**Before the**

Federal Communications Commission

Washington, D.C. 20554

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| In the Matter of                 | * | File No. EB-07-SE-310        |
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| Cardinal Broadband LLC,\         | ) | NAL/Acct. No. 200832100069   |
| aka Sovereign                    | * |                              |
| Telecommunications,              | * | FRN No. 0018035063           |
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| a wholly owned subsidiary of     | * |                              |
| Cardinal Communications, Inc.    | * |                              |
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Notice of apparent Liability for forfeiture

**Adopted: August 15, 2008 Released: August 15, 2008**

By the Chief, Enforcement Bureau:

# I. introduction {#i.-introduction .unnumbered}

1.  In this *Notice of Apparent Liability for Forfeiture* ("*NAL*"), we
    find Cardinal Broadband, LLC, aka Sovereign Telecommunications, a
    wholly owned subsidiary of Cardinal Communications, Inc.
    (hereinafter, "Cardinal"), apparently liable for a forfeiture in the
    amount of twenty-five thousand dollars (\$25,000) for willful
    violation of Section 1.17(a)(2) of the Commission's Rules
    ("Rules").[^1] The noted apparent violation involves Cardinal's
    provision of incorrect material factual information to the
    Commission without a reasonable basis for believing that the
    information was correct and accurate.

    **II. BACKGROUND**

2.  On July 13, 2007, the Commission received a complaint alleging that
    Cardinal, an interconnected Voice over Internet Protocol ("VoIP")
    service provider,[^2] was not providing E911 service in a
    condominium complex called Millstone in Golden, Colorado.
    Specifically, the complaint alleged that "no one in the complex can
    call 911 and get our local police department." The complaint further
    alleged that the local police department had visited the condominium
    complex to confirm the situation and had provided residents a flyer
    advising them that they did not have 911 service and that they
    should call the police department's regular number in case of
    emergency. This complaint was subsequently referred to the
    Enforcement Bureau's Spectrum Enforcement Division ("Division") for
    investigation. During a follow-up phone call on August 24, 2007, the
    complainant informed Division staff that he and his neighbors had
    had a form of E911 service for approximately two weeks. The
    complainant indicated that the 911 calls now went to a third party,
    which would forward the call and the 911 caller's address to the
    appropriate emergency personnel. The complainant also asserted that
    conventional landline telephone service was not available at
    Millstone because an affiliate company of Cardinal constructed the
    condominium complex and did not permit it to be wired for
    conventional landline service.

3.  On September 10, 2007, the Division issued a letter of inquiry
    ("LOI") to Cardinal directing it to provide certain information
    concerning its provision of interconnected VoIP service.[^3] In its
    response, Cardinal admitted that it "resells" telephone service but
    claimed that it does not provide an "interconnected VoIP
    service."[^4] Specifically, Cardinal argued that "the service
    Cardinal resells does [not]{.underline} require 'a broadband
    connection from the user's location' ... \[or\] ... 'internet
    protocol-compatible customer premises equipment \["CPE"\]'" and,
    thus does not meet two of the four criteria for interconnected VoIP
    service.[^5] Relying on its claim that the service it provided was
    not interconnected VoIP service, Cardinal did not respond to the
    remainder of the LOI.

4.  During internet research on the website of Cardinal's wholly-owned
    subsidiary, Broadband, the Division found marketing materials that
    included the following statement: "Our state-of-the-art phone
    service transports voice data using both regular phone lines and the
    Internet. Getting connected to our broadband network is easy. You
    simply connect your telephone to your Digital Telephone adaptor and
    use your phone service like you do today."

5.  On November 20, 2007, the Division directed a follow-up LOI to
    Cardinal, attaching the marketing materials found on the Broadband
    website.[^6] In a preliminary e-mail response, Cardinal stated that:

> In my initial response I relied on the information provided to me
> verbally by the employees of our subsidiary, Cardinal Broadband.
> Somewhere we had a communication break down because I agree with you
> that anywhere a customer must use an internet adapter to have
> telephone service would definitely qualify as Interconnected VoIP.[^7]

Beyond this admission, in its response to the follow-up LOI, Cardinal
provided additional information confirming that the company is an
interconnected VoIP service provider.[^8]

# III. Discussion {#iii.-discussion .unnumbered}

## Cardinal Apparently Provided Incorrect Material Factual Information to the Commission

6.  Section 1.17 of the Rules[^9] provides, in pertinent part, that in
    any investigation, no person shall:

> \(1\) In any written or oral statement of fact, intentionally provide
> material factual information that is incorrect or intentionally omit
> material information that is necessary to prevent any material factual
> statement that is made from being incorrect or misleading; and
>
> \(2\) In any written statement of fact, provide material factual
> information that is incorrect or omit material information that is
> necessary to prevent any material factual statement that is made from
> being incorrect or misleading without a reasonable basis for believing
> that any such material factual statement is correct and not
> misleading.

Any person who has received a letter of inquiry from the Commission or
its staff or is otherwise the subject of a Commission investigation is
subject to this rule.[^10] In expanding the scope of Section 1.17 in
2003 to include written statements made without a reasonable basis for
believing the statements are correct and not misleading, the Commission
explained that it intended this requirement to clarify the obligations
of persons dealing with the Commission, ensure that they exercised due
diligence in preparing written submissions, and enhance the
effectiveness of the Commission's enforcement efforts.[^11] Thus, even
absent an intent to deceive, a false statement may constitute an
actionable violation of Section 1.17 of the Rules if provided without a
reasonable basis for believing that the material factual information it
contains is correct and not misleading.[^12]

7.  In its response to the first LOI, Cardinal claimed that its
    telephone service is not interconnected VoIP service because it does
    not require a broadband connection from the user's location or
    Internet protocol-compatible CPE, and thus the service fails to meet
    two of the four criteria defining interconnected VoIP service. Our
    review of Cardinal's marketing materials,[^13] however, indicates
    that a broadband connection and, at least in some locations, a
    digital telephone adapter were required for Cardinal's digital
    telephone service. We therefore conclude on the basis of Cardinal's
    marketing materials that it already knew it was providing
    interconnected VoIP service. Moreover, as noted above, Cardinal
    subsequently admitted that the service it provides is interconnected
    VoIP service. Cardinal's earlier claim that the service it provides
    does not require a broadband connection from the user's location or
    Internet protocol-compatible CPE is, therefore, incorrect material
    factual information.

8.  As the Commission has stated, parties must "use due diligence in
    providing information that is correct and not misleading to the
    Commission, including taking appropriate affirmative steps to
    determine the truthfulness of what is being submitted. A failure to
    exercise such reasonable diligence would mean that the party did not
    have a reasonable basis for believing in the truthfulness of the
    information."[^14] It does not appear that Cardinal had a reasonable
    basis for believing that the information it initially provided was
    correct and not misleading. We think that, had it exercised even a
    minimum of diligence prior to the submission of its initial LOI
    response, Cardinal would not have submitted incorrect or misleading
    material factual information.[^15] Although we have insufficient
    information to conclude that Cardinal's provision of incorrect
    material factual information was intentional in violation of Section
    1.17(a)(1) of the Rules,[^16] we find that Cardinal apparently
    willfully[^17] violated Section 1.17(a)(2) by providing material
    factual information that was incorrect without a reasonable basis
    for believing that the information was correct and not
    misleading.[^18]

    **B. Proposed Forfeiture**

9.  Section 503(b) of the Act[^19] authorizes the Commission to assess a
    forfeiture for each willful or repeated violation of the Act or of
    any rule, regulation, or order issued by the Commission under the
    Act. In exercising such authority, we are required to take into
    account "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."[^20]

10. Under the *Forfeiture Policy Statement*[^21] and Section 1.80 of the
    Rules,[^22] the base forfeiture amount for misrepresentation or lack
    of candor is the statutory maximum.[^23] Therefore, for common
    carriers such as Cardinal,[^24] the statutory maximum is \$130,000
    for each violation or each day of a continuing violation. The
    Commission has imposed the statutory maximum penalty against common
    carriers for the intentional provision of incorrect material factual
    information.[^25] Because we do not have evidence that the
    misrepresentation was intentional and Cardinal provided the correct
    information against its interest and prior to any formal Commission
    action, we impose a lesser forfeiture penalty here.[^26]
    Nonetheless, we find a significant forfeiture appropriate. The
    Commission has stated that "\[we rely\] heavily on the truthfulness
    and accuracy of the information provided to us. If information
    submitted to us is incorrect, we cannot properly carry out our
    statutory responsibilities."[^27] Cardinal's failure to exercise due
    diligence to ensure that the information provided in its initial LOI
    response was correct and not misleading hampered our ability to
    properly carry out our statutory responsibilities and consumed
    scarce Commission resources. Although Cardinal ultimately provided
    the correct information, it did so only after the Bureau sent the
    company a follow-up LOI directing it to provide substantially the
    same information requested in the first LOI. Accordingly,
    considering all of the enumerated factors and the particular
    circumstances of this case, we find that a forfeiture of \$25,000 is
    warranted here for Cardinal's apparent willful violation of Section
    1.17(a)(2).

# iV. ordering clauses {#iv.-ordering-clauses .unnumbered}

11. Accordingly, **IT IS ORDERED** that, pursuant to Section 503(b) of
    the Act, and Sections 0.111, 0.311 and 1.80 of the Rules,[^28]
    Cardinal Broadband LLC **IS NOTIFIED** of its **APPARENT LIABILITY
    FOR A FORFEITURE** in the amount of twenty-five thousand dollars
    (\$25,000) for providing incorrect material factual information to
    the Commission in willful violation of Section 1.17(a)(2) of the
    Rules.

12. **IT IS FURTHER ORDERED** that, pursuant to Section 1.80 of the
    Rules, within thirty days of the release date of this Notice of
    Apparent Liability for Forfeiture, Cardinal **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 must be made by check or similar
    instrument, payable to the order of the Federal Communications
    Commission. The payment must include the NAL/Account Number and FRN
    Number referenced above. Payment by check or money order may be
    mailed to Federal Communications Commission, P.O. Box 979088, St.
    Louis, MO 63197-9000. Payment by overnight mail may be sent to U.S.
    Bank -- Government Lockbox #979088, SL-MO-C2-GL, 1005 Convention
    Plaza, St. Louis, MO 63101. Payment by wire transfer may be made to
    ABA Number 021030004, receiving bank TREAS/NYC, and account
    number 27000001. For payment by credit card, an FCC Form 159
    (Remittance Advice) must be submitted. When completing the FCC Form
    159, enter the NAL/Account number in block number 23A (call
    sign/other ID), and enter the letters "FORF" in block number 24A
    (payment type code). Requests for full payment under an installment
    plan should be sent to: Chief Financial Officer \-- Financial
    Operations, 445 12th Street, S.W., Room 1-A625, Washington,
    D.C. 20554. Please contact the Financial Operations Group Help Desk
    at 1-877-480-3201 or Email: ARINQUIRIES@fcc.gov with any questions
    regarding payment procedures. Cardinal will also send electronic
    notification on the date said payment is made to
    Thomas.Fitz-Gibbon@fcc.gov and Ricardo.Durham@fcc.gov.

14. The response, if any, must be mailed to the Office of the Secretary,
    Federal Communications Commission, 445 12th Street, S.W.,
    Washington, D.C. 20554, ATTN: Enforcement Bureau -- Spectrum
    Enforcement Division, and must include the NAL/Acct. No. referenced
    in the caption.

15. The Commission will not consider reducing or canceling a forfeiture
    in response to a claim of inability to pay unless the petitioner
    submits: (1) federal tax returns for the most recent three-year
    period; (2) financial statements prepared according to generally
    accepted accounting practices; or (3) some other reliable and
    objective documentation that accurately reflects the petitioner'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. **IT IS FURTHER ORDERED** that a copy of this Notice of Apparent
    Liability for Forfeiture shall be sent by first class mail and
    certified mail return receipt requested to Ronald S. Bass, Principal
    Accounting Officer, Cardinal Communications, Inc., 11101 120^th^
    Avenue, Suite 220, Broomfield, CO 80021.

    FEDERAL COMMUNICATIONS COMMISSION

Kris Anne Monteith

Chief, Enforcement Bureau

[^1]: 47 C.F.R. § 1.17(a)(2). In a companion decision issued
    concurrently with this *NAL*, we propose a forfeiture of \$25,000
    against Cardinal for its willful and repeated failure to provide
    fully compliant E911 service in apparent violation of Section 9.5(b)
    of the Rules. *Cardinal Broadband LLC*, Notice of Apparent Liability
    and Order, DA 08-1920 (Enf. Bur., rel. August 15, 2008) ("*Cardinal
    VoIP E911 NAL*").

[^2]: An interconnected VoIP service is a service that: (1) enables
    real-time, two-way voice communications; (2) requires a broadband
    connection from the user's location; (3) requires Internet
    Protocol-compatible customer premises equipment; and (4) permits
    users generally to receive calls that originate on the public
    switched telephone network ("PSTN") and to terminate calls to the
    PSTN. *See* 47 C.F.R. § 9.3; *see also IP-Enabled Services and E911
    Requirements for IP-Enabled Service Providers*, First Report and
    Order and Notice of Proposed Rulemaking, 20 FCC Rcd 10245, 10257-58,
    ¶ 24 (2005) ("*VoIP 911 Order*"), *aff'd sub nom. Nuvio v. FCC*, 473
    F.3d 302 (D.C. Cir. 2006).

[^3]: Letter from Kathryn S. Berthot, Chief, Spectrum Enforcement
    Division, Enforcement Bureau, Federal Communications Commission, to
    Cardinal Communications, Inc. (September 10, 2007) ("LOI").

[^4]: Letter from Edward A. Garneau, Chief Executive Officer, Cardinal
    Communications, Inc., and Ronald S. Bass, Principal Accounting
    Officer, Cardinal Communications, Inc., to Kathryn S. Berthot,
    Chief, Spectrum Enforcement Division, Enforcement Bureau, Federal
    Communications Commission, and Thomas D. Fitz-Gibbon, Esq., Spectrum
    Enforcement Division, Enforcement Bureau, Federal Communications
    Commission (October 9, 2007) ("LOI Response") at 3.

[^5]: *Id.* at 3 (emphasis in original).

[^6]: Letter from Kathryn S. Berthot, Chief, Spectrum Enforcement
    Division, Enforcement Bureau, Federal Communications Commission, to
    Ronald S. Bass, Principal Accounting Officer, Cardinal
    Communications, Inc. (November 20, 2007) ("Second LOI").

[^7]: Electronic Mail Message from Ronald S. Bass, Principal Accounting
    Officer, Cardinal Communications, Inc., to Thomas D. Fitz-Gibbon,
    Esq., Spectrum Enforcement Division, Enforcement Bureau, Federal
    Communications Commission (November 30, 2007).

[^8]: *See Cardinal VoIP E911 NAL* at ¶ 12.

[^9]: 47 C.F.R. § 1.17.

[^10]: 47 C.F.R. § 1.17(b)(4).

[^11]: *In the Matter of Amendment of Section 1.17 of the Commission's
    Rules Concerning Truthful Statements to the Commission,* Report and
    Order, 18 FCC Rcd 4016, 4016-17 ¶ 1-2, 4021 ¶ 12 (2003) ("*Amendment
    of Section 1.17*"), *recon. denied,* Memorandum Opinion and Order,
    [19 FCC Rcd
    5790,](http://web2.westlaw.com/find/default.wl?rs=WLW8.01&serialnum=2004246746&fn=_top&sv=Split&tc=-1&findtype=Y&tf=-1&db=4493&utid={2956FF8F-5A81-4347-9AF0-B6AF4D68A849}&vr=2.0&rp=%2Ffind%2Fdefault.wl&mt=Communications)
    *further recon. denied,* Memorandum Opinion and Order, 20 FCC Rcd
    1250 (2004).

[^12]: *See Amendment of Section 1.17,* 18 FCC Rcd at 4017 ¶ 2 (stating
    that the revision to Section 1.17 is intended to "prohibit incorrect
    statements or omissions that are the result of negligence, as well
    as an intent to deceive").

[^13]: *See* ¶ 4, *supra.*

[^14]: *Amendment of Section 1.17*, 18 FCC Rcd at 4021 ¶ 12.

[^15]: *See, e.g., Syntax-Brillian Corporation*, Forfeiture Order and
    Notice of Apparent Liability for Forfeiture, 23 FCC Rcd 6323 6342 ¶
    44 (2008) ("*Syntax-Brillian Further NAL*") (finding that a
    television manufacturer apparently provided incorrect material
    information concerning its importation and interstate shipment of
    non-DTV-compliant televisions without a reasonable basis for
    believing that the information was correct and not misleading, in
    violation of Section 1.17(a)(2) of the Rules); *Citicasters License,
    L.P.*, Memorandum Opinion and Order and Notice of Apparent Liability
    for Forfeiture, 22 FCC Rcd 19324, 19338 ¶ 40 (2007)
    ("*Citicasters*") (forfeiture paid) (finding that a licensee's false
    certification that it had not violated the Act or any Commission
    rules during the preceding license term had no reasonable basis but
    was not made with the intent to deceive Commission and, therefore,
    apparently violated Section 1.17(a)(2) of the rules)"".

[^16]: 47 C.F.R. § 1.17(a)(1),

[^17]: Section 312(f)(1) of the Communications Act of 1934, as amended
    ("Act"), 47 U.S.C. § 312(f)(1), which applies to violations for
    which forfeitures are assessed under Section 503(b) of the Act,
    provides that "\[t\]he term 'willful', ... means the conscious and
    deliberate commission or omission of such act, irrespective of any
    intent to violate any provision of this Act or any rule or
    regulation of the Commission authorized by this Act ...." *See
    Southern California Broadcasting Co.*, Memorandum Opinion and Order,
    6 FCC Rcd 4387 (1991).

[^18]: We further note that Cardinal initially failed to respond to all
    of the questions in the LOI, which itself is a violation of a
    Commission order and subject to forfeiture. *See, e.g., Hauppauge
    Computer Works, Inc*, Notice of Apparent Liability, 23 FCC Rcd 3684
    ¶ 8 (Enf. Bur., Spectrum Enf. Div. 2008) (proposing an \$11,000
    forfeiture for failure to provide complete response to Letter of
    Inquiry) (forfeiture paid). Given that Cardinal ultimately responded
    to the LOI in full and our Section 1.17 holding largely relies on
    the same facts, however, we will exercise our prosecutorial
    discretion here and not propose an additional forfeiture for
    Cardinal's incomplete initial response to our LOI.

[^19]: 47 U.S.C. § 503(b).

[^20]: 47 U.S.C. § 503(b)(2)(E).

[^21]: *The Commission's Forfeiture Policy Statement and Amendment of
    Section 1.80 of the Rules to Incorporate the Forfeiture Guidelines,*
    Report and Order, 12 FCC Rcd 17087, 17113 (1997) ("*Forfeiture
    Policy Statement*"), *recon. denied,* 15 FCC Rcd 303 (1999).

[^22]: 47 C.F.R. § 1.80(b)(4), Note to Paragraph (b)(4): Section I. Base
    Amounts for Section 503 Forfeitures.

[^23]: *See, e.g., SBC Communications, Inc.*, Notice of Apparent
    Liability, 16 FCC Rcd 19091, 19120 (2001) (statutory maximum
    forfeiture amount proposed for intentional violation of Section 1.17
    of the Rules) (subsequent history omitted).

[^24]: As noted above, Cardinal is a reseller of Qwest analog telephone
    service and therefore is subject to the forfeiture penalties
    applicable to common carriers. *See, e.g., Telrite Corp.,* Notice of
    Apparent Liability and Order, 23 FCC Rcd 7231 (2008) (proposing a
    forfeiture for non-payment of universal service contributions
    against a toll reseller as a common carrier); *Regulatory Policies
    Concerning Resale And Shared Use Of Common Carrier Services And
    Facilities*, Report and Order, 60 FCC 2d 261 at ¶ 101(1976)
    (subsequent history omitted) ("Resellers will be offering a
    communications service for hire to the public just as the
    traditional carriers do. The ultimate test is the nature of the
    offering to the public. No one contends that resellers will make a
    private offer of communications service rather than a public
    offering. Nor we will permit resellers to operate in a
    discriminatory fashion. Accordingly, the offering which resellers
    will make will satisfy the ' *sine qua non* ' of common carrier
    status, and they will be considered as such."). *See also* 47 C.F.R.
    § 63.01 (granting blanket Section 214 authority to domestic carriers
    for the construction and operation of all new lines).

[^25]: *See* note 34, *supra*.

[^26]: *See, e.g., Access.1 New York License Company, LLC,* Notice of
    Apparent Liability, 22 FCC Rcd 15205, 15209 ¶ 11 (Media Bur. 2007)
    (forfeiture amount proposed for provision of incorrect material
    factual information adjusted downward from statutory maximum amount
    of \$32,500 to \$10,000 on basis that violation was unintentional).
    *Compare Syntax-Brillian Further NAL,* 23 FCC Rcd at 6343 ¶ 46
    (proposing statutory maximum forfeiture (\$11,000) for apparent
    negligent misrepresentation based on totality of the circumstances;
    company corrected the erroneous information only after the
    Commission had relied on it in an earlier enforcement action);
    *Intelsat North America,* Notice of Apparent Liability, 21 FCC Rcd
    9246, 9250 ¶ 12 (Enf. Bur., Inv. & Hearings Div. 2006) (proposing
    statutory maximum forfeiture (\$11,000) for apparent negligent
    misrepresentation based on the totality of the circumstances,
    including ability to pay and the Commission's reliance on the
    incorrect information). We note that in the *Syntax-Brillian* and
    *Intelsat* cases, our statutory maximum forfeiture was significantly
    less than that applicable to broadcast licensees and common
    carriers.

[^27]: *In the Matter of Amendment of Section 1.17 of the Commission's
    Rules Concerning Truthful Statements to the Commission,* Notice of
    Proposed Rulemaking, 17 FCC Rcd 3296, 3297 ¶ 3 (2002).

[^28]: *Id*. §§ 0.111, 0.311 and 1.80.