[Federal Register Volume 68, Number 76 (Monday, April 21, 2003)]
[Notices]
[Pages 19539-19542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9687]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

[EB Docket No. 03-96; FCC 03-75]


NOS Communications, Inc., Affinity Network Incorporated, and 
NOSVA Limited Partnership (``NOS/ANI'' or ``the Companies''), Order To 
Show Cause and Notice of Opportunity for Hearing

AGENCY: Federal Communications Commission.

ACTION: Notice; order to show cause and opportunity for hearing.

-----------------------------------------------------------------------

SUMMARY: This document is an order for NOS/ANI to show cause and give 
the Companies the opportunity for a hearing before the Commission. The 
Commission has found that an evidentiary hearing is required to 
determine whether: (1) The Commission should revoke the operating 
authority of the Companies, (2) NOS/ANI and its principal should be 
ordered to cease and desist from any future provision of interstate 
common carrier services without the prior consent of the Commission, 
and (3) a forfeiture against

[[Page 19540]]

NOS/ANI is warranted and, if so, the amount of the forfeiture.

DATES: Effective April 21, 2003.

FOR FURTHER INFORMATION CONTACT: Donna Cyrus, Attorney Advisor for 
Telecommunications Consumers Division, Enforcement Bureau (202) 418-
7325.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
document regarding EB Docket No. 03-96, released on April 7, 2003. The 
complete text of this document is available for inspection and copying 
during normal business hours in the FCC Reference Information Center, 
445 12th Street, SW., CY-A257, Washington, DC, 20554, and also may be 
purchased from the Commission's copy contractor, Qualex International, 
445 12th SW., CY-B402, Washington, DC, 20554, (202) 863-2893. It is 
also available on the Commission's Web site at http://www.fcc.gov/Daily_Releases/Daily_Business/2003/db0407/FCC-03-68A1.pdf.

Synopsis

A. Background

    1. NOS/ANI are switchless resellers of MCI long distance service. 
Their customers are primarily small and medium-sized companies. NOS/ANI 
operates as a common carrier subject to Title II of the Communications 
Act of 1934, as amended (the ``Act''). Specifically, NOS/ANI currently 
provides or has provided resale interstate long distance 
telecommunications services to consumers in numerous states. Under the 
regulatory scheme established by the Act and the Commission's rules, 
NOS/ANI is classified as a nondominant interexchange carrier. As such, 
it is considered to have ``blanket'' authority to operate domestic 
common carrier facilities within the meaning of section 214 of the Act.
    2. It appears that NOS/ANI may have willfully or repeatedly 
violated sections 201(b) of the Act, by conducting a misleading 
marketing campaign (the ``Winback Campaign'') apparently designed to 
improperly induce former customers into authorizing switches back to 
NOS/ANI. These improper inducements apparently included the Companies 
contacting their former customers and describing ``problems'' that the 
customers' chosen carriers were allegedly having in completing the 
customers' requests to establish new service. NOS/ANI apparently 
threatened their former customers with loss of service unless they 
agreed to retain NOS/ANI services as a ``temporary measure.'' Under 
coercion, some of these customers signed Letters of Agency (``LOAs'') 
that authorized the Companies to be their preferred carriers, believing 
that doing so was necessary to keep receiving service while their new 
preferred carriers completed their switches. The representations of 
NOS/ANI to their former customers appear to be knowingly false. In 
reality, the consumers had already been switched to their new preferred 
carriers and the Companies' marketing campaign was an apparently 
misleading scheme to trick consumers into returning to the Companies' 
services.
    3. The Enforcement Bureau (the ``Bureau'') initiated this 
investigation against NOS/ANI after receiving information about the 
Companies' marketing campaign from Mr. Robert Faulkner, a former NOS/
ANI employee. Based upon the information provided by Mr. Faulkner, the 
Bureau contacted numerous consumers to investigate the allegations. All 
of the consumers who form the basis of this Order have signed 
declarations under penalty of perjury stating that NOS/ANI contacted 
them after they switched to new carriers and told them that their new 
carriers had not picked up all of their lines, and that as result, 
their lines were still billing with NOS/ANI. The consumers also state 
that they were threatened with service disruption if they did not sign 
new LOAs, which they were told were temporary, but necessary to keep 
their service running. Some of the consumers were induced into signing 
the LOAs with the assurance that it was only temporary, while others 
refused to sign.
    4. The Companies' Winback Campaign apparently began in December 
2001. As alleged by the consumers, and reflected in audiotapes, the 
conversations between consumers and NOS/ANI representatives followed a 
similar script, during which NOS/ANI apparently made numerous false 
representations to the consumers to induce them to switch their 
services back to NOS/ANI. NOS/ANI representatives also represented to 
these consumers that their lines were still billing with the Companies 
because their new carrier had not yet switched over the services. 
During the calls made in this marketing campaign, NOS/ANI 
representatives also advised the consumers that they needed to execute 
new LOAs until the consumers' new carriers picked up their lines, to 
ensure continuity of service. Consumers were incorrectly informed that 
once they signed an LOA with another company to switch their services 
from NOS/ANI, even though their lines were still being billed by NOS/
ANI, NOS/ANI did not ``have authorization to carry the traffic 
anymore.'' NOS/ANI representatives apparently told consumers that once 
they signed the Companies' allegedly standard, FCC-approved LOA, with a 
notation to ``See attached addendum,'' the consumers' service would 
continue, and all ties with NOS/ANI would be severed as soon as the new 
carriers picked up their lines.
    5. The apparent pattern of these conversations NOS/ANI had with 
former customers bears a remarkable similarity to a ``Winback Script'' 
provided by Mr. Faulkner, who attested that the Companies originated 
the script in December 2001, with top management handing down the 
script to branch managers and sales representatives in the Winback/
Quality Assurance Department. Under the script, the LOA is described as 
providing temporary authority for NOS/ANI to keep their former 
customers' service running ``til the new carrier picks them up.''

B. Discussion

    6. The consumer complaints and information from a former company 
executive all suggest a continuous telemarketing campaign, apparently 
intended for the sole purpose of tricking and threatening former 
customers into signing new LOAs to switch their services back to NOS/
ANI. This practice depicts a callous disregard for the requirements of 
the Communications Act and section 201(b) in particular. Section 201(b) 
of the Act, states, in pertinent part, that ``[a]ll charges, practices, 
classifications, and regulations for and in connection with such 
communication service, shall be just and reasonable, and any such 
charge, practice, classification, or regulation that is unjust or 
unreasonable is hereby declared to be unlawful.'' Based upon our review 
of the evidence before us, we find that NOS/ANI's apparent 
telemarketing campaign evidences apparently willful or repeated 
violations of section 201(b) of the Act. The Companies' apparent 
Winback Campaign involving misleading representations to consumers 
regarding the switch status of their services and threats of service 
disruption to scare consumers into signing LOAs appears to constitute 
an ``unjust and unreasonable practice'' within the meaning of section 
201(b).
    7. Further, there is nothing in the Act or in our rules which 
supports NOS/ANI's statements to consumers that NOS/ANI would lose 
authority to carry a consumer's lines once the consumer signs a new LOA 
with another carrier. In fact, this interpretation of our rules would 
provide absurd results, as it often is the case that a preferred 
carrier

[[Page 19541]]

change is not executed until days after the consumer has requested the 
change and the request has been submitted to the local carrier and 
executed. Under NOS/ANI's theory, every carrier would be providing 
service without authorization if it did not immediately obtain 
``transitional'' or ``temporary'' LOAs from consumers switching from 
their service to another carrier the moment those consumers requested 
the change or signed new LOAs with the other carriers. Further, 
administration in such an event would be nearly impossible, as most 
consumers do not even contact the old carrier when requesting a change 
to a different carrier. They simply give authorization to the new 
carrier. Given that carriers are only notified of lost accounts from 
the local carriers after the switches have been complete, the old 
carriers would have no way of knowing from whom to request these 
temporary LOAs.
    8. It necessarily follows, therefore, that an old carrier loses 
authorization when the carrier change has been completed, and not when 
the consumer signs a new LOA or otherwise requests a carrier change. 
That said, NOS/ANI's statements to consumers that new LOAs are needed 
because consumers' new carriers did not pick up all of their lines are 
apparently false and misleading and not based upon any reasonable 
interpretation of the Act or our rules. In the unlikely event that a 
new carrier does not pick up all of a consumer's lines, NOS/ANI would 
continue to be the authorized carrier until the lines were switched 
over notwithstanding the Companies' dubious policy against partial 
accounts.
    9. It appears that NOS/ANI engaged in an unjust and unreasonable 
marketing practice in apparent violation of the Act. It thus appears 
that the continued operation of NOS/ANI as a common carrier may not 
serve the public convenience and necessity within the meaning of 
section 214 of the Act. We therefore direct the ALJ to determine 
whether the NOS/ANI blanket section 214 authorization should be 
revoked. Further, in light of the egregious nature of NOS/ANI's 
apparently unlawful activities, we direct the ALJ to determine whether 
specific Commission authorization should be required for NOS/ANI, or 
the principal or principals of NOS/ANI, to provide any interstate 
common carrier services in the future.

C. Conclusion

    10. In light of the totality of the information now before us, an 
evidentiary hearing is warranted to determine whether the continued 
operation of NOS/ANI as a common carrier would serve the public 
convenience and necessity within the meaning of section 214 of the Act. 
Further, due to the egregious nature of NOS/ANI's apparently unlawful 
activities, NOS/ANI will be required to show cause why an order to 
cease and desist from the provision of any interstate common carrier 
services without the prior consent of the Commission should not be 
issued. In addition, consistent with our practice in revocation 
proceedings, the hearing will also address whether a forfeiture should 
be levied against NOS/ANI for willful and repeated violation of section 
201(b) of the Act.

Ordering Clauses

    11. Pursuant to sections 4(i) and 214 of the Communications Act of 
1934, as amended, 47 U.S.C. 154(i) and 214, the principal or principals 
of NOS Communications, Inc., Affinity Network Incorporated, and NOSVA 
Limited Partnership are directed to show cause why the operating 
authority bestowed on NOS Communications, Inc., Affinity Network 
Incorporated, and NOSVA Limited Partnership pursuant to section 214 of 
the Communications Act of 1934, as amended, should not be revoked.
    12. Pursuant to section 312(b) of the Communications Act of 1934, 
as amended, 47 U.S.C. 312(b), the principal or principals of NOS 
Communications, Inc., Affinity Network Incorporated, and NOSVA Limited 
Partnership are directed to show cause why an order directing them to 
cease and desist from the provision of any interstate common carrier 
services without the prior consent of the Commission should not be 
issued.
    13. The hearing shall be held at a time and location to be 
specified by the Chief Administrative Law Judge in a subsequent order. 
The ALJ shall apply the conclusions of law set forth in this Order to 
the findings that he makes in that hearing, upon the following issues:
    (a) To determine whether NOS Communications, Inc., Affinity Network 
Incorporated, and NOSVA Limited Partnership engaged in a misleading and 
continuous telemarketing campaign in apparent willful and repeated 
violation of section 201(b) of the Act's prohibition against unjust and 
unreasonable practices;
    (b) To determine, in light of all the foregoing, whether NOS 
Communications, Inc., Affinity Network Incorporated, and NOSVA Limited 
Partnership authorization pursuant to section 214 of the Act to operate 
as common carriers should be revoked;
    (c) To determine whether, in light of all the foregoing, NOS 
Communications, Inc., Affinity Network Incorporated, and NOSVA Limited 
Partnership and/or their principals should be ordered to cease and 
desist from the provision of any interstate common carrier services 
without the prior consent of the Commission.
    14. The Chief, Enforcement Bureau, shall be a party to the 
designated hearing. Pursuant to section 312(d) of the Communications 
Act of 1934, as amended, both the burden of proceeding and the burden 
of proof shall be upon the Enforcement Bureau as to issues (a) through 
(c) inclusive.
    15. To avail themselves of the opportunity to be heard, the 
principal or principals of NOS Communications, Inc., Affinity Network 
Incorporated, and NOSVA Limited Partnership, pursuant to section 
1.91(c) of the Commission's rules, shall file with the Commission 
within 30 days of the mailing of this Order to Show Cause and Notice of 
Opportunity for Hearing a written appearance stating that a principal 
or other legal representative from NOS Communications, Inc., Affinity 
Network Incorporated, and NOSVA Limited Partnership will appear at the 
hearing and present evidence on the matters specified in the Show Cause 
Order. If NOS Communications, Inc., Affinity Network Incorporated, and 
NOSVA Limited Partnership fail to file a written appearance within the 
time specified, NOS Communications, Inc., Affinity Network 
Incorporated, and NOSVA Limited Partnership's right to a hearing shall 
be deemed to be waived. In the event that the right to a hearing is 
waived, the Presiding Judge, or the Chief, Administrative Law Judge if 
no Presiding Judge has been designated, shall terminate the hearing 
proceeding as to that entity and certify this case to the Commission in 
the regular course of business, and an appropriate order shall be 
entered.
    16. If it is determined that NOS Communications, Inc., Affinity 
Network Incorporated, and NOSVA Limited Partnership have willfully or 
repeatedly violated any provision of the Act or the Commission's rules 
cited in this Order to Show Cause and Notice of Opportunity for 
Hearing, it shall be further determined whether an Order for Forfeiture 
shall be issued pursuant to section 503(b) of the Communications Act of 
1934, as amended, for the maximum forfeiture amount of $120,000 per day 
for more than ten (10) days up to the statutory maximum of $1,200,000.
    17. This document constitutes a notice of opportunity for hearing 
pursuant to section 503(b)(3)(A) of the Communications Act of 1934, as 
amended, 47 U.S.C. 503(b)(A), for the

[[Page 19542]]

potential forfeiture liability outlined above.
    18. A copy of this order to show cause and notice of opportunity 
for hearing shall be sent by certified mail, return receipt requested, 
to NOS Communications, Inc., Affinity Network Incorporated, and NOSVA 
Limited Partnership at:

NOS Communications, Inc., 6110 Executive Boulevard, Ste. 508, 
Rockville, MD 20852.
Affinity Network, Inc., 4380 Boulder Highway, Las Vegas, NV 89121.
NOSVA Limited Partnership, 6701 Democracy Boulevard, Ste. 811, 
Bethesda, MD 20817.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 03-9687 Filed 4-18-03; 8:45 am]
BILLING CODE 6712-01-P