10 FCC Red No. 21 Federal Communications Commission Record DA 95-1834
Before the
Federal Communications Commission 
Washington, D.C. 20554
In the Matter of
File No. ENF 95-14INTERSTATE SAVINGS,
INC. d/b/a
ISI NAL/Acct. No. 516EF0004
TELECOMMUNICATIONS
Apparent Liability for Forfeiture
NOTICE OF APPARENT LIABILITY FOR FORFEITURE 
Adopted: August 18,1995; Released: August 18, 1995
By the Chief, Common Carrier Bureau:
I. INTRODUCTION
1. By this Notice of Apparent Liability for Forfeiture 
("NAL"), we initiate enforcement action against Interstate 
Savings, Inc. d/b/a ISI Telecommunications ("ISI"). 1 For 
the reasons discussed below, we find that ISI willfully 
violated Commission rules and orders2 by changing the 
primary interexchange carrier ("PIC") designated by 
Knicely & Cotorceanu, P.C. ("K&C") of Williamsburg, Vir 
ginia, without K&C's authorization. Based upon our review 
of the facts and circumstances surrounding the violations, 
we find that ISI is apparently liable for a forfeiture in the 
amount of forty thousand dollars ($40,000).
II. BACKGROUND
2. In its Allocation Order and subsequent Reconsideration 
Order and Waiver Order.3 the Commission set forth rules 
and procedures for implementing equal access4 and cus 
tomer presubscription* to an interexchange carrier
("IXC").6 The Commission's original allocation plan re 
quired IXCs to have on file a letter of agency ("LOA") 
signed by the customer before submitting PIC change or 
ders to the local exchange carrier ("LEC") on behalf of the 
customer.7 After considering claims by certain IXCs that 
this requirement would stifle competition because consum 
ers would not be inclined to execute the LOAs even 
though they agreed to change their PIC, the Commission 
later modified the requirement to allow IXCs to initiate 
PIC changes if they had "instituted steps to obtain signed 
LOAs." 8 In 1992, the Commission again revised its rules 
because it continued to receive complaints about 
unauthorized PIC changes.9 Specifically, while the Commis 
sion recognized the benefits of permitting a 
telephone-based industry to rely on telemarketing to solicit 
new business, it required IXCs to institute one of the 
following four confirmation procedures before submitting 
PIC change orders generated by telemarketing: (1) obtain 
the consumer's written authorization; (2) obtain the con 
sumer's electronic authorization by use of an 800 number; 
(3) have the consumer's oral authorization verified by an 
independent third party; or (4) send an information pack 
age, including a prepaid, returnable postcard, within three 
days of the consumer's request for a PIC change, and wait 
14 days before submitting the consumer's order to the 
LEC, so that the consumer has sufficient time to return the 
postcard denying, cancelling or confirming the change or 
der. 10 Hence, the Commission's rules and orders require 
that IXCs either obtain a signed LOA or, in the case of 
telemarketing solicitations, complete one of the four 
telemarketing verification procedures before submitting 
PIC change requests to LECs on behalf of consumers.
3. Because of its continued concern over unauthorized 
PIC changes, the Commission recently prescribed the gen 
eral form and content of the LOA used to authorize a 
change in a customer's primary long distance carrier. 11 The 
Commission's recent rules prohibit the potentially decep 
tive or confusing practice of combining the LOA with 
promotional materials in the same document.12 The rules 
also prescribe the minimum information required to be 
included in the LOA and require that the LOA be written
1 Interstate Savings, Inc. is a Pennsylvania corporation regis 
tered in the District of Columbia. Its business address is 1015 
18th Street, N.W. - Suite 505, Washington, D.C. 20036. Matthew 
Freedman is President and Director.
2 47 C.F.R. § 64.1100; Investigation of Access and Divestiture 
Related Tariffs, CC Docket 83-1145, Phase 1, 101 FCC 2d 911 
(1985) (Allocation Order); recon. denied, 102 FCC 2d 503 
(l9&5)(Reconsideration Order); Investigation of Access and 
Divestiture Related Tariffs, CC Docket 83-1145, Phase 1, 101 
FCC 2d 935 (1985) (Waiver Order).
3 See supra proceedings cited at note 2.
4 Equal access for interexchange carriers ("IXCs") is that 
which is equal in type, quality and price to the access to local 
exchange facilities provided to AT&T and its affiliates. United 
States v. American Tel. & Tel., 552 F. Supp. 131, 227 (D.D.C. 
1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 
(1983) (Modification of Final Judgement or "MFJ"). "Equal ac 
cess allows end users to access facilities of a designated [IXC] by 
dialing T only." Allocation Order, 101 FCC 2d at 911. 
5 Presubscription is the process by which each customer selects 
one primary interexchange carrier ("PIC"), from among several 
available carriers, for the customer's phone line(s). Allocation
Order, 101 FCC 2d at 911, 928. Thus, when a customer dials 
"1", only the customer accesses the primary IXC's services. An 
end user can also access other IXCs by dialing a five-digit access 
code (10XXX). Id. at 911.
6 Pursuant to the MFJ, the Bell Operating Companies (BOCs) 
were ordered to provide, where technically feasible, equal access 
to their customers by September 1986. Id.
' An LOA is a document, signed by the customer, which states 
that the customer has selected a particular carrier as that cus 
tomer's primary long distance carrier. Allocation Order, 101 
FCC 2d at 929.
8 Waiver Order, 101 FCC 2d at 942.
9 Policies and Rules Concerning Changing Long Distance Car 
riers , 7 FCC Red 1038-39 (1992) (PIC Change Order).
10 See 47 C.F.R. § 64.1100; PIC Change Order, 7 FCC Red at 
1045.
11 Policies and Rules Concerning Unauthorized Changes of 
Consumers' Long Distance Carriers, FCC 95-225 (June 14, 1995) 
(LOA Order).
12 See LOA Order, FCC 95-225 at para. 27. Checks that serve 
as an LOA are excepted from the "separate or severable" re 
quirement so long as the check contains certain information
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DA 95-1834 Federal Communications Commission Record 10 FCC Red No. 21
in clear and unambiguous language. 13 The rules prohibit 
all "negative option" LOAs14 and require that LOAs and 
accompanying promotional materials contain complete 
translations if they employ more than one language. 15
4. On March 15, 1995, the Commission received a writ 
ten complaint from James J. Knicely of K&C alleging that 
ISI had converted K&C's prescribed long distance service 
provider from AT&T Corporation ("AT&T") to ISI without 
K&C's authorization.16 The complaint contains a sworn 
affidavit from Marney S. Haven, office manager of K&C, in 
which Haven states, among other things, that the "ISI 
Savings Authorization" ("authorization form") forwarded 
to her by ISI as verification of K&C's order to switch 
carriers bears a forged signature. 17
5. Haven states that she was first contacted by Lee J. 
Gladney, a sales or marketing agent of ISI, on November 3, 
1994 is On or about November 28, 1994, at Gladney's 
request, Haven sent Gladney one of K&C's billing state 
ments to enable Gladney to generate a proposal to provide 
long distance service. Gladney forwarded the proposal to 
Haven under a transmittal letter dated November 28, 
1994. 19 Haven informed Gladney that she would pass the 
long distance service proposal on to the partners of K&C 
for their consideration.20
6. According to Haven, she had no further contact with 
Gladney until January 31, 1995, when Haven received a 
call from Gladney stating that his supervisor had autho 
rized him to offer K&C a rate of $.12 per minute on long 
distance calls.21 Haven told Gladney she would relay the 
information to the partners of the firm.22 On February 15, 
1995 Haven wrote a letter to each long distance company 
that had submitted a service proposal advising that no 
decision on their proposals had been made.23
7. On February 22, 1995, Haven telephoned an AT&T 
operator to inquire about AT&T's international telephone 
service rates.24 Haven was informed by the operator that 
AT&T was no longer the prescribed long distance carrier 
for K&C.25 Haven then contacted Bell Atlantic-Virginia 
("Bell Atlantic") and was advised that K&C's long distance 
carrier had been changed to WilTel, Inc. ("WilTel"). When 
Haven telephoned WilTel, she learned that ISI, a reseller of 
WilTel's long distance service, had submitted the PIC 
change request to Bell Atlantic that had led to ISI's des 
ignation as K&C's long distance carrier.26 Haven then 
called Kerry Holland of ISI about the service change.2 ' 
Holland transmitted to Haven by facsimile a copy of an 
LOA allegedly signed by Haven as verification of a K&C
order authorizing the carrier change.28 The LOA 
purportedly bearing Haven's signature is attached to Ha 
ven's affidavit as Attachment D.
8. Haven maintains that she had never seen the au 
thorization form before Holland sent it to her on February 
22, 1995, and that the signature in the customer signature 
box is not hers.29 Haven further states that she never spoke 
to Gladney on January 26, 1995, the date the document 
was allegedly signed and that the rate information con 
tained in the LOA did not reflect ISI's January 31, 1995 
proposal.30
III. DISCUSSION
9. We have carefully evaluated the information submitted 
in connection with K&C's informal complaint and con 
clude that ISI is apparently liable for forfeiture for willful 
violation of the Commission's rules and PIC change re 
quirements. We find ISI's apparent actions particularly 
egregious. It appears that on or about February 6, 1995, ISI 
submitted a PIC change request to Bell Atlantic, based on 
an apparently forged LOA. which resulted in the conver 
sion of K&C's telephone service from AT&T to ISI. The 
statements and information provided by K&C leave virtu 
ally no doubt that the LOA was forged and that ISI lacked 
the requisite authorization to request a PIC change to 
K&C's long distance service. There is no similarity between 
the signature on Haven's sworn affidavit and her purported 
signature on the LOA form that ISI used as the basis for 
the PIC change submitted to Bell Atlantic. Under these 
circumstances, we conclude that ISI's apparent actions 
were in willful violation of the Commission's PIC change 
rules and orders and that a substantial forfeiture penalty is 
appropriate.
10. Section 503(b)(2)(B) of the Communications Act au 
thorizes the Commission to assess a forfeiture of up to one 
hundred thousand dollars ($100,000) for each violation or 
each day of a continuing violation up to a statutory maxi 
mum of one million dollars ($1,000,000) for a single act or 
failure to act.31 In exercising such authority, the Commis 
sion is required to take into account "the nature, cir 
cumstances, extent, and gravity of the violation and, with 
respect to the violator, the degree of culpability, any his 
tory of prior offenses, ability to pay, and such other matters 
as justice may require.32 For purposes of determining an 
appropriate forfeiture penalty in this case, we regard the 
conversion of K&C's telephone line as a single violation.
clearly indicating that endorsement of the check authorizes a 
PIC change and otherwise complies with the Commission's 
LOA requirements. Id. at para. 25.
13 See id. at para. 10.
14 See id. at para. 11. "Negative option" LOAs require consum 
ers to take some action to avoid having their long distance 
telephone service changed.
15 See id. at para. 40.
16 Knicely & Cotorceanu, Informal Complaint File No. 
95-11136.
17 Id. at Affidavit of Marney S. Haven (Haven Affidavit).
18 Haven Affidavit at 1.19 Id.
20 Id.
21 Id. at 2.22 Id.
23 Id.
24 Id.
25 Id.
26 Although not specifically mentioned in Haven's affidavit, 
K&C had other telephone lines designating TeleFiber Net as the 
long distance provider and these lines were also apparently 
switched to ISI on February 6, 1995. See Letter from Wayne A. 
Mill to Connie Theirse, dated July 12, 1995.
27 Haven Affidavit at 2.28 Id.
29 Id.
30 Id. at 2-3. Haven also points out that the box on the form 
for accounting codes is checked "no" and that K&C always uses 
accounting codes in order to bill clients. Id. at 3.
31 47 U.S.C. § 503(b)(2)(B).
32 Id. § 503(b)(2)(D).
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10 FCC Red No. 21 Federal Communications Commission Record DA 95-1834
After weighing the circumstances surrounding the viola 
tion, we find that ISI is apparently liable for a forfeiture of 
forty thousand dollars ($40,000) for the unauthorized con 
version of the K&C line. ISI will have the opportunity to 
submit evidence and arguments in response to this NAL to 
show that no forfeiture should be imposed or that some 
lesser amount should be assessed.33 In this regard, we note 
that the Commission has previously held that a licensee's 
gross revenues are the best indicator of its ability to pay a 
forfeiture and that use of gross revenues to determine a 
party's ability to pay is reasonable, appropriate, and a 
useful yardstick in helping to analyze a company's finan 
cial condition for forfeiture purposes."34 We will give full 
consideration to any financial information provided by ISI 
before assessing a final forfeiture amount.
FEDERAL COMMUNICATIONS COMMISSION
Kathleen M.H. Wallman 
Chief, Common Carrier Bureau
IV. CONCLUSIONS AND ORDERING CLAUSES
11. We have carefully reviewed the information submit 
ted in connection with Knicely & Cotorceanu. P.C.'s infor 
mal complaint and conclude that on or about February 6, 
1995, ISI apparently converted or caused a local exchange 
carrier to convert K&C's telephone line without K&C's 
authorization through the use of an apparently forged 
LOA. We further conclude that ISI thereby willfully vio 
lated Commission rules governing primary interexchange 
carrier conversions, and that its conduct warrants a for 
feiture in the amount of forty thousand dollars ($40,000).
12. Accordingly, IT IS ORDERED, pursuant to Section 
503(b) of Communications Act of 1934, as amended, 47 
U.S.C. § 503(b), and Section 1.80 of the Commission's 
rules, 47 C.F.R. § 1.80, that Interstate Savings, Inc. d/b/a 
ISI Telecommunications IS HEREBY NOTIFIED of an 
Apparent Liability for Forfeiture in the amount of forty 
thousand dollars ($40,000) for its willful violation of the 
Commission's PIC change rules and orders, 47 C.F.R. § 
64.1100; PIC Change Order, 7 FCC Red 1038 (1992): Al 
location Order, 101 FCC 2d 911 (1985); Waiver Order, 101 
FCC 2d 935 (1985).
13. IT IS FURTHER ORDERED, pursuant to Section 
1.80 of the Commission's rules. 47 C.F.R. § 1.80, that 
within thirty days of the release of this Notice, Interstate 
Savings, Inc. d/b/a ISI Telecommunications SHALL PAY 
the full amount of the proposed forfeiture35 OR SHALL 
FILE a response showing why the proposed forfeiture 
should not be imposed or should be reduced.
14. IT IS FURTHER ORDERED that a copy of this 
Notice of Apparent Liability for Forfeiture SHALL BE 
SENT by certified mail to Matthew Freedman, President of 
Interstate Savings, Inc. d/b/a ISI Telecommunications 1015 
18th Street, N.W. - Suite 505, Washington, D.C. 20036.
33 See 47 U.S.C. § 503(b)(4)(C); 47 C.F.R. § 1.80(f)(3).
34 PJB Communications of Virginia, 7 FCC Red 2088, 2089 
(1992) (finding that forfeitures of $5,000 and $3.000 assessed 
against two jointly owned and operated paging companies were 
not excessive because the total forfeiture amount ($8,000) repre 
sented approximately 2.02 percent of the companies' combined 
gross revenues of $395,469). See also David L. Hollingsworth 
d/b/a Worland Services, 7 FCC Red 6640 (Com. Car. Bur. 1992) 
($6,000 forfeiture representing approximately 1.21 percent of 
licensee's 1991 gross revenues and approximately 1.34 percent of 
projected 1992 gross revenues not found to be excessive); Afton 
Communications Corp., 7 FCC Red 6741 (Com. Car. Bur. 1992)
($6,000 forfeiture representing approximately 3.91 percent of 
1990 gross revenues and 2.75 percent of projected 1992 gross 
revenues not found to be excessive).
35 The forfeiture amount must be paid by check or money 
order drawn to the order of the Federal Communications Com 
mission. Reference should be made on Interstate Savings, Inc. 
d/b/a ISI Telecommunications check or money order to 
"NAUAcct. No. 516EF0004." Such remittances must be mailed 
to Forfeiture Collection Section, Finance Branch, Federal Com 
munications Commission, P.O. Box. 73482, Chicago, Illinois 
60673-7482.
10879