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Before the
Federal Communications Commission
Washington, D.C. 20554
)
In the Matter of ) File No. EB-07-SE-310
Cardinal Broadband LLC, ) NAL/Acct. No.
aka Sovereign Telecommunications, 200832100069
)
a wholly owned subsidiary of Cardinal FRN No. 0018035063
Communications, Inc. )
)
Notice of apparent Liability for forfeiture
Adopted: August 15, 2008 Released: August 15, 2008
By the Chief, Enforcement Bureau:
I. introduction
1. In this Notice of Apparent Liability for Forfeiture ("NAL"), we find
Cardinal Broadband, LLC, aka Sovereign Telecommunications, a wholly
owned subsidiary of Cardinal Communications, Inc. (hereinafter,
"Cardinal"), apparently liable for a forfeiture in the amount of
twenty-five thousand dollars ($25,000) for willful violation of
Section 1.17(a)(2) of the Commission's Rules ("Rules"). The noted
apparent violation involves Cardinal's provision of incorrect material
factual information to the Commission without a reasonable basis for
believing that the information was correct and accurate.
II. BACKGROUND
2. On July 13, 2007, the Commission received a complaint alleging that
Cardinal, an interconnected Voice over Internet Protocol ("VoIP")
service provider, was not providing E911 service in a condominium
complex called Millstone in Golden, Colorado. Specifically, the
complaint alleged that "no one in the complex can call 911 and get our
local police department." The complaint further alleged that the local
police department had visited the condominium complex to confirm the
situation and had provided residents a flyer advising them that they
did not have 911 service and that they should call the police
department's regular number in case of emergency. This complaint was
subsequently referred to the Enforcement Bureau's Spectrum Enforcement
Division ("Division") for investigation. During a follow-up phone call
on August 24, 2007, the complainant informed Division staff that he
and his neighbors had had a form of E911 service for approximately
two weeks. The complainant indicated that the 911 calls now went to a
third party, which would forward the call and the 911 caller's address
to the appropriate emergency personnel. The complainant also asserted
that conventional landline telephone service was not available at
Millstone because an affiliate company of Cardinal constructed the
condominium complex and did not permit it to be wired for conventional
landline service.
3. On September 10, 2007, the Division issued a letter of inquiry ("LOI")
to Cardinal directing it to provide certain information concerning its
provision of interconnected VoIP service. In its response, Cardinal
admitted that it "resells" telephone service but claimed that it does
not provide an "interconnected VoIP service." Specifically, Cardinal
argued that "the service Cardinal resells does not require `a
broadband connection from the user's location' ... [or] ... `internet
protocol-compatible customer premises equipment ["CPE"]'" and, thus
does not meet two of the four criteria for interconnected VoIP
service. Relying on its claim that the service it provided was not
interconnected VoIP service, Cardinal did not respond to the remainder
of the LOI.
4. During internet research on the website of Cardinal's wholly-owned
subsidiary, Broadband, the Division found marketing materials that
included the following statement: "Our state-of-the-art phone service
transports voice data using both regular phone lines and the Internet.
Getting connected to our broadband network is easy. You simply connect
your telephone to your Digital Telephone adaptor and use your phone
service like you do today."
5. On November 20, 2007, the Division directed a follow-up LOI to
Cardinal, attaching the marketing materials found on the Broadband
website. In a preliminary e-mail response, Cardinal stated that:
In my initial response I relied on the information provided to me verbally
by the employees of our subsidiary, Cardinal Broadband. Somewhere we had a
communication break down because I agree with you that anywhere a customer
must use an internet adapter to have telephone service would definitely
qualify as Interconnected VoIP.
Beyond this admission, in its response to the follow-up LOI, Cardinal
provided additional information confirming that the company is an
interconnected VoIP service provider.
III. Discussion
A. Cardinal Apparently Provided Incorrect Material Factual Information
to the Commission
6. Section 1.17 of the Rules provides, in pertinent part, that in any
investigation, no person shall:
(1) In any written or oral statement of fact, intentionally provide
material factual information that is incorrect or intentionally omit
material information that is necessary to prevent any material factual
statement that is made from being incorrect or misleading; and
(2) In any written statement of fact, provide material factual information
that is incorrect or omit material information that is necessary to
prevent any material factual statement that is made from being incorrect
or misleading without a reasonable basis for believing that any such
material factual statement is correct and not misleading.
Any person who has received a letter of inquiry from the Commission or its
staff or is otherwise the subject of a Commission investigation is subject
to this rule. In expanding the scope of Section 1.17 in 2003 to include
written statements made without a reasonable basis for believing the
statements are correct and not misleading, the Commission explained that
it intended this requirement to clarify the obligations of persons dealing
with the Commission, ensure that they exercised due diligence in preparing
written submissions, and enhance the effectiveness of the Commission's
enforcement efforts. Thus, even absent an intent to deceive, a false
statement may constitute an actionable violation of Section 1.17 of the
Rules if provided without a reasonable basis for believing that the
material factual information it contains is correct and not misleading.
7. In its response to the first LOI, Cardinal claimed that its telephone
service is not interconnected VoIP service because it does not require
a broadband connection from the user's location or Internet
protocol-compatible CPE, and thus the service fails to meet two of the
four criteria defining interconnected VoIP service. Our review of
Cardinal's marketing materials, however, indicates that a broadband
connection and, at least in some locations, a digital telephone
adapter were required for Cardinal's digital telephone service. We
therefore conclude on the basis of Cardinal's marketing materials that
it already knew it was providing interconnected VoIP service.
Moreover, as noted above, Cardinal subsequently admitted that the
service it provides is interconnected VoIP service. Cardinal's earlier
claim that the service it provides does not require a broadband
connection from the user's location or Internet protocol-compatible
CPE is, therefore, incorrect material factual information.
8. As the Commission has stated, parties must "use due diligence in
providing information that is correct and not misleading to the
Commission, including taking appropriate affirmative steps to
determine the truthfulness of what is being submitted. A failure to
exercise such reasonable diligence would mean that the party did not
have a reasonable basis for believing in the truthfulness of the
information." It does not appear that Cardinal had a reasonable basis
for believing that the information it initially provided was correct
and not misleading. We think that, had it exercised even a minimum of
diligence prior to the submission of its initial LOI response,
Cardinal would not have submitted incorrect or misleading material
factual information. Although we have insufficient information to
conclude that Cardinal's provision of incorrect material factual
information was intentional in violation of Section 1.17(a)(1) of the
Rules, we find that Cardinal apparently willfully violated Section
1.17(a)(2) by providing material factual information that was
incorrect without a reasonable basis for believing that the
information was correct and not misleading.
B. Proposed Forfeiture
9. Section 503(b) of the Act authorizes the Commission to assess a
forfeiture for each willful or repeated violation of the Act or of any
rule, regulation, or order issued by the Commission under the Act. In
exercising such authority, we are required to take into account "the
nature, circumstances, extent, and gravity of the violation and, with
respect to the violator, the degree of culpability, any history of
prior offenses, ability to pay, and such other matters as justice may
require."
10. Under the Forfeiture Policy Statement and Section 1.80 of the Rules,
the base forfeiture amount for misrepresentation or lack of candor is
the statutory maximum. Therefore, for common carriers such as
Cardinal, the statutory maximum is $130,000 for each violation or each
day of a continuing violation. The Commission has imposed the
statutory maximum penalty against common carriers for the intentional
provision of incorrect material factual information. Because we do not
have evidence that the misrepresentation was intentional and Cardinal
provided the correct information against its interest and prior to any
formal Commission action, we impose a lesser forfeiture penalty here.
Nonetheless, we find a significant forfeiture appropriate. The
Commission has stated that "[we rely] heavily on the truthfulness and
accuracy of the information provided to us. If information submitted
to us is incorrect, we cannot properly carry out our statutory
responsibilities." Cardinal's failure to exercise due diligence to
ensure that the information provided in its initial LOI response was
correct and not misleading hampered our ability to properly carry out
our statutory responsibilities and consumed scarce Commission
resources. Although Cardinal ultimately provided the correct
information, it did so only after the Bureau sent the company a
follow-up LOI directing it to provide substantially the same
information requested in the first LOI. Accordingly, considering all
of the enumerated factors and the particular circumstances of this
case, we find that a forfeiture of $25,000 is warranted here for
Cardinal's apparent willful violation of Section 1.17(a)(2).
iV. ordering clauses
11. Accordingly, IT IS ORDERED that, pursuant to Section 503(b) of the
Act, and Sections 0.111, 0.311 and 1.80 of the Rules, Cardinal
Broadband LLC IS NOTIFIED of its APPARENT LIABILITY FOR A FORFEITURE
in the amount of twenty-five thousand dollars ($25,000) for providing
incorrect material factual information to the Commission in willful
violation of Section 1.17(a)(2) of the Rules.
12. IT IS FURTHER ORDERED that, pursuant to Section 1.80 of the Rules,
within thirty days of the release date of this Notice of Apparent
Liability for Forfeiture, Cardinal SHALL PAY the full amount of the
proposed forfeiture or SHALL FILE a written statement seeking
reduction or cancellation of the proposed forfeiture.
13. Payment of the forfeiture must be made by check or similar instrument,
payable to the order of the Federal Communications Commission. The
payment must include the NAL/Account Number and FRN Number referenced
above. Payment by check or money order may be mailed to Federal
Communications Commission, P.O. Box 979088, St. Louis, MO 63197-9000.
Payment by overnight mail may be sent to U.S. Bank - Government
Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO
63101. Payment by wire transfer may be made to ABA Number 021030004,
receiving bank TREAS/NYC, and account number 27000001. For payment by
credit card, an FCC Form 159 (Remittance Advice) must be submitted.
When completing the FCC Form 159, enter the NAL/Account number in
block number 23A (call sign/other ID), and enter the letters "FORF" in
block number 24A (payment type code). Requests for full payment under
an installment plan should be sent to: Chief Financial Officer --
Financial Operations, 445 12th Street, S.W., Room 1-A625, Washington,
D.C. 20554. Please contact the Financial Operations Group Help Desk at
1-877-480-3201 or Email: ARINQUIRIES@fcc.gov with any questions
regarding payment procedures. Cardinal will also send electronic
notification on the date said payment is made to
Thomas.Fitz-Gibbon@fcc.gov and Ricardo.Durham@fcc.gov.
14. The response, if any, must be mailed to the Office of the Secretary,
Federal Communications Commission, 445 12th Street, S.W., Washington,
D.C. 20554, ATTN: Enforcement Bureau - Spectrum Enforcement Division,
and must include the NAL/Acct. No. referenced in the caption.
15. 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; 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.
16. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability
for Forfeiture shall be sent by first class mail and certified mail
return receipt requested to Ronald S. Bass, Principal Accounting
Officer, Cardinal Communications, Inc., 11101 120th Avenue, Suite 220,
Broomfield, CO 80021.
FEDERAL COMMUNICATIONS COMMISSION
Kris Anne Monteith
Chief, Enforcement Bureau
47 C.F.R. S: 1.17(a)(2). In a companion decision issued concurrently with
this NAL, we propose a forfeiture of $25,000 against Cardinal for its
willful and repeated failure to provide fully compliant E911 service in
apparent violation of Section 9.5(b) of the Rules. Cardinal Broadband LLC,
Notice of Apparent Liability and Order, DA 08-1920 (Enf. Bur., rel. August
15, 2008) ("Cardinal VoIP E911 NAL").
An interconnected VoIP service is a service that: (1) enables real-time,
two-way voice communications; (2) requires a broadband connection from the
user's location; (3) requires Internet Protocol-compatible customer
premises equipment; and (4) permits users generally to receive calls that
originate on the public switched telephone network ("PSTN") and to
terminate calls to the PSTN. See 47 C.F.R. S: 9.3; see also IP-Enabled
Services and E911 Requirements for IP-Enabled Service Providers, First
Report and Order and Notice of Proposed Rulemaking, 20 FCC Rcd 10245,
10257-58, P: 24 (2005) ("VoIP 911 Order"), aff'd sub nom. Nuvio v. FCC,
473 F.3d 302 (D.C. Cir. 2006).
Letter from Kathryn S. Berthot, Chief, Spectrum Enforcement Division,
Enforcement Bureau, Federal Communications Commission, to Cardinal
Communications, Inc. (September 10, 2007) ("LOI").
Letter from Edward A. Garneau, Chief Executive Officer, Cardinal
Communications, Inc., and Ronald S. Bass, Principal Accounting Officer,
Cardinal Communications, Inc., to Kathryn S. Berthot, Chief, Spectrum
Enforcement Division, Enforcement Bureau, Federal Communications
Commission, and Thomas D. Fitz-Gibbon, Esq., Spectrum Enforcement
Division, Enforcement Bureau, Federal Communications Commission (October
9, 2007) ("LOI Response") at 3.
Id. at 3 (emphasis in original).
Letter from Kathryn S. Berthot, Chief, Spectrum Enforcement Division,
Enforcement Bureau, Federal Communications Commission, to Ronald S. Bass,
Principal Accounting Officer, Cardinal Communications, Inc. (November 20,
2007) ("Second LOI").
Electronic Mail Message from Ronald S. Bass, Principal Accounting Officer,
Cardinal Communications, Inc., to Thomas D. Fitz-Gibbon, Esq., Spectrum
Enforcement Division, Enforcement Bureau, Federal Communications
Commission (November 30, 2007).
See Cardinal VoIP E911 NAL at P: 12.
47 C.F.R. S: 1.17.
47 C.F.R. S: 1.17(b)(4).
In the Matter of Amendment of Section 1.17 of the Commission's Rules
Concerning Truthful Statements to the Commission, Report and Order, 18 FCC
Rcd 4016, 4016-17 P: 1-2, 4021 P: 12 (2003) ("Amendment of Section 1.17"),
recon. denied, Memorandum Opinion and Order, 19 FCC Rcd 5790, further
recon. denied, Memorandum Opinion and Order, 20 FCC Rcd 1250 (2004).
See Amendment of Section 1.17, 18 FCC Rcd at 4017 P: 2 (stating that the
revision to Section 1.17 is intended to "prohibit incorrect statements or
omissions that are the result of negligence, as well as an intent to
deceive").
See P: 4, supra.
Amendment of Section 1.17, 18 FCC Rcd at 4021 P: 12.
See, e.g., Syntax-Brillian Corporation, Forfeiture Order and Notice of
Apparent Liability for Forfeiture, 23 FCC Rcd 6323 6342 P: 44 (2008)
("Syntax-Brillian Further NAL") (finding that a television manufacturer
apparently provided incorrect material information concerning its
importation and interstate shipment of non-DTV-compliant televisions
without a reasonable basis for believing that the information was correct
and not misleading, in violation of Section 1.17(a)(2) of the Rules);
Citicasters License, L.P., Memorandum Opinion and Order and Notice of
Apparent Liability for Forfeiture, 22 FCC Rcd 19324, 19338 P: 40 (2007)
("Citicasters") (forfeiture paid) (finding that a licensee's false
certification that it had not violated the Act or any Commission rules
during the preceding license term had no reasonable basis but was not made
with the intent to deceive Commission and, therefore, apparently violated
Section 1.17(a)(2) of the rules)"".
47 C.F.R. S: 1.17(a)(1),
Section 312(f)(1) of the Communications Act of 1934, as amended ("Act"),
47 U.S.C. S: 312(f)(1), which applies to violations for which forfeitures
are assessed under Section 503(b) of the Act, provides that "[t]he term
`willful', ... means the conscious and deliberate commission or omission
of such act, irrespective of any intent to violate any provision of this
Act or any rule or regulation of the Commission authorized by this Act
...." See Southern California Broadcasting Co., Memorandum Opinion and
Order, 6 FCC Rcd 4387 (1991).
We further note that Cardinal initially failed to respond to all of the
questions in the LOI, which itself is a violation of a Commission order
and subject to forfeiture. See, e.g., Hauppauge Computer Works, Inc,
Notice of Apparent Liability, 23 FCC Rcd 3684 P: 8 (Enf. Bur., Spectrum
Enf. Div. 2008) (proposing an $11,000 forfeiture for failure to provide
complete response to Letter of Inquiry) (forfeiture paid). Given that
Cardinal ultimately responded to the LOI in full and our Section 1.17
holding largely relies on the same facts, however, we will exercise our
prosecutorial discretion here and not propose an additional forfeiture for
Cardinal's incomplete initial response to our LOI.
47 U.S.C. S: 503(b).
47 U.S.C. S: 503(b)(2)(E).
The Commission's Forfeiture Policy Statement and Amendment of Section 1.80
of the Rules to Incorporate the Forfeiture Guidelines, Report and Order,
12 FCC Rcd 17087, 17113 (1997) ("Forfeiture Policy Statement"), recon.
denied, 15 FCC Rcd 303 (1999).
47 C.F.R. S: 1.80(b)(4), Note to Paragraph (b)(4): Section I. Base Amounts
for Section 503 Forfeitures.
See, e.g., SBC Communications, Inc., Notice of Apparent Liability, 16 FCC
Rcd 19091, 19120 (2001) (statutory maximum forfeiture amount proposed for
intentional violation of Section 1.17 of the Rules) (subsequent history
omitted).
As noted above, Cardinal is a reseller of Qwest analog telephone service
and therefore is subject to the forfeiture penalties applicable to common
carriers. See, e.g., Telrite Corp., Notice of Apparent Liability and
Order, 23 FCC Rcd 7231 (2008) (proposing a forfeiture for non-payment of
universal service contributions against a toll reseller as a common
carrier); Regulatory Policies Concerning Resale And Shared Use Of Common
Carrier Services And Facilities, Report and Order, 60 FCC 2d 261 at P:
101(1976) (subsequent history omitted) ("Resellers will be offering a
communications service for hire to the public just as the traditional
carriers do. The ultimate test is the nature of the offering to the
public. No one contends that resellers will make a private offer of
communications service rather than a public offering. Nor we will permit
resellers to operate in a discriminatory fashion. Accordingly, the
offering which resellers will make will satisfy the ` sine qua non ' of
common carrier status, and they will be considered as such."). See also 47
C.F.R. S: 63.01 (granting blanket Section 214 authority to domestic
carriers for the construction and operation of all new lines).
See note 34, supra.
See, e.g., Access.1 New York License Company, LLC, Notice of Apparent
Liability, 22 FCC Rcd 15205, 15209 P: 11 (Media Bur. 2007) (forfeiture
amount proposed for provision of incorrect material factual information
adjusted downward from statutory maximum amount of $32,500 to $10,000 on
basis that violation was unintentional). Compare Syntax-Brillian Further
NAL, 23 FCC Rcd at 6343 P: 46 (proposing statutory maximum forfeiture
($11,000) for apparent negligent misrepresentation based on totality of
the circumstances; company corrected the erroneous information only after
the Commission had relied on it in an earlier enforcement action);
Intelsat North America, Notice of Apparent Liability, 21 FCC Rcd 9246,
9250 P: 12 (Enf. Bur., Inv. & Hearings Div. 2006) (proposing statutory
maximum forfeiture ($11,000) for apparent negligent misrepresentation
based on the totality of the circumstances, including ability to pay and
the Commission's reliance on the incorrect information). We note that in
the Syntax-Brillian and Intelsat cases, our statutory maximum forfeiture
was significantly less than that applicable to broadcast licensees and
common carriers.
In the Matter of Amendment of Section 1.17 of the Commission's Rules
Concerning Truthful Statements to the Commission, Notice of Proposed
Rulemaking, 17 FCC Rcd 3296, 3297 P: 3 (2002).
Id. S:S: 0.111, 0.311 and 1.80.
(Continued from previous page)
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Federal Communications Commission DA 08-1921
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Federal Communications Commission DA 08-1921