
itself, in addition to certain factors about the particular violator,
in establishing a forfeiture. Section 503(b)(2)(D) states: "In
determining the amount of such a forfeiture penalty, the Commission or
its designee shall 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." In
establishing a forfeiture, the Commission must consider certain
features about both the violation and the violator.
27. Our analysis satisfied both prongs of section 503(b)(2)(D) for each of
InPhonic's violations. For example, with respect to the registration
violation, we explained, as InPhonic itself acknowledges, the
importance of the registration requirement and how noncompliance
compromises not only the USF, but also other statutorily-mandated
programs. We also compared the failure to register to the failure to
file Telecommunications Reporting Worksheets, and explained why the
registration violation is more severe and therefore warrants a higher
forfeiture. With respect to InPhonic itself, we considered the degree
of the company's culpability and explained that InPhonic had violated
the registration requirement from the time it began providing service
until January 31, 2005. In addition, we acknowledged that InPhonic had
cured its registration violation before we issued the NAL, but
explained that such action did not reduce the severity of the
violation because the company did not cure the problem until after the
Bureau made inquiries about the violations. We also indicated that we
would consider arguments about InPhonic's ability to pay before
imposing a forfeiture under certain conditions. Thus, our analysis of
the registration violation considered all of factors set forth in
section 503(b)(2)(D), and the analysis appropriately supports a
forfeiture of $100,000. Our analysis of InPhonic's other violations
also considered both the general impact of noncompliance with each
rule, and the degree of InPhonic's misconduct in particular.
28. Although InPhonic claims on one hand that our analyses of the
appropriate forfeitures for its various violations were not
sufficiently tied to its misconduct in particular, on the other hand
the company also attacks our approach of basing the upward adjustment
for nonpayment to the TRS Fund and the USF on one-half of the balance
that a company owed to the funds. This approach, however, which the
Commission has consistently followed in numerous recent cases, ties
the upward adjustment of the forfeiture to the impact that a company's
failure to contribute had on the funds, and, as a consequence, the
impact on company's competitors. As the Commission has repeatedly
stated, the upward adjustment "`illustrate[s] 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 contribution
it fails to make.'" It is therefore difficult to envision an approach
that better satisfies that aspect of section 503(b)(2)(D) that
mandates that we base a forfeiture on the "degree of culpability" of a
violator - exactly what InPhonic claims we did not do - and on the
"extent[] and gravity of the violation." Yet InPhonic claims that
consideration of any amount owing to either fund for any period of
time beyond the twelve months immediately preceding the date of the
NAL violates the one-year statute of limitations set forth in section
503(b)(6) of the Act. It is a well-settled principle of law, however,
that the Commission may properly consider prior offenses that occurred
more than one year before a violation to establish the context for
determining an appropriate forfeiture amount. As a result, our
approach to the upward adjustment to the forfeiture for violations for
nonpayment to the TRS Fund and USF not only does not violate the
one-year statute of limitations, but in fact, best realizes the
mandate in section 503(b)(2)(D) that our forfeitures take into account
the "degree of culpability" of a particular violator.
D. Discriminatory Treatment
29. As its final argument, InPhonic contends that the forfeitures proposed
in the NAL are much larger than penalties imposed against small
carriers for similar violations, and would effect a greater punishment
on InPhonic than penalties that have been imposed on larger carriers.
As a result, the NAL "arbitrary [sic] and capriciously discriminates
against InPhonic and for this reason alone the NAL should be
cancelled."
30. As support for its argument involving the larger carriers, InPhonic
cites two enforcement matters, one involving SBC Communications and
the other involving Verizon Comunications. In SBC Communications, the
Commission imposed a forfeiture of $6,000,000 against SBC for
violating conditions of the Commission's approval of the merger
between SBC and Ameritech Corporation. InPhonic claims that this
forfeiture constitutes approximately 0.013 percent of SBC's annual
common carrier revenues and 0.1 percent of its net income, while the
forfeiture of approximately $820,000 against InPhonic represents 1.7
percent of its common carrier revenues and a net loss in its income.
InPhonic does not mention, however, that the forfeiture imposed
against SBC was the statutory maximum for the violations at issue,
while that proposed against InPhonic does not begin to approach the
maximum for its multiple violations, which would be nearly
$15,000,000.
31. In Verizon Communications, the Bureau admonished, but did not impose a
forfeiture against, the company for failure to publicize certain
services in six states in accordance with Commission rules, because
the statute of limitations set forth in section 503(b)(6) had expired
for these violations. The Bureau explained that "[b]ecause Verizon
undertook renewed outreach efforts in these six states within the last
year, we are constrained from pursuing a proposed forfeiture at this
time." InPhonic claims that the Bureau did not say that the statute of
limitations had run, and that "because the failure had been rectified
prior to the issuance of the forfeiture order, ... the Commission
could not lawfully impose a forfeiture on Verizon." Because the
Commission did not take this approach with InPhonic, the company
claims that we engaged in "discriminatory treatment of the
Commission's Rules against a small carrier in favor [of] a large
carrier." InPhonic mischaracterizes the admonishment. The Bureau
clearly explained that Verizon's failures occurred in between January
2001 and December 2003, more than twelve months before the
admonishment was issued in 2005. Thus, the fact that the Bureau
admonished Verizon but issued an NAL against InPhonic does not
evidence any form of discrimination against InPhonic.
32. As support for its claim that the Commission's actions against smaller
carriers demonstrate discrimination, InPhonic points to a number of
cases where InPhonic asserts the Commission assessed or proposed
lesser penalties against such carriers for nonpayment into the USF. In
each of these cases, the Commission assessed a base forfeiture of
$20,000 for one or two months of nonpayment, with an upward adjustment
of one-half of the carrier's balance owed to the fund for one or two
months, whereas we proposed a base forfeiture of $20,000 for each
month that InPhonic did not contribute to the USF within the one-year
period preceding the NAL, with an upward adjustment of one-half of its
total outstanding balance.
33. As we explained in Globcom, since the ConQuest decision it has become
apparent that substantially larger forfeiture amounts are needed to
deter carriers from violating our universal service contribution and
reporting rules. The Commission held that the time had come to
implement a substantially greater forfeiture amount in order to deter
carriers from violating our universal service contribution and
reporting rules. Clearly, our method of assessing forfeitures prior to
Globcom was not a sufficient deterrent. Therefore, consistent with
prior Commission warnings concerning likely increases in forfeiture
amounts, we properly increased the number of months of USF nonpayment
on which we assess forfeiture amounts and the discretionary upward
adjustment, and the Commission fully explained the reasons for doing
so.
E. Conclusion
34. Accordingly, we find no reason to cancel or reduce the forfeiture we
proposed in the InPhonic NAL. As a result, we impose a forfeiture of
$819,905 against InPhonic.
IV. FURTHER NOTICE OF APPARENT LIABILITY FOR FORFEITURE
35. In today's Order we also find that InPhonic is apparently in violation
of section 214(a) of the Act and section 63.18 of the Commission's
rules by willfully and repeatedly failing to apply for and obtain
authorization from the Commission to provide international
telecommunications service. Accordingly, we find that InPhonic is
apparently liable for an additional forfeiture of $100,000.
36. Section 214(a) of the Act prohibits any carrier from constructing,
extending, or operating any line, and from engaging in transmission
through any such line, "unless and until there shall first have been
obtained from the Commission a certificate that the present or future
public convenience and necessity" require, or will require, the
construction, extension, or operation of the line. Part 63 of the
Commission's rules sets out the rules for providing U.S.-international
service, including the requirement that a carrier seek and obtain
Commission approval prior to providing international service. The
Commission has explained that the international section 214 review
process serves several purposes. It enables the Commission to review
applications for risks to competition, particularly in situations
where the applicant has an affiliation with a foreign carrier with
market power on the foreign end of the route that may be able to
leverage that market power to discriminate against U.S. competitors to
the detriment of U.S. consumers. The review process also includes
consultation with the Executive Branch agencies regarding national
security, law enforcement, foreign policy and trade concerns that may
be unique to the provision of international service.
37. For these reasons, section 63.18 of the Commission's rules therefore
requires that "any party seeking authority pursuant to Section 214 . .
. for the provision of common carrier communications services between
the United States, its territories or possessions, and a foreign point
shall request such authority by formal application." Section
63.18(e)(2) clearly assigns the obligation to apply for and obtain
section 214 authorization before providing international service to
resellers by establishing specific requirements for parties "applying
for authority to resell the international services of authorized U.S.
common carriers subject to [section 63.23] of this part," which, in
turn, identifies the conditions that apply to "carriers authorized to
resell the international services of other authorized carriers." The
Commission has specifically stated that this requirement for prior
approval to provide international service explicitly extends to
wireless telecommunications carriers.
38. Notwithstanding these explicit requirements, InPhonic provides
international service, but apparently does not hold an authorization
pursuant to section 214 from the Commission. In its annual
Telecommunications Reporting Worksheets for 2003, 2004, and 2005,
InPhonic reports international revenues for certain mobile and toll
services. Yet the Commission's [1]International Bureau's Filing System
("IBFS") database has no record that InPhonic or its subsidiaries have
applied for or obtained section 214 authorization. In addition, as
discussed above, InPhonic admits that it does not hold "a license,
permit, certificate or other authorization issued by the Commission."
39. The Commission has previously proposed forfeitures against
telecommunications service providers failing to obtain section 214
authorization prior to providing service. In Philippine Long Distance
Telephone, the Commission proposed forfeitures of $200,000 each
against World Communications, Inc. ("WorldCom") and Manila Peninsula
Hotel ("Peninsula") for failing to obtain section 214 authority prior
to providing international telecommunications service. The Commission
found that the violations were egregious and continuing and applied
upward adjustments of $120,000 to the then-existing base forfeitures
of $80,000 to assess total forfeitures of $200,000 each. In Ameritech
Corporation, the Commission issued a $200,000 forfeiture against
Ameritech for constructing new communications facilities without first
obtaining authorization from the Commission. The Commission found that
the requirements of section 214, as indicated by the unambiguous
language of the statute, should have been readily apparent to
Ameritech. The Commission also considered Ameritech's ability to pay
and found that the violation was continuing, and proposed a forfeiture
of $200,000.
40. Both the Philippine Long Distance Telephone and the Ameritech
Corporation decisions were released prior to the Commission's current
forfeiture guidelines. In 1993, when the Commission released
Philippine Long Distance Telephone, the base forfeiture for a section
214 violation under the 1991 Forfeiture Guidelines was $80,000, i.e.,
80 percent of the maximum forfeiture under section 503 of the Act
($100,000 in 1993). The D.C. Circuit vacated the 1991 Forfeiture
Guidelines in 1994. The Commission's enforcement action in Ameritech
Corporation was taken in 1995. In 1997, the Commission adopted the
current forfeiture guidelines, which provide a base forfeiture amount
of $10,000 for operation without an instrument of authorization for
the service. Although the Philippine Long Distance Telephone and the
Ameritech Corporation decisions were issued before the Commission's
adoption of the current forfeiture guidelines, these decisions provide
guidance on the appropriate upward adjustment to the base forfeiture
for a section 214(a) violation, when the Commission's upward
adjustment factors are implicated.
41. InPhonic has apparently been operating as an international
telecommunications service provider since 2002 without authorization
from the Commission. We therefore find that this apparent violation of
the Act and the Commission's rules was continuing. Given the
unambiguous language of the Act, the Commission's rules and decisions,
and even the Commission's web site, it should have been apparent to
InPhonic that it was required to obtain section 214 authority from the
Commission to provide international telecommunications service. In
light of the Commission's clear requirements, and the important public
interest considerations involving national security, law enforcement,
foreign policy and trade policy, we find that InPhonic's failure to
obtain section 214 authority from the Commission prior to providing
international telecommunications service was also egregious. We view
InPhonic's apparent failure to obtain section 214 authority as serious
a dereliction of its responsibilities under the Act and our rules as
its failure to register pursuant to section 64.1195(a) of the
Commission's rules. Just as a telecommunications carrier that fails to
register can operate outside of the Commission's oversight and evade
its federal obligations to contribute toward the vital programs linked
to registration, international telecommunications carriers that fail
to obtain section 214 authority may endanger important pubic interest
considerations involving national security, law enforcement, foreign
policy and trade policy. We also find that a proposed forfeiture must
be large enough to have a deterrent effect on companies with gross
revenues commensurate with those of InPhonic. Pursuant to the
Commission's mandate from Congress 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," we find, consistent with prior precedent for entities
failing to receive prior authorization from the International Bureau,
that a proposed forfeiture of $100,000 is warranted for InPhonic's
apparent willful and repeated failure to obtain section 214 authority
from the Commission prior to providing international
telecommunications service.
V. CONCLUSION
42. InPhonic operated as a provider of interstate and international
telecommunications services for multiple years without registering
with the Commission or making payments to Congressionally-mandated
telecommunications programs, thereby denying these programs of
essential funding for an extended period of time and totaling hundreds
of thousands of dollars in withheld contributions. In light of the
seriousness, duration and scope of the apparent violations, we find
that the forfeiture proposed in the InPhonic NAL is warranted. As
discussed above, this forfeiture amount includes as follows: (1) a
total proposed penalty of $100,000 for failing to register pursuant to
section 64.1195 of the Commission's rules; (2) a total proposed
penalty of $100,000 for failing to file two Telecommunications
Reporting Worksheets within the year preceding issuance of the
InPhonic NAL; (3) a total proposed penalty of $598,626 for failing to
make seven monthly universal service contributions within the year
preceding issuance of the InPhonic NAL; and (3) a proposed total
penalty of $21,279 for failing to make its 2004 TRS Fund contribution
when due.
43. Furthermore, in light of the seriousness, duration and scope of
InPhonic's apparent violation concerning its failure to obtain
Commission approval under section 214(a) to provide international
telecommunications service, we find that an additional proposed
forfeiture in the amount of $100,000 is warranted. We direct InPhonic
to submit within thirty days either as part of its response to this
Notice of Apparent Liability or separately, a report supported by a
sworn statement or declaration under penalty of perjury of a corporate
officer, stating its plan to come into compliance with the relevant
authorization rules described herein. InPhonic should also submit to
the Commission within thirty days all authorization applications under
section 214(a) to provide international telecommunications service. We
again caution InPhonic that additional violations of the Act or the
Commission's rules could subject InPhonic to further enforcement
action. Such action could take the form of higher monetary forfeitures
and/or possible revocation of InPhonic's operating authority,
including disqualification of InPhonic's principals from the provision
of any interstate common carrier services without the prior consent of
the Commission.
VI. ORDERING CLAUSES
44. Accordingly, IT IS ORDERED THAT, pursuant to section 503(b) of the
Communications Act of 1934, as amended, and section 1.80 of the
Commission's rules, InPhonic, Inc. IS LIABLE FOR A MONETARY FORFEITURE
in the amount of $819,905 for willfully and repeatedly violating the
Act and the Commission's rules.
45. Payment of the forfeiture shall be made in the manner provided for in
section 1.80 of the Commission's rules within thirty days of the
release of this 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 Section 504(a) of the Act. Payment of the
forfeiture must be made by check or similar instrument, payable to the
order of the Federal Communications Commission. The payment must
include the NAL/Acct. No. and FRN No. referenced above. Payment by
check or money order may be mailed to Federal Communications
Commission, P.O. Box 358340, Pittsburgh, PA 15251-8340. Payment by
overnight mail may be sent to Mellon Bank /LB 358340, 500 Ross Street,
Room 1540670, Pittsburgh, PA 15251. Payment by wire transfer may be
made to ABA Number 043000261, receiving bank Mellon Bank, and account
number 911-6106. Requests for payment of the full amount of the
forfeiture under an installment plan should be sent to: Chief, Credit
and Management Center, 445 12^th Street, S.W., Washington, D.C.
46. IT IS FURTHER ORDERED THAT, pursuant to sections 4(i) and 214(a) of
the Act, and section 63.18 and 63.20 of the Commission's rules, within
thirty days of the release of this FORFEITURE ORDER AND FURTHER NOTICE
OF APPARENT LIABILITY FOR FORFEITURE, InPhonic SHALL SUBMIT to the
Commission a report, supported by a sworn statement or declaration
under penalty of perjury by a corporate officer, stating its plan to
come into compliance with the authorization rules discussed herein,
and its application for authority to provide international
telecommunications service.
47. IT IS FURTHER ORDERED THAT, pursuant to section 503(b) of the
Communications Act of 1934, as amended, and section 1.80 of the
Commission's rules, that InPhonic is hereby NOTIFIED of its FURTHER
NOTICE OF APPARENT LIABILITY FOR A FORFEITURE in the amount of
$100,000 for willfully and repeatedly violating the Act and the
Commission's rules.
48. IT IS FURTHER ORDERED THAT, pursuant to section 1.80 of the
Commission's Rules, within thirty days of the release date of this
FURTHER NOTICE OF APPARENT LIABILITY, InPhonic SHALL PAY the full
amount of the further proposed forfeiture or SHALL FILE a written
statement seeking reduction or cancellation of the further proposed
forfeiture. Payment of the further proposed forfeiture must be made by
check or similar instrument, as set forth above.
49. The response, if any, to this FURTHER NOTICE OF APPARENT LIABILITY
must be mailed to Hillary DeNigro, Chief, Investigations and Hearings
Division, Enforcement Bureau, Federal Communications Commission, Room
4-C330, 445 12^th Street, S.W., Washington, D.C. 20554 and must
include the NAL/Acct. No. referenced above.
50. 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.
51. IT IS FURTHER ORDERED that copies of this ORDER OF FORFEITURE AND
FURTHER NOTICE OF APPARENT LIABILITY shall be sent by certified mail,
return receipt requested, to Aaron Daniels, Senior Vice-President and
Corporate Treasurer, InPhonic, Inc., 1010 Wisconsin Avenue, N.W.,
Suite 600, Washington, D.C. 20007, and to Dana Frix, Chadbourne and
Parke, LLP, 1200 New Hampshire Avenue, NW, Washington, D.C. 20036.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
InPhonic, Inc., Notice of Apparent Liability for Forfeiture and Order, 20
FCC Rcd. 13277 (2005) ("InPhonic NAL" or "NAL").
47 C.F.R. S 64.1195.
Id. at SS 54.706(a), 64.604(c)(5)(iii)(B).
47 U.S.C. S 254(d).
47 C.F.R. S 54.711(a).
Id. at S 64.604(c)(5)(iii)(A).
47 U.S.C. S 214(a).
47 C.F.R. S 63.18.
See 47 U.S.C. SS 225 ("[T]he Commission shall ensure that interstate and
intrastate telecommunications relay services are available, to the extent
possible and in the most efficient manner, to hearing-impaired and
speech-impaired individuals in the United States").
47 U.S.C. SS 225, 254(d).
See 47 U.S.C. S 254(d) ("Any other provider of interstate
telecommunications may be required to contribute to the preservation and
advancement of universal service if the public interest so requires.");
Universal Service Contribution Methodology, Federal-State Joint Board on
Universal Service, 1998 Biennial Regulatory Review - Streamlined
Contributor Reporting Requirements Associated with Administration of
Telecommunications Relay Service, North American Numbering Plan, Local
Number Portability, and Universal Service Support Mechanisms,
Telecommunications Services for Individuals with Hearing and Speech
Disabilities, and the Americans with Disabilities Act of 1990,
Administration of the North American Numbering Plan and North American
Numbering Plan Cost Recovery Contribution Factor and Fund Size, Number
Resource Optimization, Telephone Number Portability, Truth-In-Billing and
Billing Format, IP-Enabled Services, Report and Order and Notice of
Proposed Rulemaking, WC Docket Nos. 06-122 and 04-36, CC Docket Nos.
96-45, 98-171, 90-571, 92-237, 99-200, 95-116, and 98-170, 21 FCC Rcd 7518
(2006) (extending section 254(d) permissive authority to require
interconnected VoIP providers to contribute to the USF) ("2006
Contribution Methodology Order").
47 U.S.C. S 214(a); 47 C.F.R. S 63.18.
See 1998 Biennial Regulatory Review of Int'l Common Carrier Regulations,
Report & Order, 14 FCC Rcd 4909, 4914-17, PP 14-18 (1999) ("1998
International Biennial Review Order").
See 47 C.F.R. SS 63.21, 63.23. We note in particular that neither InPhonic
nor any of its subsidiaries have filed annual traffic and revenue reports
for their international service as required by the Commission's rules. See
id. at SS 43.61, 63.21(d).
See Response of InPhonic, Inc. to Notice of Apparent Liability,
EB-05-IH-0158 (dated August 24, 2005) ("InPhonic NAL Response"), at 8.
InPhonic also sells "wireless activation services" and "wireless enhanced
data services," id. at 7, but these services were not the subject of the
NAL.
See, e.g., Implementation of Section 6002(b) of the Omnibus Budget
Reconciliation Act of 1993, Annual Report & Analysis of Competitive Market
Conditions With Respect to Commercial Mobile Radio Servs., Tenth Annual
Report, 20 FCC Rcd 15908, 15920, P 27 (2005).
InPhonic NAL Response at 8.
Id.
See, e.g., InPhonic's Response to the Enforcement Bureau's March 2, 2005
Inquiry Regarding Federal Regulatory Fee Payments, EB-05-IH-0158 (dated
Apr. 8, 2005) ("InPhonic LOI Response"), at Ex. H.
47 U.S.C. S 254(d), 47 C.F.R. S 64.1195(a); 2006 Contribution Methodology
Order, 21 FCC Rcd at 7548-49, P 61.
Implementation of the Subscriber Carrier Selection Provisions of the
Telecomms. Act of 1996, Third Report & Order & Second Order on
Reconsideration, 15 FCC Rcd 15996, 16024, P 59 (2000).
47 C.F.R. S 54.711. Carriers project future quarterly revenues on FCC Form
499-Q, and report the previous year's revenue on FCC Form 499-A. Section
64.604(c)(5)(iii)(B) also requires common carriers to complete and submit
FCC Form 499-A. Id. at S 64.604(c)(5)(iii)(B).
Id. at S 54.706(a).
Id. at S 64.604(c)(5)(iii)(A).
47 U.S.C. S 214(a).
47 C.F.R. S 63.01(a) ("Any party that would be a domestic interstate
communications common carrier is authorized to provide domestic,
interstate services to any domestic point and to construct or operate any
domestic transmission line as long as it obtains all necessary
authorizations from the Commission for use of radio frequencies.").
Implementation of Section 402(b)(2)(A) of the Telecomms. Act of 1996,
Report & Order in CC Docket No. 97-11, Second Memorandum Opinion & Order
in AAD File No. 98-43, 14 FCC Rcd 11364, 11366 n. 8 (1999) (grant of
blanket authority is only for domestic services and does not extend to the
provision of international services).
47 C.F.R. S 63.18.
See id.
See id. at S 63.18(e)(2).
1998 International Biennial Review Order, 14 FCC Rcd at 4926-27, PP 38-39.
See also Personal Communications Indus. Ass'n's Broadband Personal
Communications Servs. Alliance's Pet. for Forbearance for Broadband
Personal Communications Servs., Memorandum Opinion & Order & Notice of
Proposed Rulemaking, 13 FCC Rcd 16857, 16881-84, PP 45-54 (1998)
(declining PCIA's request to forbear from requiring section 214 authority
for a broadband PCS carrier to provide international services) ("PCIA
Forbearance Order"); Implementation of Sections 3(n) and 332 of the
Communications Act, Regulatory Treatment of Mobile Servs., Second Report &
Order, 9 FCC Rcd 1411, 1481 n. 369 (1994) (declining to forbear from
application of section 214 to CMRS carriers' provision of international
services).
See Letter from Hugh Boyle, Chief Auditor, Investigations and Hearings
Division, Enforcement Bureau, to InPhonic (dated Mar. 30, 2004) ("Mar. 30,
2004 Audit Letter"); Letter from Hugh Boyle, Chief Auditor, Investigations
and Hearings Division, Enforcement Bureau, to InPhonic (dated Aug. 9,
2004) ("Aug. 9, 2004 Audit Letter").
Letter from Karly E. Baraga, Esq., Kelly Drye & Warren, LLP, counsel to
InPhonic, Inc., to Hugh L. Boyle, Chief Auditor, Investigations & Hearings
Division, Enforcement Bureau, Federal Communications Commission (dated
Jan. 18, 2005) ("InPhonic Jan. 18, 2005 Letter").
On April 1, 2005, InPhonic filed its 2005 Form 499-A on a timely basis.
InPhonic provided the Bureau no other annual or quarterly
Telecommunications Reporting Worksheets. InPhonic stated however that it
filed its Quarterly Worksheet for February 1, 2005, in a timely manner.
See InPhonic LOI Response at 2.
Letter from Hillary S. DeNigro, Deputy Chief, Investigations and Hearings
Division, Enforcement Bureau, Federal Communications Commission, to Darius
B. Withers, Esq., Kelley Drye & Warren, LLP, counsel to InPhonic, Inc.
(dated March 2, 2005) ("InPhonic LOI").
InPhonic LOI Response at Ex. I. According to USAC, InPhonic owed
$917,251.59 for USF contributions, which was due on March 15, 2005.
InPhonic LOI Response, supra note 21.
47 U.S.C. S 503(b)(1)(B); 47 C.F.R. S 1.80(a)(1).
47 U.S.C. S 312(f)(1).
H.R. Rep. No. 97-765, 97^th Cong. 2d Sess. 51 (1982).
See, e.g., Application for Review of Southern California Broadcasting Co.,
Memorandum Opinion & Order, 6 FCC Rcd 4387, 4388, P 5 (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 (2001)
(issuing a Notice of Apparent Liability for, inter alia, a cable
television operator's repeated signal leakage) ("Callais Cablevision,
Inc.").
Callais Cablevision, Inc., 16 FCC Rcd at 1362, P 9; Southern California
Broadcasting Co., 6 FCC Rcd at 4388, P 5.
47 U.S.C. S 503(b); 47 C.F.R. S 1.80(f).
See, e.g., SBC Communications, Inc., Forfeiture Order, 17 FCC Rcd 7589,
7591, P 4 (2002) ("SBC Forfeiture Order") (forfeiture paid).
InPhonic NAL, supra note 1.
InPhonic NAL Response, supra note 15.
Id. at 4.
Id. at 3-4, 15-17.
Id. at 18-19.
Id. at 19-28.
Id. at 7, 30-37.
47 U.S.C. S 503(b)(2)(B).
Id.
Globcom, Inc., Order of Forfeiture, 21 FCC Rcd 4710, 4721-24, PP 29-38
(2006) ("Globcom Forfeiture Order"); Globcom, Inc. d/b/a Globcom Global
Communications, Notice of Apparent Liability for Forfeiture & Order, 18
FCC Rcd 19893, 19902-05, PP 22-32 (2003) ("Globcom NAL").
47 U.S.C. S 254(d); 47 C.F.R. SS 54.706(a), 54.711(a), 64.604.
Globcom Forfeiture Order, 21 FCC Rcd at 4721, P 31.
InPhonic argues that the InPhonic NAL is factually inaccurate in a number
of ways, although the company does not appear to contend that these
"mistakes" justify cancellation or reduction of the forfeiture, but rather
indicate that the company is not as lax about compliance as the NAL
suggests. As indicated above, the Bureau first sent InPhonic a letter
inquiring about some of the facts that led to the NAL on March 30, 2004,
and after receiving no response, the Bureau followed up with a second
letter on August 9, 2004. InPhonic NAL, 20 FCC Rcd at 13280, P 9. InPhonic
claims that it never received either of these letters, that in fact, the
Bureau first contacted the company on January 10 or 11, 2005, and by that
time the company was already taking steps to correct its failures that are
the subject of the NAL. InPhonic NAL Response at 8-15. Notwithstanding
InPhonic's receipt of the 2004 letters, however, it does not claim that it
voluntarily brought its failures to the attention of the Commission, or
that it in fact corrected any of its violations until after it received
inquiries from the Bureau in January 2005. Moreover, while InPhonic notes
it did register and file Telecommunications Reporting Worksheets in late
January 2005, it does not dispute that it did not make any payments to the
USF until March 18, 2005, or to the TRS Fund until April 25, 2005, after
the Bureau issued its LOI. By this time, as the InPhonic NAL concludes,
the company had been operating without participating in any of the
Commission programs at issue since 2002. In sum, the Bureau clearly was
investigating InPhonic in the absence of any disclosure by the company of
its wrongdoing, and before InPhonic corrected any of the filing,
non-payment, and registration violations that are the subject of the NAL.
The company therefore is not entitled to a reduction in the proposed
forfeiture amount.
InPhonic NAL Response at 15-17. InPhonic states that section 503(b)(5) of
the Act provides: "No forfeiture liability shall be determined under this
subsection against any person, if such person does not hold a license,
permit, certificate, or other authorization issued by the Commission, and
if such person is not an applicant for a license, permit, certificate, or
other authorization issued by the Commission, unless, prior to the notice
required by paragraph (3) of this subsection or the notice of apparent
liability required by paragraph (4) of this subsection, such person (A) is
sent a citation of the violation charged; (B) is given a reasonable
opportunity for a personal interview with an official of the Commission,
at the field office of the Commission which is nearest to such person's
place of residence; and (C) subsequently engages in conduct of the type
described in such citation." 47 U.S.C. S 503(b)(5).
Id. at S 503(b)(5).
See supra P 7 and infra PP 35-41.
Because we find that InPhonic is subject to section 503(b)(1)(B) given the
requirement that it must obtain Commission authorization under section
214, we need not and do not rule herein on InPhonic's position that it is
not a Commission licensee.
InPhonic NAL Response at 18-19.
Id. at 19 & n.17.
47 U.S.C. S 503(b)(6)(B) (emphasis supplied).
See Colorado Small Business Dev. Assoc., Inc., Memorandum Opinion & Order,
15 FCC Rcd 24314, 24316, P 7 (2000) ("the statute does not require that
the NAL be received within one year of the violation, but that the NAL
must be issued within one year of the violation.").
Cf. 47 C.F.R. S 1.4(b)(2). InPhonic is correct that the Commission did not
list the InPhonic NAL on its electronic daily list of releases until July
26, 2005. See InPhonic NAL Response at 19 n.17. The InPhonic NAL, however,
appeared along with seven others under the boldface heading "ADDENDA: THE
FOLLOWING ITEMS, RELEASED JULY 25, 2005, DID NOT APPEAR IN DIGEST NO.
140," i.e., the agency's daily list of releases for the preceding day.
Daily Digest, Vol. 24, No. 141 (July 26, 2005). The documents were
released the preceding day by operation of the Commission's procedures. At
that same time, the Commission also made the documents available to the
public. The Commission routinely provides information electronically about
some documents the day after they are released. The date of issuance of a
non-rulemaking document like the InPhonic NAL is however the date of
release, the date the Commission makes the full text of the document
available to the public.
InPhonic NAL Response at 19, n.17.
InPhonic LOI Response at 2.
InPhonic NAL Response at 20-29.
47 C.F.R. S 1.80(b)(4).
InPhonic argues that the forfeitures we proposed for its failures to file
Telecommunications Reporting Worksheets and for failures to contribute to
the USF and TRS Funds suffer from the same deficiencies, i.e., that we did
not begin with what InPhonic contends are the applicable base forfeitures
for the violations, and that we did not explain why we deviated from the
base forfeitures in InPhonic's particular case. InPhonic NAL Response at
26-29.
InPhonic cites U.S. Telecom Ass'n v. FCC, 28 F.3d 1232 (D.C. Cir. 1994)
for the proposition that the D.C. Circuit "has concluded that where the
Commission codifies penalties for particularized behavior such penalties
constitutes [sic] Commission Rules and the Commission must, to some
extent, be constrained by them because they are binding Rules." InPhonic
NAL Response at 23. InPhonic misrepresents the case. The court found that
the Commision's earlier forfeiture standards should have been subject to
notice and comment because the standards functioned as a rule and not a
policy statement, in part because the agency seldom deviated from strict
application of the standards. The court did not make the global
pronouncement InPhonic claims. Following the USTA case, the Commission
revised the standards, recast them as guidelines and has applied them
without the rigidity that attended the old standards. Indeed, in arguing
that the Commission has failed to adhere strictly to the guidelines,
InPhonic appears to recognize the fact that we do not treat the guidelines
as binding rules. InPhonic also appears to recognize as much when it later
acknowledges that the InPhonic NAL and the USTA case involve "opposite"
problems. Id. at 25.
47 C.F.R. S 1.80(b)(4), note (emphasis supplied).
Id. See also Commission's Forfeiture Policy Statement & Amendment of
Section 1.80 of the Rules to Incorporate the Forfeiture Guidelines, Report
& Order, 12 FCC Rcd 17087, 17101, P 29 (1997) ("1997 Forfeiture Policy
Statement") (explaining that "[b]ecause th[e forfeiture guidelines that
are being adopted as a Note to Section 1.80] is only a guideline and not a
binding rule, however, the Commission retains its discretion to depart
from the guidelines where appropriate").
InPhonic NAL Response at 21.
47 C.F.R. S 1.80. See, e.g., Globcom Forfeiture Order, 21 FCC Rcd at
4721-24, PP 31-38; Globcom NAL, 18 FCC Rcd at 19905, PP 31-32 ("The
Commission's Forfeiture Policy Statement and implementing rules establish
$3,000 as the base forfeiture for failing to provide required forms or
information. We find that a substantial upward adjustment is appropriate
[for failing to file periodic revenue information]."); InPhonic NAL at
13286-87, PP 25-26 ("The Commission's Forfeiture Policy Statement and
implementing rules prescribe a base forfeiture of $3,000 for failure to
file required forms or information. ... Taking into account all of the
factors enumerated in section 503(b)(2)(D) of the Act, we conclude that a
proposed forfeiture of $100,000 is warranted [for failing to register with
the Commission pursuant to section 64.1195 of the Commission's rules].").
InPhonic NAL Response at 23-24.
Id. at 25-26 (emphasis in original).
InPhonic NAL, 20 FCC Rcd at 13287, P 25.
Id. at 13287, P 26. See also id. at 13282, P 15. We therefore disagree
with InPhonic that we were "analytically wrong" in assigning a higher
forfeiture for failure to register than failure to file Telecommunications
Reporting Worksheets. As we explained in the NAL, "failure to register is
an even more egregious violation" because carriers that are not on record
operate outside of the requirements of the Act and the Commission's rules,
and can only be detected through time-intensive compliance reviews, which
delays detection of their misconduct, and imposes administrative burdens
on the Commission. Id. at 13287, P 26.
Id. at 13282, P 14.
Id. at 13283, P 16.
Id. at 13289, P 38.
See id. at 13283-84, PP 17-19 & 13288, P 27 (failure to file Worksheets);
id. at 13284, P 20 & 13288, P 28-29 (failure to contribute to the USF);
id. at 13285, P 21-22 & 13288-89, P 30-31 (failure to contribute to the
TRS Fund).
E.g., Globcom Forfeiture Order, 21 FCC Rcd at 4721, P 31.
Globcom NAL, 18 FCC Rcd at 19904, P 27 (quoting Matrix Telecom, Inc.,
Notice of Apparent Liability, 15 FCC Rcd 13544, 13547, P 8 (2000), which
cites Conquest Operator Servs. Corp., Forfeiture Order, 14 FCC Rcd 12518,
12527, P 19 (1999)).
InPhonic NAL Response at 29-30.
E.g., Roadrunner Transp., Inc., Forfeiture Order, 15 FCC Rcd 9669,
9671-72, P 8 (2000) ("While the Commission may not ... find the Licensees
liable for violations committed prior to [the NAL], it may lawfully look
at facts arising before that date in determining an appropriate forfeiture
amount."); Cate Communications Corp., Memorandum Opinion & Order, 60 Rad
Reg 2d 1386, 1388, P 7 (1986) (holding that facts prior to the statute of
limitations period may be used to place "the violations in context, thus
establishing the licensee's degree of culpability and the continuing
nature of the violations"); Eastern Broadcasting Corp., Memorandum Opinion
& Order, 11 FCC2d 193, 195, P 6 (1967) ("Earlier events may be utilized to
shed light on the true character of matters occurring within the
limitations period."). InPhonic apparently fails to "distinguish between
conduct the Commission may consider in determining a licensee liable for a
forfeiture and conduct or other matters the Commission may consider in
determining the degree of culpability." Eastern Broadcasting Corp., 11
FCC2d at 193, P 2 (1967).
InPhonic NAL Response at 31.
Id. at 31-35 (citing SBC Communications, Inc., Forfeiture Order, 17 FCC
Rcd 19923 (2002); Verizon Communications, Inc., Memorandum Opinion &
Order, 20 FCC Rcd 4244 (Enf. Bur. 2005)).
SBC Communications, 17 FCC Rcd at 19934, P 23.
InPhonic NAL Response at 35.
The statutory maximum forfeiture against InPhonic for its failure to
register, file two Worksheets, make seven USF contributions, and make one
TRS Fund contribution would be $14,575,000.
Verizon Communications, 20 FCC Rcd at 4247, P 8.
InPhonic NAL Response at 32.
Id. at 34.
Verizon Communications, 20 FCC Rcd at 4246, P 5.
InPhonic NAL Response at 35-36 (citing PTT Telekom, Notice of Apparent
Liability, 16 FCC Rcd 7477, 7479-80, PP 7-8 (2001); America's Tele-Network
Corp., Notice of Apparent Liability, 15 FCC Rcd 20903, 20906, PP 8-9
(2000) ("ATNC"); Intellicall Operator Servs., Notice of Apparent
Liability, 15 FCC Rcd 13539, 13541-42, PP 7-8 (2000); Matrix, 15 FCC Rcd
at 13546-47, PP 7-8; North American Tel. Network, LLC, Notice of Apparent
Liability, 15 FCC Rcd 14022, 14024, P 8 (2000); Conquest, 14 FCC Rcd at
12527-28, PP 19-20).
Globcom Forfeiture Order, 21 FCC Rcd at 4723-24, P 36; Globcom NAL, 18 FCC
Rcd at 19903, PP 25-26.
Globcom Forfeiture Order, 21 FCC Rcd at 4724, P 38 ("we affirm the
forfeiture calculation methodology for nonpayment of universal service
contributions and reporting violations as set forth in the Globcom NAL. We
again warn carriers that if the forfeiture methodology described herein is
not adequate to deter violations of our USF and TRS rules, our statutory
authority permits the imposition of much larger penalties and we will not
hesitate to impose them."); Globcom NAL, 18 FCC Rcd at 19903, PP 25-26.
Globcom Forfeiture Order, 21 FCC Rcd at 4724, P 37; Globcom NAL, 18 FCC
Rcd at 19903, P 26.
Globcom Forfeiture Order, 21 FCC Rcd at 4723-24, PP 36-38; Globcom NAL, 18
FCC Rcd at 19903-04, PP 25-27.
47 U.S.C. S 214(a).
47 C.F.R. S 63.18.
47 U.S.C. S 214(a).
47 U.S.C. Part 63.
See 1998 International Biennial Review Order, 14 FCC Rcd at 4915-16, 4918,
4921, PP 16, 21, 27; PCIA Forbearance Order, 13 FCC Rcd at 16883, PP
50-51.
See 1998 International Biennial Review Order, 14 FCC Rcd at 4914-16, PP
14-16; PCIA Forbearance Order, 13 FCC Rcd at 16882-83, P 50.
1998 International Biennial Review Order, 14 FCC Rcd at 4914-15, P 14;
PCIA Forbearance Order, 13 FCC Rcd at 16882, P 50.
47 C.F.R. S 63.18.
Id. S 63.18(e)(2).
1998 International Biennial Review Order, 14 FCC Rcd at 4926-27, PP 38-39
(the public interest concerns for requiring prior review of international
section 214 applications apply equally to CMRS carriers); PCIA Forbearance
Order, 13 FCC Rcd at 16881, P 46 (all CMRS carriers are required to obtain
an international section 214 authorization before providing international
service). In 2004, the Commission sought comment on whether to reconsider
the prior application requirement for certain wireless carriers, but to
date it has not rescinded or modified that requirement. Amendment of Parts
1 & 63 of the Commission's Rules, Notice of Proposed Rulemaking, 19 FCC
Rcd 4231, 4238-4241, PP 15-21 (2004).
See InPhonic LOI Response at Ex. H.
See
http://svartifoss2.fcc.gov/myibfs/quickSearch.do?sortBy=callsign&ssid=960021005&pgid=2.
InPhonic NAL Response at 17.
Philippine Long Distance Tel. Co., Order & Notice of Apparent Liability
for Forfeitures, 8 FCC Rcd 755 (1993).
Id. at P 15. The forfeitures against WorldCom and Peninsula were later
cancelled due to insufficient evidence. Philippine Long Distance Tel. Co.,
Order, 13 FCC Rcd 21520 (1998), aff'd, Order on Recons., 16 FCC Rcd 16612
(2001).
Ameritech Corp., Apparent Liability for Forfeiture, 10 FCC Rcd 10559
(1995).
Id. at 10560, P 9.
Id. Ameritech and the Commission subsequently entered into a Consent
Decree to resolve the investigation and Ameritech made a $150,000
voluntary contribution to the U.S. Treasury. Ameritech Corp., Order, 11
FCC Rcd 15474 (1996).
The current forfeiture guidelines are set forth in the Commission's 1997
Forfeiture Policy Statement, 12 FCC Rcd 17087. The forfeiture guidelines
applicable from 1991-94 are set forth in Standards for Assessing
Forfeitures, Policy Statement, 6 FCC Rcd 4695 (1991) ("1991 Forfeiture
Guidelines").
1991 Forfeiture Guidelines, 6 FCC Rcd 4695, Appendix I. The 1991
Forfeiture Guidelines provided for upward adjustments, which included an
additional percentage of the maximum forfeiture permitted under section
503 of the Act, 47 U.S.C. S 503, as follows: egregious misconduct, 50-90
percent; ability to pay/relative disincentive, 50-90 percent; intentional
violation, 50-90 percent; substantial harm, 40-70 percent; substantial
economic gain, 20-50 percent; repeated or continuous violation, variable
up to the statutory maximum per violation or per day of a continuing
violation. Id. at Appendix II.
US Tel. Assoc. v. FCC, 28 F.3d 1232 (D.C. Cir. 1994).
Forfeiture Policy Statement, 12 FCC Rcd 17087, Appendix A; 47 C.F.R. S
1.80.
47 U.S.C. S 214(a).
See, e.g., 47 C.F.R. SS 63.12, 63.18, 63.20, 63.21, 63.23; 1998
International Biennial Review Order, 14 FCC Rcd 4909; Regulation of Int'l
Common Carrier Services, Report and Order, 7 FCC Rcd 7331 (1992)
("International Resale Order").
For example, the Commission's website has a list of frequently asked
questions about section 214 applications for providers of international
telecommunications services. See
[2]http://www.fcc.gov/ib/pd/pf/214guide.html. Among the questions and
answers are the following: "Question: If I am merely reselling the
international services of another carrier, do I have to file a section 214
application? Answer: Yes, including in the case of mobile international
services. Refer to 47 CFR S 63.18(e)(2), global resale service."
See 1998 International Biennial Review Order, 14 FCC Rcd at 4915-17, PP
15-18, 4939-40, PP 72-74.
47 C.F.R. S 64.1195(a).
See InPhonic LOI Response at Ex. H (submitting gross annual revenue on its
2003-05 Annual Worksheets).
47 U.S.C. S 503(b)(2)(D).
See, e.g., DIRECTV, Notice of Apparent Liability for Forfeiture, 19 FCC
Rcd 10939 (2004) (proposing a substantial forfeiture against a company
that failed to obtain requisite international authorization from the
Commission).
47 C.F.R. S 64.1195.
See Business Options, Inc., Consent Decree, 19 FCC Rcd 2916 (2003); NOS
Communications, Inc., Affinity Network Inc. & NOSVA LP, Consent Decree,
2003 WL 22439710 (2003).
47 U.S.C. S 503(b).
47 C.F.R. S 1.80.
47 U.S.C. S 504(a).
See 47 C.F.R. S 1.1914.
47 U.S.C. SS 154(i), 214(a).
47 C.F.R. SS 63.18, 63.20.
47 U.S.C. S 503(b).
47 C.F.R. S 1.80.
See 47 C.F.R. S 1.80(f)(3).
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Federal Communications Commission FCC 07- 58
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Federal Communications Commission FCC 07-58
References
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