**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of ) File No. EB --00-IH-0055

)

Intellicall Operator Services ) NAL/Acct. No. 32080023

## 

## NOTICE OF APPARENT LIABILITY FOR FORFEITURE

**Adopted: July 21, 2000 Released: July 27, 2000**

By the Commission:

## I. INTRODUCTION

1\. In this Notice of Apparent Liability for Forfeiture (\"NAL\"), we
find that Intellicall Operator Services ("Intellicall") has apparently
violated Section 254(d) of the Communications Act of 1934, as amended
(the "Act"), and Section 54.706 of the Commission's rules by willfully
and repeatedly failing to make required contributions to universal
service support programs. [^1] Based on our review of the facts and
circumstances in this case, we conclude that Intellicall is apparently
liable for a forfeiture in the amount of \$198,000.

# 

# II. BACKGROUND

### 

2\. In 1996, Congress amended the Act to require that:

> Every telecommunications carrier that provides interstate
> telecommunications services shall contribute, on an equitable and
> nondiscriminatory basis, to the specific, predictable, and sufficient
> mechanisms established by the Commission to preserve and advance
> universal service.[^2]

In implementing Section 254, the Commission authorized the Universal
Service Administrative Company ("USAC") to administer universal service
support mechanisms and to perform billing and collection functions.[^3]
As to these matters, the Commission directed USAC to distribute, receive
and process the Universal Service Worksheet (now the Telecommunications
Reporting Worksheet) ("Worksheet"), which is used to report certain
categories of revenue for the purpose of calculating a carrier's
universal service contribution, and to adjust carriers' contributions in
accordance with factors established by the Commission.[^4] In addition,
the Commission gave USAC the authority to bill carriers monthly,
starting in February 1998 for their contributions.[^5] To foster
compliance with universal service requirements, the Commission's rules
provide that a carrier's failure "to submit the required . . .
contributions may subject the contributor to the enforcement provisions
of the Act and any other applicable law."[^6]

3\. Intellicall, an interstate telecommunications service provider, does
not appear to dispute its liability for universal service contributions
and has paid a portion of the amount it owes for universal service.
USAC's records reflect that Intellicall has made over twenty payments to
USAC in the last two years totaling more than \$3 million. During that
period, however, Intellicall has missed several payments, underpaid its
monthly invoices and failed to cure its arrearages. As a result,
Intellicall owed over \$2 million in universal service payments as of
April 17, 2000.

4\. In February 2000, the Enforcement Bureau sent a letter to
Intellicall which explained that Intellicall was the subject of a
potential enforcement action. [^7] In its response, Intellicall states
that it is in "complete understanding of the potential enforcement
action for failure to pay outstanding balances due..."[^8] In the same
letter, Intellicall indicates a commitment to "remedy the current
situation." Since it received the Enforcement Bureau letter, Intellicall
contacted USAC and presented USAC with a payment plan designed to cure
its current arrearage in twenty-one months. Intellicall committed to pay
each month an amount equal to its current monthly obligation and an
additional \$75,000 toward the amount it is in arrears. Intellicall
began making payments on this plan in April 2000. Intellicall made
payments for April, May, and June.

**III. DISCUSSION**

5\. We conclude that Intellicall is apparently liable for forfeiture for
willful and repeated violations of Section 254 of the Act and the
Commission's rules governing universal service contributions. Since
early 1998, Intellicall has paid only a portion of its universal service
obligations. As noted above, Section 254(d) of the Act and Sections
54.706 and 54.709 of the Commission's rules require that interstate
telecommunications carriers make universal service contributions in the
amount calculated by USAC. [^9] We find that Intellicall's failure to
make the required contributions is both willful and repeated. The term
"willful" means that the violator knew that it was taking the action in
question, irrespective of any intent to violate the Commission's
rules,[^10] and "repeated" means more than once.[^11] Considering the
record before us, it appears that Intellicall was aware of its
obligation to contribute to universal service programs, yet knowingly
failed to meet that obligation. Intellicall apparently received USAC's
invoices, but failed to make the required universal service payments.

6\. Section 503(b)(1)(B) of the Act provides that any person who
willfully or repeatedly fails to comply with the Act or the Commission's
rules shall be liable for a forfeiture penalty.[^12] Section
503(b)(2)(B) of the Act authorizes the Commission to assess a forfeiture
of up to \$110,000 for each violation, or each day of a continuing
violation, up to a statutory maximum of \$1,100,000 for a single act or
failure to act.[^13] In assessing a forfeiture, we take into account the
statutory factors set forth in Section 503(b)(2)(D) of the Act, which
include the nature, circumstances, extent and gravity of the violation,
and, with respect to the violator, the degree of culpability, any
history of prior offenses, ability to pay, and such other matters as
justice may require.[^14]

7\. Although Intellicall's delinquency has continued since early 1998,
we limit the scope of this NAL to Intellicall's apparent failures to
make the contributions assessed in USAC invoices for January and
February 2000, each of which sought a monthly contribution of \$288,613
for the universal service programs. Although, in the past, we have
sanctioned carriers for failure to make the required universal service
contributions for only one month of a continuing violation, we expressly
stated that:

> \[I\]n light of the accumulating record of non-compliance, we are
> prepared to impose substantially greater forfeitures in the future. .
> . . \[O\]ur future notices likely will cover greater periods of
> non-payment than a single month . . . \[and\] will be based on some
> variant of \[our\] formula, which includes, as a component of the
> forfeiture, one half of the unpaid contribution amount for the period
> in question.[^15]

8\. Taking into account the factors listed in Section 503(b)(2)(D) of
the Act,[^16] as well as Commission precedent, we find Intellicall
apparently liable for a forfeiture of \$198,000. This forfeiture
consists of three components. First, we have assessed a base figure of
\$40,000 as a general fixed penalty of \$20,000 for each of the two
violations at issue.[^17] As we noted in the [Conquest Forfeiture
Order]{.underline}, it is necessary to set a base figure designed to
deter delinquencies regardless of their amount.[^18] Second, consistent
with the [ConQuest Forfeiture Order]{.underline}, we have added to the
base amount of \$40,000 an amount equal to one half of the unpaid
\$577,226 universal service contributions for the months of January and
February 2000, or an addition of \$288,613.[^19] We have imposed this
component of the forfeiture to illustrate 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 contributions it fails
to make.[^20] Finally, for the reasons explained below, we have applied
a downward adjustment of \$130,613, approximately 40% of the sum of the
first two components.

9\. The Act and the Commission's rules provide a framework for adjusting
the forfeiture amounts imposed depending on the facts and circumstances
of the particular case.[^21] Although Intellicall has for more than two
years failed to pay in full outstanding balances when due, we note that
Intellicall has acknowledged its liability for the amounts assessed, and
has made significant efforts to satisfy its universal service
obligations. As noted, Intellicall made over twenty payments toward its
universal service obligations, which totaled approximately \$3 million.
Further, Intellicall has now submitted a plan for curing its arrearage.
We consider Intellicall's significant efforts to pay to be a factor
warranting a downward adjustment of the amount of the forfeiture. We
also consider its submission of a plan to cure its outstanding balance
and commencement of payments on that plan to be a factor warranting a
downward adjustment.

10\. Although Intellicall's failure to make payment in other months
represents independent violations of the Act and our rules, we are not
imposing any sanction for these apparent violations at this time.
Nevertheless, we note that these violations could form the basis for
additional notices of apparent liability.[^22] If Intellicall continues
to violate our universal service rules, such violations could result in
future NALs proposing substantially greater forfeitures, or could result
in issuance of a show cause order to revoke Intellicall's operating
authority.[^23]

**IV. ORDERING CLAUSES**

11\. Accordingly, IT IS ORDERED THAT, pursuant to Section 503(b) of the
Act,[^24] and Section 1.80 of the Commission's rules,[^25] Intellicall
Operator Services is hereby NOTIFIED of its APPARENT LIABILITY FOR A
FORFEITURE in the amount of one hundred ninety eight thousand dollars
(\$198,000) for violating the Act and the Commission\'s rules requiring
regular contributions for universal service.

12\. IT IS FURTHER ORDERED THAT, pursuant to Section 1.80 of the
Commission\'s rules,[^26] within thirty days of this NOTICE OF APPARENT
LIABILITY Intellicall Operator Services 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 may be made by credit card through the
Commission\'s Credit and Debt Management Center at (202) 418-1995 or by
mailing a check or similar instrument, payable to the order of the
Federal Communications Commission, to the Forfeiture Collection Section,
Finance Branch, Federal Communications Commission, P.O. Box 73482,
Chicago, Illinois 60673-7482. The payment should note the NAL/Acct. No.
referenced above.

14\. The response, if any, must be mailed to the Federal Communications
Commission, Enforcement Bureau, Investigations and Hearings Division,
445 12th Street, S.W., Washington, D.C. 20554 and MUST INCLUDE THE
NAL/Acct. No. referenced above.

15\. The Commission will not consider reducing or canceling a forfeiture
in response to a claim of inability to pay unless the respondent
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 respondent'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\. Requests for payment of the full amount of this Notice of Apparent
Liability under an installment plan should be sent to: Chief, Credit and
Debt Management Center, 445 12th Street, S.W., Washington, D.C.
20554.[^27]

17\. IT IS FURTHER ORDERED THAT a copy of this NOTICE OF APPARENT
LIABILITY shall be sent by Certified Mail Return Receipt Requested to
Intellicall Operator Services, attn: George M. Trevino, Corporate
Controller, 16200 Addison Road, Suite 100, Addison, TX 75001.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

[^1]: 47 U.S.C. § 254(d); 47 C.F.R. § 54.706.

[^2]: 47 U.S.C. § 254(d).

[^3]: *See* [Amendment of Parts 54 and 69 -- Changes to Board of NECA,
    Inc.]{.underline}, 12 FCC Rcd 18400, 18415 (1997) ("[NECA Changes
    Order]{.underline}"); 47 C.F.R. § 54.702(b).

[^4]: *See* [NECA Changes Order]{.underline}, 12 FCC Rcd at 18424-25; 47
    C.F.R. §§ 54.709(a)(1-3), 54.711(a).

[^5]: *See* [Amendment of Part 54 -- Universal Service]{.underline}, 12
    FCC Rcd 22423, 22425 (1997); 47 C.F.R. §§ 54.709(a)(4), 54.709(d).

[^6]: 47 C.F.R. § 54.713.

[^7]: Letter from David H. Solomon, Chief, Enforcement Bureau, to
    Intellicall Operator Services dated February 16, 2000.

[^8]: Letter from George M. Trevino, Corporate Controller, to James W.
    Shook, Investigations and Hearings Division, Enforcement Bureau
    dated March 10, 2000.

[^9]: 47 U.S.C. 254(d); 47 C.F.R. §§ 54.706, 54.709.

[^10]: *See* [Jerry Szoka]{.underline}, 14 FCC Rcd 9857, 9865 (1999);
    [Southern California Broadcasting Co.]{.underline}, 6 FCC Rcd 4387
    (1991).

[^11]: *See* [Hale Broadcasting Corp.]{.underline}, 79 FCC 2d 169, 171
    (1980).

[^12]: 47 U.S.C. § 503(b)(1)(B); 47 C.F.R. § 1.80(a)(2).

[^13]: 47 U.S.C. § 503(b)(2)(B); 47 C.F.R. § 1.80(b)(2).

[^14]: 47 U.S.C. § 503(b)(2)(D). *See also* [The Commission's Forfeiture
    Policy Statement and Amendment of Section 1.80 of the Rules to
    Incorporate the Forfeiture Guidelines]{.underline}, 12 FCC Rcd
    17087, 17100-01 (1997), *recon. denied*, 15 FCC Rcd 303 (1999)
    ("[Forfeiture Guidelines]{.underline}").

[^15]: [ConQuest Operator Services Corp.]{.underline}, 14 FCC Rcd 12518,
    12528 (1999) ("[ConQuest Forfeiture Order]{.underline}").

[^16]: 47 U.S.C. § 503(b)(2)(D).

[^17]: *See* [ConQuest Forfeiture Order]{.underline}, 14 FCC Rcd at
    12527 (The Commission determined that \$20,000 should be the general
    penalty for failure to pay the assessed universal service
    contribution in a timely manner).

[^18]: *See* [id.]{.underline}

[^19]: [Id.]{.underline} *See also* [Operator Communications,
    Inc.]{.underline}, 13 FCC Rcd 16082, 16087 (1998)

[^20]: *See* [Conquest Forfeiture Order]{.underline}, 14 FCC Rcd at
    12,527, ¶ 19.

[^21]: *See* 1.80(b)(4) of the Commission's rules and accompanying note,
    47 C.F.R. 1.80(b)(4). *See also* [Forfeiture
    Guidelines]{.underline}, 12 FCC Rcd at 17100-01 ("\[T\]he adjustment
    factors we evaluate in considering the actions of the violator
    include egregious misconduct, ability or inability to pay,
    intentional violations, prior violation of the same or other
    requirements, good faith or voluntary disclosure, and history of
    overall compliance. 47 U.S.C. § 503(b)(2)(D). In sum, although the
    base amount is the starting point in assessing a forfeiture, the
    forfeiture may be decreased below the base amount or increased to
    the statutory maximum when the adjustment criteria are considered
    based on the facts of the case").

[^22]: [ConQuest Forfeiture Order]{.underline}, 14 FCC Rcd at 12527.

[^23]: *See* [CCN, Inc. *et al*.]{.underline}, 12 FCC Rcd 8547 (1997)
    (the "Fletcher Companies").

[^24]: 47 U.S.C. § 503.

[^25]: 47 C.F.R. § 1.80.

[^26]: [Id.]{.underline}

[^27]: *See* 47 C.F.R. § 1.1914.