**Before the**

**FEDERAL COMMUNICATIONS COMMISSION**

**Washington, D.C. 20554**

In the Matter of )

)

ASCOM COMMUNICATIONS, INC., )

)

Complainant, )

)

v\. ) File Nos.

)

SPRINT COMMUNICATIONS COMPANY, L.P. ) E-94-73

)

and )

)

NEW YORK TELEPHONE COMPANY, ) E-94-74

)

Defendants. )

**MEMORANDUM OPINION AND ORDER**

Adopted: February 3, 2000 Released: February 8, 2000

By the Commission:

**I. INTRODUCTION**

1\. In this *Order*, we grant in part a complaint filed by Ascom
Communications, Inc. (\"Ascom\") against Sprint Communications Co., L.P.
(\"Sprint\") and New York Telephone Company (\"NYT\"), alleging that
Sprint violated sections 201(b), 202(a), and 203(c)[^1] of the
Communications Act of 1934, as amended (\"the Act\"), by attempting to
collect charges for fraudulent international telephone calls that were
placed from Ascom\'s pay telephones in the New York metropolitan area
(\"New York payphones\") and were completed through the Sprint and NYT
networks.[^2] We also grant, in part, Ascom's complaint that NYT
violated section 201(b) of the Act by not taking financial
responsibility for the fraudulent calls.

**II. BACKGROUND**

2\. Ascom provides payphone service in the New York City metropolitan
area and in other areas of the United States. Ascom also owns a switch
in the New York City metropolitan area. NYT was the local exchange
carrier (\"LEC\") and Sprint was one of the interexchange carriers
(\"IXC\") for calls originating from Ascom\'s New York payphones.[^3]

3\. During the second half of 1992, Ascom discovered that callers were
able to place unauthorized and fraudulent direct-dialed international
calls from certain of Ascom\'s New York payphones. Carriers completing
these calls included Sprint and AT&T.[^4] Ascom determined, and Sprint
and NYT do not dispute, that at least 352 of its New York payphones were
used to make fraudulent calls that were completed through the Sprint
network.[^5] Ascom notified NYT in August 1992 of the occurrence of the
fraudulent calls and notified Sprint of the fraud in December 1992.[^6]
On or about September 23, 1992, NYT advised the New York State Public
Service Commission (\"New York Commission\") of two reasons that callers
were able to make the fraudulent payphone calls.[^7] First, some of
NYT\'s switches permitted payphone callers to dial certain non-working
800 numbers owned by another carrier to obtain \"secondary dial tone.\"
This secondary dial tone enabled callers to dial fraudulently the access
code of an interexchange carrier and the numerical sequence for
direct-dial international calls.[^8] The second reason cited by NYT was
a programming problem with NYT\'s Limited InterLATA Dialing (\"LID\")
service, which normally would prevent direct-dialed interLATA and
international calls.[^9] NYT stated at the time that, in conjunction
with the secondary dial tone problem, in \"certain limited instances,
callers were able to make international calls where there were problems
with the LID service.\"[^10] In switches where LID was improperly
programmed, NYT\'s local facilities routed the fraudulent calls via the
public switched network to Sprint or AT&T for completion.[^11]

4\. Although NYT took certain steps to attempt to correct these
malfunctions, these efforts were ineffectual for months. For example,
NYT implemented a software correction for the secondary dial tone
problem beginning in September 1992; however, NYT\'s subsequent
implementation of certain new calling features invalidated that software
correction and callers were again able to obtain secondary dial tone to
place fraudulent calls.[^12] It was not until mid-December 1992 that NYT
finally resolved the secondary dial tone problem by implementing
database blocking for the affected 800-numbers.[^13] With regard to the
problems with LID service, NYT discovered in mid-July 1992 that, due to
\"human error,\" some NYT switches were not programmed to block calls
from the payphones subscribed to LID service. In these cases, the
Carrier Identification Codes (\"CICs\") had not been programmed into the
switches that served the payphones from which fraudulent calls were
made.[^14] Although NYT states that the LID problems were corrected in
August 1992,[^15] fraudulent direct-dialed international calls continued
from Ascom\'s payphones through December 1992.[^16]

5\. Prior to the occurrence of the fraudulent calls at issue, Ascom took
measures to prevent unauthorized calling access from its New York
payphones. It designated the payphones as \"PIC-None\" so that the
payphones were not presubscribed to any primary interexchange carrier.
Ascom also programmed the payphones to reject \"1+,\" \"011+,\"
\"10XXX+1+\" and \"10XXX-011+\" dialing. Ascom also claims that it
subscribed the payphones to both NYT\'s tariffed LID service and to
NYT\'s High Toll Notifier service, which is used to monitor high or
unusual calling activity.[^17]

6\. On August 10, 1992, prior to the occurrence of the fraudulent calls
at issue, Ascom entered into a Virtual Private Network (\"VPN\")
agreement with Sprint in which calls from Ascom\'s payphones for the
entire nationwide Ascom network were to be aggregated and delivered to
Sprint\'s network. The VPN contract enabled Ascom to use both \"on-net\"
and \"off-net\" calling features. \"On-net calling\" enabled Ascom, in
areas where it maintained its own switching capabilities (such as New
York) to first route a payphone call to its own switch. At its switch,
Ascom would check to make sure the call was authorized before delivering
the traffic to Sprint. By contrast, with \"off-net calling,\" calls
originating at Ascom\'s payphones would be delivered directly to Sprint
over the public switched network, without first going through screening
at Ascom\'s switch.[^18]

7\. Sprint maintains that Ascom owes Sprint \$818,865.70 for the
fraudulent calls placed from Ascom\'s New York payphones during the
relevant time period. Sprint billed and attempted to collect these
charges from Ascom. On July 1, 1994, Ascom filed complaints against
Sprint and NYT with the Commission, alleging that Ascom was not a
customer of Sprint for the international calls and that NYT should have
accepted responsibility for its failure to provide blocking
services.[^19] On July 15, 1994, Sprint filed an action in Florida state
court seeking payment from Ascom for the calls at issue. Ascom removed
the case to federal court and was granted a stay of the case pending the
Commission\'s resolution of the instant proceeding.[^20]

**III. DISCUSSION**

8\. In its complaints, Ascom requests that the Commission: (1) declare
that Ascom is not liable to Sprint for any charges incurred as a result
of the fraudulent calling and that NYT and Sprint were at fault for
allowing fraudulent calls to be placed from Ascom\'s New York payphones;
(2) prohibit Sprint from taking action against Ascom for non-payment of
the disputed charges; (3) award damages plus interest, attorneys\' fees,
costs, and disbursements to Ascom; and (4) further relief as the
Commission deems just and proper.[^21] In its brief, Ascom additionally
requests that if the Commission finds Ascom liable to Sprint for the
charges for the fraudulent calls, the Commission find NYT liable to
Ascom.[^22] For the reasons and to the extent stated below, we grant in
part and deny in part Ascom\'s complaint against Sprint and grant in
part and deny in part Ascom\'s complaint against NYT. We also limit our
consideration of the issues here to those concerning liability and allow
Ascom to file a supplemental complaint for damages.[^23]

**A. Section 201(b) Claim Against Sprint**

9\. After considering the relevant contract and tariff provisions, the
relevant case law, and the record before us, we conclude that Sprint
violated section 201(b) when it charged Ascom for certain calls for
which Ascom was not a customer.[^24] As explained below, we find that
Ascom was, in fact, Sprint\'s customer for some, but not all, of the New
York payphones that were used to make the fraudulent calls.

10\. The key inquiry for the section 201(b) claim against Sprint is
whether and to what extent Ascom was a customer that ordered off-net VPN
service from Sprint for its New York payphones. If Ascom was an ordering
customer, Sprint was entitled - in fact, obligated - to charge Ascom its
tariffed rate for the calls at issue.[^25] If not, the opposite result
holds.

11\. In making this determination, we are guided by the Commission
precedent set forth in *United Artists Payphone Corp. v. New York
Telephone Co. and American Telephone and Telegraph Co*.[^26] In *United
Artists*, the Commission found that AT&T had acted unlawfully in
attempting to hold the complainant, a public payphone provider, liable
for toll fraud charges because the complainant was not a \"customer\" of
AT&T. Under the AT&T tariff in *United Artists*, only a \"customer\" who
ordered \"service\" could be responsible for charges associated with
that service. The Commission determined that the complainant was not a
customer of AT&T because the complainant intentionally avoided ordering
service by instructing its local exchange carrier not to presubscribe
its payphones to AT&T. The Commission also found that the complainant
had avoided constructively ordering AT&T\'s service because it adopted a
number of precautions to prevent unauthorized calls, including ordering
services from its local exchange carrier that were meant to block long
distance calls.[^27]

12\. As stated above, we must determine whether Ascom ordered off-net
VPN service for its New York payphones. It is clear from the record in
this case that all of the fraudulent calls at issue were off-net calls
from Ascom\'s New York payphones.[^28] That is, such calls went straight
from Ascom\'s New York payphones to Sprint\'s switch over the public
switched network, thereby bypassing the screening mechanisms at Ascom\'s
switch. Sprint\'s VPN tariff defines a customer as a \"person, firm,
corporation or other legal entity that orders Virtual Private Network
Service from Sprint and therefore is responsible for the payment of
charges and compliance with this Tariff.\"[^29] Neither the VPN contract
nor the VPN tariff specify what steps are necessary to \"order\" either
on-net or off-net VPN service.

13\. We find that Ascom was a Sprint customer for some of the fraudulent
calls because it intentionally ordered off-net service from Sprint by
signing the VPN contract and sending Sprint the ANIs[^30] for some of
the New York payphones at issue.[^31] We are not persuaded by Ascom\'s
argument that it was the intent of both parties that the VPN contract
include only on-net calls from Ascom\'s New York payphones.[^32]
Notwithstanding Ascom\'s stated intention to screen all New York calls
at Ascom\'s switch for potential fraud problems prior to delivering the
calls to Sprint\'s switch for termination,[^33] we find that the plain
language of the VPN contract unambiguously includes both on-net and
off-net calls delivered to Sprint and makes no exception for off-net
calls from the New York payphones.[^34]

14\. Furthermore, we find that Ascom has failed to rebut satisfactorily
Sprint\'s assertion that Ascom ordered VPN off-net service for any
payphone, including a New York payphone, by giving Sprint the ANI of
that payphone. As part of the agreement between Ascom and Sprint, Ascom
was obligated to provide ANIs of its payphones to Sprint, although the
purpose of furnishing this information is disputed by the parties.
Sprint states that after it loaded that ANI into the VPN database, Ascom
would deliver traffic from its payphone to Sprint and Sprint would use
the ANI information to verify the origin of the call.[^35] Ascom admits
that it sent Sprint a number of payphone ANIs, including some of the New
York payphone ANIs, [^36] but claims that these actions did not
constitute \"ordering\" of service because the ANI information was only
used for billing purposes (in order to calculate VPN discounts).

15\. Ascom admits, however, that its contentions with regard to VPN
off-net service for the New York payphones are largely unsupported by
contemporaneous documentary evidence because it does not have most of
the relevant documents in its possession.[^37] Ascom does supply an
affidavit from an Ascom employee that states that the VPN contract did
not include off-net calls from Ascom\'s New York payphones.[^38] Sprint,
however, supplies affidavits from two Sprint employees asserting the
opposite fact, that the VPN contract was not location specific but
rather included traffic from any payphone whose ANI was sent to Sprint
by Ascom.[^39] Ascom also states that proof of Sprint\'s understanding
that off-net New York payphone calls were excluded from the VPN contract
is found in a memorandum from an Ascom employee addressed to two Sprint
employees. This memorandum states \"\[a\]s you know, Ascom currently
places no calls on a switched origination basis to *any* destination
originating out of the NY Metro LATA. All legitimate calls out of the
metro LATA (132) will originate on the T-1\'s to Sprint out of our Bronx
switching POP.\"[^40] Although this memorandum is consistent with
Ascom\'s contentions, there is no proof that Sprint received the
document or acknowledged its contents. We are therefore constrained to
find that Ascom was Sprint's customer for certain off-net calls from the
New York payphones.[^41]

16\. We also find, however, that Ascom was a Sprint customer only for
fraudulent calls made from the New York payphones for which ANIs were
actually transmitted by Ascom to Sprint. Through discovery, using
billing records supplied by Sprint, Ascom found that the payphone ANI
lists transmitted to Sprint contained the ANIs of only 110 of the 352
New York payphones used to place the fraudulent calls.[^42] Sprint does
not challenge the accuracy of Ascom\'s findings, but reiterates that, to
order off-net VPN service for a particular payphone, Ascom had to
provide Sprint with the ANI of that payphone.[^43] It follows from
Sprint\'s statement that Ascom did not \"order\" off-net service for any
payphones for which ANIs were not supplied to Sprint, and that those
payphones should be excluded from the VPN contract. Accordingly, we find
that Ascom is not liable to Sprint for charges for fraudulent calls made
from the New York payphones for which ANIs were not sent by Ascom to
Sprint.

17\. We also reject Sprint\'s argument that Ascom constructively ordered
service from Sprint for the New York payphones for which ANIs were not
supplied to Sprint. We find that Ascom implemented reasonable fraud
prevention measures, similar to those taken by the complainant in
*United Artists*,[^44] including designating its payphones as PIC-None
and programming its payphones to reject \"1+,\" \"011+,\" \"10XXX+1+\"
and \"10XXX-011+\" dialing.[^45] We also find below that Ascom ordered
LID blocking service from NYT for 310 of the New York payphones
associated with the fraudulent calls, although NYT\'s faulty programming
rendered the LID service ineffectual.[^46] Therefore, applying the
analysis in *United Artists*, we conclude that because Ascom took
extensive precautions to prevent fraudulent calling, Ascom did not
constructively order off-net service from Sprint for the New York
payphones for which ANIs were not supplied to Sprint.

18\. Because we find that Ascom was not Sprint\'s customer for the
fraudulent calls made from the New York payphones for which ANIs were
not sent by Ascom to Sprint, we find that Sprint\'s actions in charging
and attempting to collect charges from Ascom for fraudulent calls from
those payphones violate section 201(b), which provides that all charges
and practices must be just and reasonable.[^47] We deny Ascom\'s section
201(b) claim against Sprint, however, with respect to the fraudulent
calls made from the New York payphones for which Ascom gave ANIs to
Sprint.[^48]

19\. Although we find that Sprint should not have charged Ascom for
fraudulent calls made from some of the New York payphones, we cannot at
this time determine the exact amount of these charges.[^49] Ascom states
that, at most, it only owes Sprint \$245,764.84, which is the amount of
charges for fraudulent calls made from payphones for which ANIs were
actually given to Sprint.[^50] This calculation is based, however, on
the call detail provided by Sprint, which did not include the month of
August 1992. All parties admit that fraudulent calls occurred in that
month.[^51] Accordingly, call billing information for August 1992 is
necessary to determine the amounts properly billed to Ascom during that
month. Therefore, although we conclude that Sprint should not have
charged Ascom for fraudulent calls made from the payphones for which
ANIs were not sent to Sprint by Ascom, we do not reach a conclusion
regarding the exact amount of these charges.[^52]

**B. Section 201(b) Claim Against NYT**

20\. We further conclude that NYT acted unjustly and unreasonably in
violation of section 201(b) when it failed to provide properly
functioning LID service to Ascom. We agree with Ascom that the
fraudulent calls occurred because: (1) NYT\'s network failures resulted
in the ability of callers to reach a secondary dial tone that permitted
bypassing of Ascom\'s switch, and (2) NYT failed to program properly its
switches to provide the LID blocking service ordered by Ascom.[^53] We
also find that NYT's failure to provide LID service to Ascom constituted
\"willful misconduct\" under NYT\'s own construction of the limited
liability provision in its tariff, such that NYT is liable to Ascom for
a majority of the charges associated with the fraudulent calls.

21\. We first find that NYT's failure to provide LID service, in
conjunction with the secondary dialtone problem, was responsible for the
ability of callers to make fraudulent international calls from Ascom\'s
New York payphones. NYT has admitted, both on the record and to the New
York Commission, that it discovered in August 1992 that fraudulent calls
were occurring because some of NYT\'s switches permitted payphone
callers to dial certain non-working 800 numbers (owned by another
carrier) to obtain secondary dialtone, which then was used to place the
fraudulent calls. NYT admits, on the record and to the New York
Commission, that properly functioning LID service would have prevented
the direct-dialed international fraudulent calls from occurring.[^54]
NYT states that it discovered in July 1992 that some of its switches
were not programmed to provide LID service and that it corrected this
problem in August 1992, but does not explain why the fraudulent calling
continued from Ascom\'s payphones until December 1992.[^55]

22\. We also find that Ascom subscribed to NYT\'s LID service for at
least 310 of the New York payphones associated with the fraudulent
calling. Ascom states that by examining \"NYT\'s own documentation\"
(NYT bills for service to Ascom\'s New York payphones), Ascom was able
to verify that NYT billed, and Ascom paid, LID monthly service charges
during the relevant time period for almost all of the New York payphones
associated with the fraudulent calls. Based on its research, Ascom
concludes that 310 of the 352 payphones connected with the fraud were
subscribed to LID service during the relevant time period.[^56] NYT does
not rebut Ascom\'s research other than to state that Ascom did not
supply any letters or service orders to prove that it ordered LID
service for its payphones.[^57] We are satisfied from Ascom\'s research
that, of the 352 payphones used to make the fraudulent calls at issue,
310 were subscribed to (and billed for) NYT\'s LID service during the
relevant time period.[^58]

23\. We find, however, that Ascom has failed to prove that it subscribed
to LID for *all* of the New York payphones associated with the
fraudulent calls. Neither Ascom\'s affidavits nor its exhibits sustain
Ascom\'s burden of proof as to 42 of the payphones at issue. While Ascom
submitted affidavits of employees stating that it routinely ordered all
available blocking services for all of its payphones,[^59] these general
statements do not prove that Ascom ordered LID service for all of its
New York payphones in this particular instance. Moreover, as noted
above, Ascom has produced no evidence that it was billed for LID service
for 42 of the payphones at issue. We therefore find the evidence
submitted by Ascom to be insufficient to prove that Ascom subscribed to
LID service for 42 of the New York payphones used to make the fraudulent
calls.

24\. Finally, we conclude that NYT is liable to Ascom for the charges
for the fraudulent calls made from payphones subscribed to LID service,
despite the limited liability provisions in NYT\'s tariff.[^60] NYT
argues that it cannot be held liable for any damages due to fraudulent
conduct by others because its tariff limits liability for network or
service failures except in instances of its own willful misconduct.[^61]
NYT\'s tariff states that

\"\[t\]he Telephone Company\'s liability, if any, for its willful
misconduct is not limited by this tariff. With respect to any other
claim or suit, by a customer or by any others, for damages associated
with the installation, provision, preemption, termination, maintenance,
repair or restoration of service . . . the Telephone Company\'s
liability, if any, shall not exceed an amount equal to the proportionate
charge for the service for the period during which the service was
affected.\" [^62]

25\. NYT\'s tariff does not define the term \"willful misconduct.\" NYT
argues that its actions can only meet that standard if NYT either (1)
intentionally and consciously failed to take steps to prevent the
allegedly unauthorized calls from occurring with knowledge that its
failure to do so would probably result in injury or damage to Ascom; or
(2) failed to exercise even the slightest degree of care and its conduct
was so careless as to show complete disregard for Ascom\'s rights.[^63]
We find that, even under NYT\'s proffered definition, NYT\'s conduct in
this case rose to the level of \"willful misconduct.\" Accordingly, NYT
is liable under the terms of its tariff for the charges of the
fraudulent calls.[^64]

26\. We find that NYT committed willful misconduct, according to its own
definition of that term, by (1) failing to provide properly functioning
LID service; (2) failing to take adequate steps to correct the failure
in a reasonably timely manner even after becoming aware of the problem;
and (3) failing to notify Ascom of such failure in the LID service until
two months after it became aware that Ascom was experiencing fraudulent
calling from its payphones as a result of the LID failure. NYT knew that
Ascom had ordered and paid for LID service specifically to prevent
fraudulent direct-dialed interLATA and international calls.[^65] NYT
admits that it realized in July 1992 that LID service was
malfunctioning, and by August 1992, NYT knew that Ascom was experiencing
fraudulent direct-dialed international calls as a result of LID
failure.[^66] NYT further admits that the LID malfunction could have
been corrected simply by having NYT employees program the proper CIC
codes into the switches and, in fact, claims that it had corrected the
programming error in the switches by August 1992.[^67] Nonetheless, NYT
provides no explanation for the continued occurrence of fraudulent
direct-dialed international calling from Ascom\'s payphones through
December 1992. Indeed, NYT offers no rebuttal for Ascom\'s specific
showing that LID failed on at least one of Ascom\'s payphones in
September 1992. We find that the record demonstrates that NYT failed to
take reasonable and timely steps to fix the LID problem, despite the
fact that NYT knew that LID failure was permitting fraudulent
direct-dialed international calls to be made from Ascom\'s payphones and
knew of a relatively simple \"fix\" for the LID failure problem.

27\. Equally important, the record also shows that NYT did not inform
Ascom of the nature of the LID problem until October 13, 1992,[^68] even
though it became aware in July 1992 that its switches were improperly
programmed.[^69] We find this failure to take steps to mitigate injury
to Ascom particularly egregious because NYT was, or should have been,
aware that Ascom had ordered the LID service to prevent precisely the
type of fraud alleged here. Furthermore, Ascom had asked NYT in August
1992 for an explanation for the occurrence of the fraudulent calls.[^70]
NYT offers no explanation for why it did not give Ascom warning of the
LID problem earlier. In fact, the record shows that in September 1992,
NYT representatives told Ascom that Ascom should seek redress from the
IXC that was routing the fraudulent calls rather than explaining that
LID failure was permitting the fraudulent calls to be routed to the IXC
in the first place.[^71] By not taking the readily available step of
informing Ascom of the exact nature of the LID problem until October
1992, NYT denied Ascom the opportunity to take alternative measures to
protect itself from fraud. Thus, applying NYT\'s own definition of
\"willful misconduct,\" we find that NYT \"failed to take steps to
prevent\" the unauthorized calls from occurring \"with knowledge that
its failure to do so would\" likely result in injury to Ascom.[^72]

28\. We recognize that, in many instances, limited liability provisions
may serve to prevent the costs of unforeseeable and speculative damages
from being passed on to ratepayers.[^73] In the instant case, however,
the complainant is seeking damages for fraudulent charges incurred
because of the failure of the LEC\'s blocking service, which was ordered
specifically to prevent fraudulent calling. Not only was it foreseeable
that this failure would result in fraudulent calling, but it is clear
that such fraud would be its natural and direct consequence. We note
that this Order should not be read as condoning tariff terms limiting
liability to willful misconduct. Although we have found it unnecessary
to reach the issue in this case, in the future the Commission will not
hesitate to exercise authority to investigate the reasonableness of such
tariff terms.

**IV. CONCLUSION**

29\. We grant Ascom\'s complaint to the extent that its seeks relief
from Sprint for violations of section 201(b) with respect to the New
York payphones for which ANIs were not transmitted to Sprint. We deny
Ascom\'s complaint to the extent it seeks relief for violations of
section 201(b) with respect to those New York payphones for which Ascom
delivered ANIs to Sprint. We decline to consider Ascom\'s allegations
against Sprint regarding section 202(a) and 203(c). Finally, we grant
Ascom\'s complaint against NYT to the extent that it seeks relief for
violations of section 201(b) with respect to the 310 payphones which
Ascom has proved were subscribed to LID service.

30\. We conclude that further discovery is necessary to determine the
actual amounts owed by Ascom to Sprint, and by NYT to Ascom. The record
lacks information regarding which payphones were used to make fraudulent
calls in August 1992 because Sprint did not provide Ascom with August
1992 billing records. Furthermore, because the record does not establish
exactly which payphones were included in the VPN contract during the
relevant time period, we cannot determine the exact amount for which NYT
is liable to Ascom. We note that, because we are awarding compensatory
damages only, the amount of NYT's liability to Ascom should not exceed
the amount for which Ascom will be liable to Sprint. The parties are
directed to report to the Enforcement Bureau\'s Market Disputes
Resolution Division within sixty (60) days on whether a settlement has
been reached or to report on what progress has been made in this regard
and the need for any Bureau assistance. Notwithstanding the above, Ascom
is free to file a supplemental complaint in pursuit of its damage
allegations within sixty (60) days.[^74]

31\. Ascom has also requested that we order the defendants to pay
attorneys\' fees, costs and disbursements. We deny this request, as we
have no authority to award attorneys\' fees and costs.[^75]

**V. ORDERING CLAUSES**

32\. Accordingly, IT IS ORDERED, pursuant to sections 4(i), 4(j),
201(b), 202(a), 203(c), and 208 of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 154(i), 154(j), 201(b), 202(a), 203(c), 208, that
the above-captioned complaints filed by Ascom Communications, Inc.
against Sprint Communications Company and New York Telephone Company ARE
GRANTED to the extent indicated herein and ARE OTHERWISE DENIED.

33\. IT IS FURTHER ORDERED that Ascom, pursuant to section § 1.722 of
the Commission\'s Rules, 47 C.F.R. § 1.722(b), may file a supplemental
complaint concerning damages within sixty (60) days after public notice
of this decision.

34\. IT IS FURTHER ORDERED that the Motions to Strike filed on June 24,
1996 by Sprint Communications Company and New York Telephone Company ARE
DENIED.[^76]

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

[^1]:     ^?^ 47 U.S.C. §§ 201(b), 202(a), 203(c).

[^2]:     ^?^ These were unauthorized calls that were charged to
    Ascom\'s account. Ascom Complaint at 3.

[^3]:     ^?^ Ascom Complaint at 2-3.

[^4]:     ^?^ Ascom Brief at 1, 9. According to Ascom, AT&T has not
    attempted to collect charges from Ascom for the fraudulent calls.
    *Id*. at 33.

[^5]:     ^?^ Ascom determined these facts using billing records
    supplied by Sprint during discovery. Ascom Brief at 19. As explained
    below, these billing records do not include information for August
    1992, although none of the parties dispute that fraudulent calls
    occurred during this month also. *See infra* para. 19.

[^6]:     ^?^ Ascom\'s Interrogatories to Defendant New York Telephone
    Company at Exhibit A (Memorandum from Andrew S. Rosen, Director of
    Network Operations of Ascom from Feb. 1992 to Oct. 1993 to Dennis
    Wallach of Ascom, Gary Davidson of Ascom, and John Cocola of Ascom,
    dated Sept. 8, 1992 (\"Rosen Memo of Sept. 8, 1992\")); Sprint Brief
    at 16; *see* Sprint Answer at Exhibit IV (Facsimile from Steven
    Stanfill, Vice President of Network Services of Ascom during Jan.
    1991 to Dec. 1993 to Charlie Rogers of Sprint and Candy Jansen of
    Sprint, dated Dec. 18, 1992 (\"Stanfill Fax\")).

[^7]:     ^?^ NYT Brief at 4; Ascom Brief at Exhibit 4 (Letter from
    Robert P. Slevin of NYT to Secretary Kelliher of the New York
    Commission, dated Sept. 23, 1992 (\"NYT Letter to the New York
    Commission\") at 2). NYT provided the NYT Letter to the New York
    Commission to Ascom during discovery, stating that it was one of the
    documents which \"fully explain\[s\] the \[network\] problems that
    Ascom complains about.\" NYT Opposition to Motion to Compel Answers
    to Interrogatories at 4.

[^8]:     ^?^ Callers would dial one of two non-working \"800\" numbers
    owned by Deluxe Data Systems (Deluxe Data), an interexchange
    carrier. Instead of providing a recorded announcement stating that
    the number was not in service, Deluxe Data\'s equipment responded
    with a series of \"winks\" and \"tones\" to which NYT\'s DMS-100
    switches responded by returning secondary dial tone to the payphone,
    which allowed another call to be placed. NYT\'s DMS switches sent
    the secondary dialtone to the payphone without providing a standard
    network signal that would have signaled the payphone to close the
    circuit and prevented the caller from using the secondary dial tone.
    NYT Brief at 4-5; Ascom Brief at 15-16. We note that Deluxe Data is
    not a party to this complaint.

[^9]:     ^?^ Normally LID should block all direct-dialed international
    calls by routing the calls to a recorded announcement and blocking
    them from being completed. NYT Answers to Ascom\'s Interrogatories
    at 3.

[^10]:     ^?^ NYT Letter to the New York Commission at 3 n.4.

[^11]:     ^?^ Ascom Brief at 15-16.

[^12]:     ^?^ NYT Brief at 5-6.

[^13]:     ^?^ *See* Attachment C to NYT\'s Opposition to Motion to
    Compel Answers to Interrogatories at 2 (Letter from Michael J.
    Goldey, attorney for NYT to Kathie A. Kneff, Chief, Informal
    Complaints and Public Inquiries Branch, Enforcement Division, Common
    Carrier Bureau, Federal Communications Commission, dated Mar. 12,
    1993 (\"NYT Letter to Kathie Kneff\")). *See* Ascom\'s
    Interrogatories to Defendant New York Telephone Company at Exhibit G
    (Memorandum of Andrew S. Rosen, Director of Network Operations of
    Ascom from Feb. 1992 to Oct. 1993 to John Cocola of Ascom, dated May
    3, 1993 (\"Rosen Memo of May 3, 1993\")).

[^14]:     ^?^ NYT Brief at 6; Ascom Brief at Affidavit of Andrew S.
    Rosen, Director of Network Operations of Ascom, dated June 6, 1996
    (\"Rosen Affidavit of June 6, 1996\") at Exhibit 6 (Memorandum from
    Andrew S. Rosen, Director of Network Operations of Ascom from Feb.
    1992 to Oct. 1993 to Dennis Wallach of Ascom, Gary Davidson of
    Ascom, and John Cocola of Ascom, dated October 21, 1992 (\"Rosen
    Memo of Oct. 21, 1992\")) and Rosen Memo of May 3, 1993.

[^15]:     ^?^ NYT Brief at 6; NYT Answers to Ascom\'s Interrogatories
    at 4.

[^16]:     ^?^ Ascom Brief at 14.

[^17]:     ^?^ Ascom Brief at 8, 31. NYT claims that HTN is only used by
    NYT personnel and is not a service available to payphone customers.
    NYT Reply Brief at 3.

[^18]:     ^?^ Sprint Reply at 2; Sprint Answer at Exhibit 3 (VPN
    Contract at Art. 13.1(d)) (\"VPN Contract\"); Sprint Reply at
    Exhibit A (Sprint F.C.C. Tariff No. 5, § 3.1.1) (\"VPN Tariff\").

[^19]:     ^?^ Ascom Complaint at i-ii, 6.

[^20]:     ^?^ *Sprint Communications Co. L.P. v. Ascom Communications,
    Inc*., No. CL94-5563AO (Fla. Cir. Ct. Palm Beach Cty. filed July 15,
    1994); *Sprint Communications Co. L.P. v. Ascom Communications,
    Inc*., Civ. No. 94-8479, Order Granting Defendant\'s Motion for Stay
    (S.D. Fla. Nov. 17, 1994).

[^21]:     ^?^ Ascom Complaint at 12-13.

[^22]:     ^?^ Ascom Brief at 36.

[^23]:     ^?^ *See infra* para. 30. We limit our consideration of the
    complaint to liability issues pursuant to our authority to conduct
    Commission proceedings in such manner as is most conducive to the
    proper dispatch of business and to the ends of justice, and to
    perform any and all acts, not inconsistent with the Act, as may be
    necessary in the execution of our functions. 47 U.S.C. § 154(i) -
    (j); *see also* 47 C.F.R. § 1.722(b).

[^24]:     ^?^ Section 201(b) provides that \"\[a\]ll charges,
    practices, classifications, and regulations for and in connection
    with such communications 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 . . . .\"
    47 U.S.C. 201(b).

[^25]:     ^?^ Section 203(c) provides that \"no carrier shall . . .
    charge, demand, collect, or receive a greater or less or different
    compensation for communication or for any service in connection
    therewith . . . than the charges specified\" in an effective tariff.
    47 U.S.C. § 203(c).

[^26]:     ^?^ 8 FCC Rcd 5563 (1993) (\"*United Artists*\").

[^27]:     ^?^ *Id*. at 5563-5565.

[^28]:     ^?^ Because Sprint\'s VPN \"on-net\" service is not an issue
    in this case, we discuss only the ordering of Sprint\'s VPN
    \"off-net\" service.

[^29]:     ^?^ VPN Tariff at Art. I.

[^30]:     ^?^ An Automatic Number Identification (\"ANI\") refers to a
    particular payphone line.

[^31]:     ^?^ As explained below, the payphone ANI list sent by Ascom
    to Sprint contained only 110 of the 352 New York payphone ANIs
    associated with the fraudulent calls. *See infra* para. 16.

[^32]:     ^?^ Ascom Brief at 6.

[^33]:     ^?^ According to Ascom, on-net calls from Ascom\'s New York
    payphones went to the LEC tandem and were then delivered to Ascom\'s
    switch via feature Group D service. After a screening/authorization
    process, the call would be routed to Sprint via dedicated T-1
    facilities. Affidavit of Steven Stanfill, Vice President of Network
    Services of Ascom from Jan. 1991 - Dec. 1993, dated June 6, 1996
    (\"Stanfill Affidavit of June 6, 1996\") at 3.

[^34]:     ^?^ *See* VPN Tariff at 3.7.4; VPN Contract at Art. 13.1.d.

[^35]:     ^?^ Sprint Brief at 3-4; Sprint Reply at Exhibit D (Affidavit
    of Ronald D. Havens, Director of Industry Forums at Sprint (\"Havens
    Affidavit\") at 1); Sprint Reply at Exhibit E (Affidavit of Charles
    E. Rogers, Senior National Account Manager for Sprint, dated July 1,
    1996 (\"Rogers Affidavit of July 1, 1996\") at 2); Sprint Answer at
    Exhibit II (Affidavit of Charles E. Rogers, Senior National Account
    Manager for Sprint, dated Aug. 29, 1994 (\"Rogers Affidavit of Aug.
    29, 1994\") at 2).

[^36]:     ^?^ Ascom Brief at 5-6. During discovery, Ascom produced
    evidence to show that the payphone ANI lists transmitted to Sprint
    contained the ANIs of only 110 of the 352 New York payphones
    associated with the fraudulent calls. *See infra* para. 16.

[^37]:     ^?^ Ascom states that the business records concerning this
    dispute were transferred to People\'s Telephone Company when it
    purchased Ascom\'s assets in October 1993. *See* Ascom\'s Motion to
    Compel Defendant Sprint to Answer Interrogatories at 13; Ascom\'s
    Answers to New York Telephone Company\'s Interrogatories at 2-3.

[^38]:     ^?^ Steven Stanfill, Vice President of Network Services of
    Ascom from Jan. 1991 - Dec. 1993 states that the VPN \"covered only
    traffic originating at Ascom\'s New York switch and from there sent
    over T-1 trunks to Sprint.\" Stanfill Affidavit of June 6, 1996 at
    4; Ascom Reply at Exhibit 2 (Affidavit of Steven Stanfill, Vice
    President of Network Services of Ascom from Jan. 1991 - Dec. 1993,
    dated June 24, 1996 (\"Stanfill Affidavit of June 24, 1996\") at 2).

[^39]:     ^?^ *See* Rogers Affidavit of Aug. 29, 1994 at 2; Rogers
    Affidavit of July 1, 1996 at 1-2; Havens Affidavit at 1.

[^40]:     ^?^ Ascom Brief at 5 (citing the Stanfill Fax, *supra* n. 6).

[^41]:     ^?^ It is well established that in a formal complaint
    proceeding pursuant to section 208, the complainant has the burden
    of proof. *See*, *e.g.*, *Directel, Inc. v. American Telephone and
    Telegraph Co.*, 11 FCC Rcd 7554 (1996).

[^42]:     ^?^ During discovery Sprint provided Ascom with the following
    information: a list of the ANIs that Sprint had received from Ascom
    during the course of the VPN contract and call detail billing
    information for all calls billed by Sprint to Ascom during the
    period between September 1992 and December 1992. By
    cross-referencing the ANI list with the call detail billing
    information, Ascom determined that, of the New York payphones
    connected to fraudulent calling, only 110 of those payphones\' ANIs
    were in the database sent to Sprint. Ascom Brief at 19-21. *See
    generally* Ascom Complaint at Affidavit of Ginger R. Be Vard, Legal
    Assistant for Dickstein, Shapiro & Morin (\"Be Vard Affidavit\") at
    Exhibit 2 (Report on Lines from Sprint Long Distance Call Detail,
    Showing Fraud).

[^43]:     ^?^ Sprint Reply at 7.

[^44]:     ^?^ *United Artists*, 8 FCC Rcd at 5566.

[^45]:     ^?^ Ascom Brief at 8.

[^46]:     ^?^ *See infra* paras. 22-23.

[^47]:     ^?^ *See* 47 U.S.C. § 201(b).

[^48]:     ^?^ Ascom also claims that Sprint violated sections 202(a)
    and 203(c). Section 202(a) prohibits a carrier from making any
    "unjust or unreasonable discrimination in charges, practices,
    classifications, regulations, facilities, or services for or in
    connection with like communication service, . . . or \[from making\]
    any undue or unreasonable preference or advantage to any particular
    person. . . . " 47 U.S.C. § 202(a). We decline to consider Ascom\'s
    section 202(a) claim because Ascom presented no evidence of actual
    discrimination or preference in violation of 202(a), and in fact
    failed to even address this claim in its briefs. Section 203(c)
    provides that \"no carrier shall . . . charge, demand, collect, or
    receive a greater or less or different compensation for
    communication or for any service in connection therewith . . . than
    the charges specified\" in an effective tariff. 47 U.S.C. § 203(c).
    Because we have already found that Sprint violated section 201(b)
    when it charged and attempted to collect charges from Ascom for
    calls for which Ascom was not a customer, we decline to reach a
    decision on whether such actions also constitute a violation of
    section 203(c).

[^49]:     ^?^ We are unpersuaded by Sprint\'s argument that the
    Commission lacks statutory authority to determine the amount of
    money owed to Sprint by Ascom under Sprint\'s tariff. Sprint Reply
    at 21, *citing* *Tel-Central v. United*, 4 FCC Rcd 8338, 8340-41
    (1989) (\"*Tel-Central*\"). In *Tel-Central*, the Commission held
    that it was not to be used as a collection agent for unpaid tariffed
    charges. *Tel-Central*, 4 FCC Rcd at 8340. In the instant case,
    however, we have determined that Sprint violated the Act by charging
    and attempting to charge Ascom for calls for which Ascom was not a
    customer.

[^50]:     ^?^ Ascom Brief at 20; *see* Be Vard Affidavit.

[^51]:     ^?^ Ascom Brief at 21, n.11.

[^52]:     ^?^ *See infra* para. 30.

[^53]:     ^?^ Ascom Brief at 12-13; 15-16.

[^54]:     ^?^ NYT Supplemental Answers to Ascom\'s Interrogatories at
    4; NYT Letter to the New York Commission at 3.

[^55]:     ^?^ NYT Brief at 6.

[^56]:     ^?^ Ascom Brief at 37; Ascom Brief at Affidavit of William
    Donnelly, legal assistant at Dickstein, Shapiro and Morin, L.L.P.,
    counsel for Ascom (\"Donnelly Affidavit\") at 11. The affidavits and
    exhibits submitted by Ascom describe in detail how Ascom examined
    its bills from NYT, which are attached as exhibits to the Donnelly
    Affidavit, to confirm that, for 310 of the 352 New York payphones
    researched by Ascom, Ascom paid a charge that corresponds exactly
    with NYT\'s tariffed rate for LID service. Ascom Brief at 23-24;
    Donnelly Affidavit at 3-10; *see generally* NYT Bills.

[^57]:     ^?^ NYT Brief at 3.

[^58]:     ^?^ In one instance in its brief, Ascom states that LID was
    on 312 of the 352 lines, *see* Ascom Brief at 32, but elsewhere in
    its brief, Ascom states that LID was on 310 of the 352 lines
    associated with the fraud. *See, e.g*., Ascom Brief at 24. We also
    note that Ascom conducted its discovery and research on the
    assumption that only 352 of its New York payphones were associated
    with the fraudulent calls, although we have concluded that this
    number may have been different, as Ascom did not include payphones
    that were billed for fraudulent charges in the month of August 1992.
    *See supra* para. 19.

[^59]:     ^?^ Stanfill June 6, 1996 Affidavit at 4; Rosen June 6, 1996
    Affidavit at 2. Ascom also submitted the Rosen Memorandum of Oct.
    21, 1992, which documents a meeting in which an NYT employee
    allegedly admitted that all of Ascom\'s payphones were subscribed to
    LID, and Ascom contends that NYT has admitted to the accuracy of
    many of the Rosen internal memoranda. Ascom Brief at 9, n.3; Ascom
    Reply at 11, n.9. We note that although NYT did admit to the
    accuracy of certain of the memoranda submitted by Ascom, NYT did not
    admit to the accuracy of that particular Rosen Memorandum of Oct.
    21, 1992. *See* NYT\'s Supplemental Answers to Ascom\'s
    Interrogatories at 2.

[^60]: We find that NYT is not liable to Ascom for fraudulent calls from
    payphones that were not subscribed to LID service. These fraudulent
    calls were able to occur solely because of NYT's secondary dialtone
    problem. We find that NYT's conduct with regard to the secondary
    dialtone problem was not unjust or unreasonable in violation of
    section 201(b). We base our conclusion on the fact that NYT
    attempted to fix the secondary dialtone problem in a timely and
    responsive manner. After discovering the secondary dialtone problem
    in August 1992, NYT promptly asked its vendor for a software fix and
    deployed such fix beginning in September 1992. NYT Brief at 4-5.
    Even though this software fix eventually failed and NYT's network
    again permitted secondary dialtone to occur, we find that NYT's
    failure to correct the secondary dialtone problem on its first
    attempt does not constitute unjust or unreasonable conduct.

[^61]:     ^?^ NYT Brief at 3.

[^62]:     ^?^ NYNEX FCC Tariff No. 1 at § 2.1.3(A).

[^63]:     ^?^ *See* NYT Brief at 4 (*citing* *AT&T v. New York City
    Human Resources Admin.,* 833 F.Supp. 962, 974 (S.D.N.Y. 1993),
    *Gentile v. Garden City Alarm Co., Inc.*, 541 N.Y.S.2d 505 (App.
    Div. 1989)).

[^64]:     ^?^ We note that while there does not appear to be any
    consensus in Commission, state, or federal cases, NYT\'s proffered
    definition of \"willful misconduct\" is similar to the definition
    set forth in one widely-respected treatise. *See* 57A AmJur 2d
    *Negligence* § 247 (1989) (stating that willful misconduct
    \"requires an intentional act or an intentional failure to act,
    either with knowledge that serious injury is a probable result, or
    with a positive and active disregard for the consequences\").

[^65]:     ^?^ *See generally* Rosen Memoranda.

[^66]:     ^?^ NYT Brief at 6; Rosen Memorandum of Sept. 8, 1992.

[^67]:     ^?^ NYT Brief at 6; NYT Answers to Ascom\'s Interrogatories
    at 4; NYT Letter to the New York Commission at 3 n.4.

[^68]:     ^?^ Rosen Memorandum of May 3, 1993. NYT has admitted that
    this particular memorandum is one of a series of Ascom internal
    memoranda that \"clearly identif\[ies\] the nature of the problem,
    and the action that NYT took to correct the problem.\" NYT
    Supplemental Answers to Ascom\'s Interrogatories at 2.

[^69]:     ^?^ NYT Brief at 6.

[^70]:     ^?^ *See* Rosen Memorandum of May 3, 1993.

[^71]:     ^?^ Rosen Memorandum of Sept. 8, 1992.

[^72]:     ^?^ *See* NYT Brief at 4.

[^73]:     ^?^ *See* *American Telephone and Telegraph Company, Proposed
    Revisions of Tariff* F.C.C. No. 260, Tariff F.C.C. No. 267, Tariff
    F.C.C. No. 259, and Tariff F.C.C. No. 263, Memorandum Opinion and
    Order, 76 F.C.C.2d 195, 197, 199 (1980).

[^74]:     ^?^ This action is consistent with our rules, which provide
    that damages may be awarded in a supplemental complaint proceeding.
    47 C.F.R. § 1.722(b).

[^75]:     ^?^ *See Multimedia Cablevision, Inc. v. Southwestern Bell
    Telephone Co*., 11 FCC Rcd 11202, 11208 (1996); *Comark Cable Fund
    III v. Northwestern Indiana Telephone Co*., 100 FCC.2d 1244, 1259
    (1985).

[^76]:     ^?^ In their Reply Briefs, filed June 24, 1996, both Sprint
    and NYT argue that some or all of the affidavits submitted by Ascom
    with its brief should be stricken because the information contained
    in the affidavits should have been submitted earlier in the
    proceeding. Sprint Reply at 3, n.2; NYT Reply at 2. Sprint also
    argues that if the Commission accepts Ascom\'s affidavits, then the
    Commission should also accept two responsive affidavits from Sprint,
    which are attached to Sprint\'s Reply Brief. Sprint Reply at 3, n.
    2. In the interest of compiling a more complete record, we accept
    the affidavits and documentation attached to Ascom\'s Brief and deny
    Sprint and NYT\'s Motions to Strike. For the same reason, we also
    accept Sprint\'s responsive affidavits, filed with its Reply Brief,
    as part of the record.