Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of )

) File No. EB-00-TC-053

Verizon Communications ) NAL/Acct. No. X3217-010 )

**ORDER**

#### Adopted: October 16, 2000 Released: October 17, 2000

#### 

#### By the Chief, Enforcement Bureau:

1.  In this Order, we adopt a Consent Decree terminating an
    investigation into possible violations of section 64.1120(a)(1)(ii)
    of the Commission's rules by Bell Atlantic Communications, Inc.
    d/b/a Verizon Long Distance (Verizon).

2.  On May 19, 2000, Verizon voluntarily disclosed to the Enforcement
    Bureau (Bureau) that it could not locate records of third-party
    verifications ("TPV") for an estimated 20-25,000 residential
    consumers who had recently switched their preferred carrier to
    Verizon during an inbound call to one of the residential sales and
    service centers ("RSSCs"). Verizon's subsequent investigation
    disclosed that the number of affected customer lines was
    approximately 34,000. The Bureau has received no evidence, such as
    complaints from any of the affected customers, indicating that
    Verizon changed the customers' preferred interexchange carrier
    without proper authorization. Accordingly, the issues before us
    solely relate to third-party verification and record maintenance,
    and not to the practice commonly known as "slamming."

3.  The Bureau and Verizon have negotiated the terms of a Consent Decree
    that would terminate the staff\'s investigation. A copy of the
    Consent Decree is attached and is incorporated by reference. As
    detailed in the Consent Decree, Verizon has taken and/or agreed to
    take various actions to rectify the matter and prevent a recurrence,
    including, but not limited to: contacting and crediting affected
    residential consumers; requiring TPV contractors both to formally
    train their employees at the time of hiring and at least twice per
    year thereafter on Commission rules and policies, and to sign an
    agreement to take disciplinary action against their employees who
    violate section 64.1120(a)(1)(ii); and periodic monitoring of TPV
    contractors to ensure compliance with the Commission's third-party
    verification and record retention rules. Verizon has also agreed,
    *inter alia*, to observe the verification activity of the TPV
    contractors through regular on-site visits and/or telephonic
    monitoring, and to perform monthly audits of all TPV contractor's
    operations.

4.  We have reviewed the terms of the Consent Decree and evaluated the
    facts before us. In light of Verizon's commitment to be bound by
    various principles regarding its third-party verification and
    records retention procedures, we believe that the public interest
    would be served by approving the Consent Decree and terminating the
    investigation.

5.  Based on the record before us, and in the absence of material new
    evidence relating to this matter, we conclude that there are no
    substantial and material questions of fact as to whether Verizon
    possesses the basic qualifications, including its character
    qualifications, to hold or obtain any FCC licenses or
    authorizations.

6.  Accordingly, IT IS ORDERED, pursuant to section 4(i) of the
    Communications Act, 47 U.S.C. § 154(i), and the authority delegated
    by sections 0.111 and 0.311 of the Commission's rules, 47 C.F.R. §§
    0.111, 0.311, that the attached Consent Decree IS ADOPTED.

7.  IT IS FURTHER ORDERED that the Commission staff inquiry into the
    matter described here IS TERMINATED.

    FEDERAL COMMUNICATIONS COMMISSION

    David H. Solomon

    Chief, Enforcement Bureau

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of )

) File No. EB-00-TC-053

Bell Atlantic Communications, Inc. ) NAL/Acct No. X3217-010

)

# CONSENT DECREE

#### 

1.  The Enforcement Bureau of the Federal Communications Commission
    ("FCC" or "Commission") and Bell Atlantic Communications, Inc. d/b/a
    Verizon Long Distance ("Verizon") hereby enter into a Consent Decree
    terminating an informal Bureau investigation into possible
    violations of section 64.1120(a)(1)(ii) of the Commission's rules,
    which, among other things, requires telecommunications carriers to
    maintain and preserve records showing that they have verified
    consumer authorization to change the consumer's telecommunications
    service provider. Verizon is a common carrier that provides
    interstate interexchange telecommunications services in the State of
    New York pursuant to tariffs on file with the Commission. Verizon
    voluntarily brought this matter to the Bureau's attention.

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8.  For the purposes of this Consent Decree the following definitions
    shall apply:

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a)  "Commission" or "FCC" means the Federal Communications Commission;

b)  "Bureau" means the Enforcement Bureau of the Federal Communications
    Commission;

c)  "Verizon" means Bell Atlantic Communications, Inc., d/b/a Verizon
    Long Distance;

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d)  "Parties" means Verizon Communications Inc., its affiliate Verizon,
    and the Commission or Bureau;

e)  "Adopting Order" means an Order of the Bureau adopting the terms and
    conditions of this Consent Decree;

f)  "Effective Date" means the date on which the Bureau releases the
    Adopting Order.

g)  "PIC Change" is an order transmitted to a local exchange carrier
    ("LEC") by an interexchange carrier or request from a consumer to a
    LEC requesting a change of the consumer's preferred interexchange
    and/or intraLATA toll carrier ("PIC");

h)  "Residence Sales and Service Centers" refers to telephone company
    service centers that serve residential service consumers. Among
    other things, employees at these centers accept requests from
    residential service consumers to change their presubscribed
    interexchange carrier and initiate the processing of these requests.

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9.  The Parties agree that the provisions of this Consent Decree shall
    be subject to final approval by the Bureau by incorporation of such
    provisions by reference in an Adopting Order of the Bureau.

10. The Parties agree that this Consent Decree shall become effective on
    the date on which the Bureau releases the Adopting Order. Upon
    release, the Adopting Order and this Consent Decree shall have the
    same force and effect as any other Order of the Commission and any
    violation of the terms of this Consent Decree shall constitute a
    violation of a Commission Order entitling the Commission to exercise
    any and all rights and to seek any and all remedies authorized by
    law for the enforcement of a Commission Order.

11. Verizon admits the jurisdiction of the Commission for purposes of
    this Consent Decree and the Adopting Order.

12. Verizon waives any rights that it may have to further procedural
    steps and any rights it may have to seek judicial review or
    otherwise challenge or contest the validity of the Adopting Order or
    this Consent Decree.

13. Verizon waives any rights it may have under any provision of the
    Equal Access to Justice Act, 5 U.S.C. § 504.

    **Statement of Facts**

14. Verizon provides long distance service to residential service
    customers in New York, and employees in its affiliated telephone
    company residence sales and service centers ("RSSCs") handle
    incoming calls from consumers who want to change their presubscribed
    carrier. On May 19, 2000, Verizon voluntarily disclosed to the
    Bureau that it could not locate records of third-party verifications
    ("TPV") for an estimated 20-25,000 residential consumers who had
    recently switched their preferred carrier to Verizon during an
    inbound call to one of the RSSCs. Verizon's subsequent investigation
    disclosed that the number of affected customer lines was
    approximately 34,000. Verizon represented to the Bureau that it had
    recently discovered the problem, and that the missing records
    related to PIC changes dating back to March 2000.

15. Verizon's auditing of the billings from its TPV contractor, The
    Sutherland Group, Ltd. ("Sutherland"), revealed that Sutherland was
    charging Verizon for fewer TPV transactions than Verizon expected
    based on the number of carrier selection orders generated through
    the RSSC. Although not all inbound requests for long distance
    service required TPV, Verizon nevertheless recognized that a problem
    existed.

16. Verizon represents that Sutherland contributed to the problem of
    locating verification records by storing verification data in a
    manner that was difficult to track and retrieve. For example,
    Verizon noted that Sutherland, after verifying a customer's carrier
    selection for multiple lines at a single residence, stored the
    information according to the billing telephone number, which created
    problems when retrieving and recording the related working telephone
    numbers in the accounts that were verified during the same
    transaction. In addition, Verizon pointed out that Sutherland stored
    verifications for PIC changes on existing additional lines under the
    billing telephone numbers, and that Sutherland stored some
    residential verifications in its business validation database.

17. Verizon also represents that it encountered other problems
    reconciling the data. For example, an area code split in Long
    Island, New York resulted in verification records being stored under
    the original area code rather than the new one. In other cases,
    Verizon states that when its service representative assigned a
    telephone number to a subscriber whose area code changed prior to
    completion of the order, the service representative performed the
    TPV under the old area code, but the completed service order record
    reflected the new one. In addition, Verizon admits that in some
    cases, the RSSC representative may have inadvertently given
    incorrect customer information to Sutherland, or Sutherland may have
    inadvertently entered incorrect information into its database.

18. Verizon represents that it promptly and voluntarily implemented a
    number of remedial actions with respect to approximately 34,000
    residential customers for whom it could not locate TPV records.
    These actions include the following:

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a)  It has contacted customers to reconfirm PIC change authorizations
    and is crediting these consumers up to the date of the completed TPV
    or the consumers' stated desire to switch to another carrier.
    Verizon represents that, to date, some 10,000 of these customers
    still have not responded to its repeated attempts to reach them.
    Verizon will credit the consumers that it has been unable to reach
    for all long distance charges since they were switched to Verizon
    through October 18, 2000. If any of these customers contacts Verizon
    to dispute his or her carrier selection before April 19, 2001,
    Verizon will process a PIC change at its expense and credit the
    customer for all Verizon charges billed since October 18, 2000.

b)  It continues to work with Sutherland to ensure that source code
    modifications are implemented to address the database entry and
    retrieval problems identified in the operational review.

c)  It has held, except during the August 2000 work stoppage, and will
    continue to hold, monthly performance review meetings and
    discussions with senior executives of Sutherland to discuss
    programming and system changes and staffing levels, to review
    changes in procedures, and to conduct joint observation sessions to
    identify any training process or performance issues.

d)  It deployed a new feature in its ordering systems that prevents a
    service representative from initiating an order before TPV has been
    successfully obtained by requiring a confirmation code on every
    Verizon presubscription order for which TPV is necessary. This code
    is communicated to the RSSC by the third-party verifier only after
    TPV has been successfully completed. The service order systems will
    not process such an order if it has no code or if the code provided
    does not conform to the encryption algorithm established with the
    third-party verifier. Any questionable orders are immediately
    forwarded to a special group in Verizon for investigation and
    resolution.

e)  All customer service representatives and supervisory employees in
    the RSSCs were retrained on TPV requirements and procedures,
    emphasizing the legal requirements and making clear that failure to
    comply with these requirements was also a violation of the company's
    code of conduct and would result in disciplinary action, including
    dismissal.

f)  Where Sutherland's records indicated that an RSSC employee had a
    high incidence of unverified PIC change orders, the company
    monitored the employee's customer contacts. Consistent with the
    company's labor practices, if any problems were found with these
    representatives or other representatives identified through random
    monitoring, the representative was reinstructed on the required
    procedures. As a result of these actions, the company has taken
    initial disciplinary action against several employees, had "second
    discussions" with some of those from the initial group, and
    subsequently issued formal warnings of potential dismissal against
    some employees. In addition, the company terminated one supervisor
    for falsifying reports of her monitoring activities.

g)  It appointed compliance managers in each RSSC director group to
    serve as the primary contact point for compliance issues, including
    compliance with the Commission's requirements regarding PIC
    conversions.

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19. During its May 19, 2000 meeting with the Bureau, Verizon described
    the corrective actions taken and the schedule to be followed with
    respect to further corrective actions. Verizon made follow-up visits
    and calls to the Bureau to update the Commission staff on the course
    of the investigation and the status of the corrective actions taken.
    Verizon memorialized the information presented to the Bureau in
    subsequent letters.[^1]

    **Terms of Settlement**

20. In consideration for the termination by the Bureau of its
    investigation into whether Verizon has violated section
    64.1120(a)(1)(ii) of the Commission's rules, 47 C.F.R. §
    64.1120(a)(1)(ii), pertaining to TPV record retention, and in
    accordance with the terms of this Consent Decree, Verizon agrees to
    the following terms.

21. Verizon shall make a voluntary contribution to the United States
    Treasury in the total amount of \$250,000 (two hundred fifty
    thousand dollars). This amount shall be paid within 30 days of the
    date on which the order adopting this Consent Decree becomes final.
    Such contribution shall be made, without further protest or
    recourse, by certified check, cashiers check, or money order drawn
    to the order of the Federal Communications Commission, and shall be
    mailed to the Federal Communications Commission, P.O. Box 73482,
    Chicago, Illinois 60673-7482.

22. Verizon agrees to subject its employees and TPV contractors to the
    following oversight mechanisms to help insure compliance with PIC
    change rules:

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a)  Upon entering into any contract with a TPV contractor and within 30
    days of the effective date of this Consent Decree for existing TPV
    contracts, Verizon shall require that the TPV contractor:

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1)  both at the time of hiring and at least twice a year thereafter,
    formally train its employees on the Commission's rules regarding
    PIC-change requests. Should those rules and orders change, Verizon
    will ensure that its TPV contractors are promptly apprised of such
    changes so that the TPV contractors can promptly update their
    training material to reflect the new rules.

2)  sign an agreement with Verizon specifying that any of the verifiers
    found to have engaged in practices that violate section
    64.1120(a)(1)(ii) of the Commission's rules shall be subject to
    disciplinary action, including, at a minimum, periodic telephonic
    monitoring described in paragraph 16(b) and retraining on Commission
    PIC-change rules and policies. Further, any pattern of such
    practices by the contractor shall subject the contractor to prompt
    termination of its relationship with Verizon.

> b\) Verizon shall observe the verification activity of the TPV
> contractor through regular on-site visits and/or telephonic monitoring
> to ensure that the verifiers are operating in compliance with the
> Commission's verification and record retention rules.
>
> c\) Verizon shall perform monthly audits of all TPV contractors'
> operations comparing orders forwarded by the Verizon representative to
> the verifier, and orders actually verified by the verifier. If this
> comparison reveals that any of the unverified orders were the result
> of noncompliance with Commission rules, Verizon agrees to further
> audit the verifier's operations and implement necessary corrective
> measures.

23. While this Consent Decree is in effect, Verizon agrees to maintain
    and make available to the Bureau, on a quarterly basis and within 14
    days of the receipt of any specific written request from the Bureau,
    business records demonstrating compliance with the terms and
    provisions of this Consent Decree.

24. In light of the covenants and representations in this Consent
    Decree, and in light of the fact that Verizon brought this matter
    voluntarily to the Bureau's attention, the Bureau agrees to
    terminate its investigation into possible violations of section
    64.1120(a)(1)(ii) of Commission rules in connection with the facts
    specified above, without any finding of liability on the part of
    Verizon.

25. Nothing in this Consent Decree shall prevent the Commission from
    adjudicating complaints against Verizon or its affiliates for
    alleged misconduct regarding unauthorized PIC conversions or for any
    other type of alleged misconduct regardless of when such misconduct
    took place, or from instituting new investigations or enforcement
    proceedings against Verizon in the event of alleged future
    misconduct. If such enforcement proceeding is initiated, Verizon's
    earlier conduct as set out in this Consent Decree may be adduced,
    but not for the purpose of assessing monetary forfeitures.

26. This Consent Decree is for settlement purposes only and Verizon does
    not admit any liability for violating Commission rules in connection
    with the matters that are the subject of this Consent Decree.

27. The Commission expressly reserves the right to investigate and take
    enforcement action against Verizon if the Commission staff receives
    consumer complaints or other information indicating that Verizon may
    have violated section 258 of the Communications Act of 1934, as
    amended, (Act) and the Commission rules and orders governing PIC
    conversions by failing to obtain authorization to effect the PIC
    changes that are the subject of this Consent Decree. Such
    enforcement action may include, inter alia, a monetary forfeiture
    pursuant to Section 503(b) of the Act.

28. The Parties agree that any provision of the Consent Decree that
    conflicts with any subsequent rule or order adopted by the
    Commission will be superseded by such Commission rule or order.

29. The Parties agree that this Consent Decree shall expire
    twenty-four (24) months from the release date of the Order adopting
    this Consent Decree. Verizon shall issue a report to the Bureau
    within 60 days from the release date demonstrating compliance with
    the terms and provisions herein.

30. This Consent Decree may be signed in counterparts.

For the Enforcement Bureau, For Bell Atlantic Communications, Inc.

Federal Communications Commission

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

David H. Solomon Maura Breen

Chief Group President -- Verizon Long Distance

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date Date

[^1]: Letters from Marie T. Breslin, Director Federal Regulatory,
    Verizon Communications, to Catherine W. Seidel, Chief,
    Telecommunications Consumers Division, Enforcement Bureau, F.C.C.,
    File No. EB-00-TC-053 (July 5, 2000 and August 16, 2000).