**Before the**

**FEDERAL COMMUNICATIONS COMMISSION**

**Washington, D. C. 20554**

In the Matter of )

) File No. EB-00-TC-005

NOS Communications, Inc. and )

Affinity Network Incorporated )

)

Apparent Liability for Forfeiture ) NAL/Acct. No. 200132170011

**NOTICE OF APPARENT LIABILITY FOR FORFEITURE**

Adopted: March 28, 2001 Released: April 2, 2001

By the Commission: Commissioner Furchtgott-Roth dissenting and issuing a
statement.

#  I. INTRODUCTION

1\. By this Notice of Apparent Liability for Forfeiture (\"NAL\"), we
find that NOS Communications, Inc. ("NOS") and Affinity Network
Incorporated ("ANI")[^1] have apparently willfully or repeatedly
violated section 201(b) of the Communications Act of 1934, as amended
(\"Act\"),[^2] by engaging in unjust and unreasonable practices in
connection with their provision of interstate communication services. As
discussed more fully below, we find that NOS and ANI have apparently
engaged in deceptive marketing of their interstate communication
services by failing to disclose clearly and conspicuously material facts
regarding their promotional plan offerings and pricing methodology.

2\. The Commission received almost 900 consumer complaints against NOS
and ANI. Based upon our review of the facts and surrounding
circumstances, we find that NOS Communications, Inc. and Affinity
Network Incorporated are apparently liable for proposed forfeitures in
the amount of \$500,000 each, resulting in a total proposed forfeiture
amount of \$1,000,000.

## II. BACKGROUND

> 3\. NOS and ANI are long distance service resellers that primarily
> market to small and medium-sized companies. NOS and ANI solicit new
> customers through telemarketing calls.
>
> As described more fully below, NOS and ANI employ what they term a
> "call unit rate structure" for their long distance pricing
> methodology. Under that pricing methodology, which appears to be
> unique to these companies, rates are billed not in terms of cents per
> minute, but in cents per call unit ("CPCUs").[^3] The call unit is
> made up of usage and non-usage charges, and generally does not equal a
> minute.[^4] Thus, determining total per call charges requires a
> conversion calculation. NOS and ANI state that, during telemarketing
> calls, they provide potential customers with both verbal[^5] and
> written disclosures explaining their plan offerings and charges. They
> also state that in addition to information conveyed by their
> telemarketing representatives, they routinely fax prospective
> customers two written disclosures, a "rate sheet" and an enrollment
> form or Letter of Agency ("LOA") to explain their service and pricing.

4\. Despite the purported pricing explanations by NOS and ANI, consumers
have filed almost 900 complaints with the Commission against the
companies since 1997. These complaints suggest widespread consumer
confusion regarding the companies' plan offerings and charges. Common
themes in these complaints are that NOS and ANI misrepresent their
rates, resulting in rates charged that are substantially higher than
what the companies promised. Consumers also complain that NOS's and
ANI's call unit pricing methodology is complicated and confusing and
appears designed for the purpose of cheating the public.[^6]
Complainants allege that when they complain directly to the companies,
the companies are unresponsive or claim ignorance or error, often
promising credits and discounts which never materialize.[^7] Many
complainants also allege that when they refused to pay disputed bill
amounts, they were threatened with collection or legal action, or their
toll-free numbers were "held hostage" by the companies.[^8]
Additionally, complainants state that when they attempted to discontinue
service with NOS or ANI, they experienced undue delays or difficulties
switching carriers, or continued to be billed for services by the
companies after the switch was complete.[^9]

5\. In addition to complaints filed with the Commission, NOS and ANI
have received complaints directly from consumers, but have requested
confidential treatment of the number of such complaints as well as the
number of requested cancellations of service that they receive.[^10]
Hence, this information will not be revealed here.

## 

## III. DISCUSSION

> 6\. Section 201(b) of the Act, states, in pertinent part, that
> "\[a\]ll charges, practices, classifications, and regulations for and
> in connection with such communication 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."[^11] The FCC has found that unfair and deceptive marketing
> practices by interstate common carriers may constitute unjust and
> unreasonable practices under section 201(b).[^12]

A.  [Calculating the Rate]{.underline}

7\. Understanding how NOS and ANI calculate their charges is central to
any discussion of whether the companies have unjustly and unreasonably
marketed their services. Although the companies assert that calculation
is not difficult, we disagree, finding the process both complicated and
confusing.[^13]

8\. To illustrate, we borrow from materials that ANI provided to a
customer. The example concerns a nine-minute, interstate call at 14.9
cents per call unit.[^14] The first step in calculating total charges
under the call unit rate structure is to identify the call duration in
seconds. A nine-minute call equals 540 seconds (9 x 60). Next, to
determine the usage charges, the minimum call unit (MCU) and any
additional call unit increments (ICUs) must be determined. For
interstate calls the MCU is 30 seconds, which is described as being the
same as 5 ICUs. Additional ICUs are added in increments of 5 for each
additional 30 seconds. Thus, at 14.9 cents, the MCU equals \$0.745
(\$0.149 x 5 ICUs).[^15] After adjusting for the 30-second MCU (540
seconds -- 30 seconds), the remaining seconds are divided by 30 seconds
to determine the additional ICUs (510 seconds 30 seconds = 17). At 14.9
cents, the additional ICUs equal \$12.665 (\$0.149 x 5 ICUs x 17 or
\$0.149 x 85 ICUs).[^16] To determine non-usage charges, the equivalent
call units (ECUs), must be determined. ECUs are provided by a table, and
are based upon call duration. For 540 seconds, the table states that the
total ECUs are 95. At 14.9 cents, the ECUs equal \$14.155 (\$0.149 x
95).[^17] The sum of the charges for the MCU, ICUs, and ECUs equal
\$27.565.[^18] This amount is then rounded to \$27.6 and divided by 10
to get the final bill amount (\$27.6 10 = \$2.76).[^19] If we take this
example one step further and divide the total charge of \$2.76 by 9
minutes (the duration of the call), the result is an actual per call
rate of 30.6 cents per minute, as compared to 14.9 cents per call unit.

9\. We believe the foregoing example demonstrates the complexity of the
call unit pricing methodology, which employs MCUs, ICUs, and ECUs to
determine usage and non-usage charges. To determine the total charge of
a call under call unit based rates, the customer must have detailed
information regarding each of the aforementioned call unit components,
as well as instructions on conversion calculation.[^20] Based upon the
foregoing, NOS's and ANI's use of the call unit rate structure would
almost certainly be misleading to consumers in the absence of clear and
conspicuous disclosure regarding the nature and components of the rate
structure, as well as clear and conspicuous disclosure on how to
calculate the total cost of a call.

B.  [Plan Disclosures]{.underline}

10\. Until recently,[^21] NOS and ANI used promotional plan offerings as
their primary vehicle for marketing their communication services to
customers. These promotional plan offerings were not expressly
denominated as promotional, however. The companies marketed and sold
these plans in terms of cents per minute. Then, following the second
billing period, the companies calculated the charges based on the call
unit rate structure. According to NOS and ANI, the companies calculated
the cents-per-minute rate by waiving non-usage charges for peak domestic
calls during the first two invoices. After the second invoice, non-usage
charges did apply.

11\. We believe that consumers would likely view the limited duration of
NOS's and ANI's promotional rates as significant qualifications. NOS's
and ANI's promotional plan offerings, although marketed in cents per
minute, are really equal to a call unit based rate with non-usage
charges waived for the first two invoices only. As can be seen from the
example of the 9-minute, interstate call, non-usage charges make up a
significant portion of the total cost of a call (almost half, in the
example). Thus, the application of non-usage charges to a call after a
customer's second invoice could result in double the cost of that call
as compared to a similar call made during the promotional period.
Therefore, although NOS and ANI clearly disclosed the cents-per-minute
rate, we must determine whether they clearly and conspicuously disclosed
the limited duration of that rate and the rates to be charged
thereafter.

a\. ["Rate Sheet"]{.underline}

12\. During sales calls, NOS and ANI appear to have faxed prospective
customers a "rate sheet" which sets forth the companies' rates and plan
offerings. The rate sheet states the rate in cents per minute in bold
letters at the very top of the page.[^22] Nowhere does the rate sheet
expressly state that the advertised per minute price is a "promotional"
or "introductory" rate. Near the bottom of the rate sheet, under a
heading entitled "No Contracts or Term Plans," the sheet states that
"\[s\]tandard tariffs on file with the FCC apply to all calls after the
first two invoices and, during the first two invoices, to all calls
except peak interstate & peak intrastate calls." The rate sheet further
states that "\[n\]on-transport/usage charges apply per carrier's tariff"
and that "\[p\]romotion terms per tariff on file."

13\. We believe these purported qualifications on the rates expressly
set forth in NOS's and ANI's rate sheets lack clarity and
understandability. Rather than provide clear and conspicuous disclosure
of the promotional nature of their cents-per-minute offering and of the
rates that will apply after that period, the language serves only to
obfuscate and to confuse. The language does not clearly indicate to the
consumer that the advertised cent-per-minute rates are of limited
duration, particularly given the unrelated heading. We believe that a
reasonable consumer would not gather that the quoted rates are
promotional.

14\. Additionally, we believe the reasonable consumer would not
understand that the companies would use anything other than the widely
used and understood cents-per-minute pricing methodology. First, there
is no clear language on the rate sheets indicating otherwise. Second,
the only quoted rates are set forth in cents per minute. Third, only
vague references regarding the call unit rate structure are provided.
While the term "non-transport/non-usage charges" is used, it is not
defined or explained. In short, nothing in the rate sheets notify the
customer that the call unit pricing methodology would be used after the
undefined promotion, or what that pricing methodology entails.[^23]

15\. In light of the foregoing, and our review of the confidential
materials submitted by the companies, we believe that the rate sheets
distributed by NOS and ANI mislead consumers about the fact that the
quoted rate is a promotional rate, fail to inform consumers that a
different pricing plan will apply after that period, and fail to inform
consumers how the non-promotional pricing plan will operate.[^24]
Therefore, by widely distributing the rate sheet to consumers in the
marketing of its long distance plans, we find that NOS and ANI have
apparently engaged in unjust or unreasonable marketing practices in
violation of section 201(b) of the Act.

> b\. [Letters of Agency (LOAs)]{.underline}

16. NOS and ANI fax what they refer to as an LOA to prospective
    customers together with the rate sheet.[^25] The ostensible purpose
    of this document is to secure the customer's written consent to have
    its interexchange carrier switched to NOS or ANI. However, the
    document contains additional information beyond what is allowed by
    our LOA rules.[^26] Therefore, as an LOA, the document is
    invalid.[^27] A valid LOA may contain only certain authorizing
    language as set forth in our rules.[^28] While we do not mean to
    suggest that a carrier may cure a misrepresentation that violates
    section 201(b) with a violation of our LOA rules, we reviewed the
    document to see if NOS and ANI made any attempts to clarify the
    terms of their promotional plan offering and the nature of their
    rate structure for the consumer. The document states, near the end
    of a fairly lengthy paragraph, that "\[s\]tandard tariff rates on
    file with the FCC and state commissions apply to all calls." It also
    states that \"\[n\]on-usage charges apply per carrier\'s tariff,\"
    and that \"\[p\]romotion terms per tariff on file.\" This language
    suffers from the same lack of clarity and understandability as the
    rate sheets. Further, the language does not alert the consumer that
    anything other than the cents-per-minute pricing methodology is
    applicable, and makes only vague references to the call unit rate
    structure. Here again, the term "non-usage charges" is used, but not
    defined or explained. Thus, as with the rate sheet, the language
    does not provide the consumer with enough information to determine
    total per call charges after the expiration of the promotional
    period.[^29]

C. [Forfeiture Authority]{.underline}

17\. Section 503(b)(1) of the Act states that any person that willfully
or repeatedly fails to comply with any provision of the Act or any rule,
regulation, or order issued by the Commission, shall be liable to the
United States for a forfeiture penalty.[^30] Section 503(b)(2)(B) of the
Act authorizes the Commission to assess a forfeiture of up to \$100,000
for each violation, or each day of a continuing violation, up to a
statutory maximum of \$1,000,000 for a single act or failure to
act.[^31] In determining the appropriate forfeiture amount, we consider
the factors enumerated in section 503(b)(2)(D) of the Act, including
\"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.\"

18\. NOS's and ANI's failure to make clear and conspicuous disclosures
in their rate sheets appear to demonstrate conscious disregard for
section 201(b)'s prohibition against unfair and unreasonable marketing
practices. The rate sheets support a conclusion that the companies
intentionally employed "bait and switch" marketing techniques and
withheld information regarding their promotional offerings and call unit
rate structure from consumers. And the number of consumer complaints
filed with the FCC against NOS and ANI, along with the number of
complaints and service cancellations reported by the companies, further
suggest widespread consumer confusion.

19\. Each rate sheet sent to consumers constitutes a separate violation
of section 201(b). In *Business Discount Plan, Inc.*,[^32] the
Commission assessed a forfeiture amount of \$40,000 for each instance in
which the carrier engaged in an unjust and unreasonable telemarketing
practice in violation of section 201(b). In light of the *BDP*
precedent, and weighing the facts before us, we find that a total
forfeiture amount of \$500,000 per company is appropriate. Although a
straightforward application of a \$40,000 base forfeiture amount would
likely produce a proposed forfeiture in the millions of dollars, we
believe that a forfeiture of \$500,000 per company is sufficient to
protect the interests of consumers and to deter future violations of the
Act.[^33] In the event the companies continue to violate section
201(b)'s prohibition against unjust and unreasonable marketing
practices, such violations could result in future NALs proposing
substantially greater forfeitures, or could result in issuance of a show
cause order to revoke their operating authority.[^34] NOS and ANI shall
have the opportunity to submit facts and arguments in response to this
NAL to show that no forfeiture should be imposed or that some lesser
amount should be assessed.

**IV.** **CONCLUSION AND ORDERING CLAUSES**

20\. We have determined that NOS and ANI have apparently violated
section 201(b) of the Act and the Commission\'s rules and orders as
identified above. We have further determined NOS Communications, Inc.
and Affinity Network Incorporated are apparently liable for forfeitures
in the amount of \$500,000 each.

21\. Accordingly, IT IS ORDERED, pursuant to section 503(b) of the Act,
as amended, 47 U.S.C. § 503(b)(5), section 1.80 of the Commission\'s
rules, 47 C.F.R. § 1.80, that NOS Communications, Inc. and Affinity
Network Incorporated ARE HEREBY NOTIFIED of an Apparent Liability for
Forfeiture in the amount of \$500,000 each, for willful or repeated
violations of section 201(b) of the Act and the Commission\'s rules and
orders in the paragraphs described above.

22\. IT IS FURTHER ORDERED, pursuant to section 1.80 of the
Commission\'s rules, 47 C.F.R. § 1.80, that within thirty (30) days of
the release of this Notice, NOS Communications, Inc. and Affinity
Network Incorporated SHALL PAY the full amount of the proposed
forfeiture OR SHALL FILE a response showing why the proposed forfeiture
should not be imposed or should be reduced.[^35]

23\. IT IS FURTHER ORDERED that a copy of this Notice of Apparent
Liability SHALL BE SENT by Certified Mail/Return Receipt Requested to:

NOS Communications, Inc.

### 4380 Boulder Highway

### Las Vegas, NV 89121

Affinity Network, Inc.

3660 Wilshire Boulevard, Suite 400

Los Angeles, CA 90010

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

####  Secretary

DISSENTING STATEMENT OF

**COMMISSIONER HAROLD FURCHTGOTT-ROTH**

*Re: NOS Communications, Inc. and Affinity Network, Inc. Apparent
Liability for Forfeiture*, Notice of Apparent Liability for Forfeiture,
File No. EB-00-TC-005, NAL/Acct. No. 200132170011.

The Commission has taken this action under section 201(b) of the
Communications Act without ever conducting a rulemaking to establish the
contours of that provision's applicability to common carrier
advertising. Moreover, as I have explained before, section 201(b) does
not empower the Commission to regulate common carrier advertising. This
enforcement action is therefore illegal, and I urge the affected parties
to seek judicial review of this decision.

**Background.** Although section 201(b) has been on the books for
upwards of sixty-five years, the Commission first applied this provision
to common carrier advertising in 1998. In a notice of apparent liability
issued against a long-distance carrier that had slammed customers, the
Commission concluded -- without citing a single precedent -- that a
company's representations regarding its product also constituted "unjust
and unreasonable practices" under section 201(b). *See* *Business
Discount Plan, Inc.,* Notice of Apparent Liability for Forfeiture, 14
FCC Rcd 340 \[¶ 29\] (1998). The Commission decided that the company
"knowingly misrepresented both its identity as a reseller and the nature
of its service offering in an effort to \[intentionally\] mislead small
business customers, who relied, to their detriment, on BDP's
misrepresentations of these material facts." *Id.* \[¶ 34\].[^36] Beyond
reciting the facts of that case, the Commission did not explain what it
meant by the terms "knowing misrepresentation," "detrimental reliance,"
or "material facts."

The Commission followed up its action in *Business Discount Plan* with a
policy statement entitled "Joint FCC/FTC Policy Statement for the
Advertising of Dial-Around and Other Long-Distance Services to
Consumers," 15 FCC Rcd 8654 (Mar. 1, 2000) (hereinafter "Policy
Statement"). There, the Commission acted though it had for years
regulated common carrier advertising practices under section 201(b),
when in fact it had only ever explicitly addressed that issue in the
*Business Discount Plan* dockets.[^37] *See* *id.* \[¶ 4\]. Borrowing
from the FTC's truth-in-advertising rules, the Policy Statement
explained if an advertisement makes an "implied or express objective
claim" that "conveys a material representation to reasonable consumers,"
the advertiser must make sure the representation is true and be able to
substantiate it. *Id.* \[¶ 11\]. Advertisements that might be
"misleading in the absence of qualifying or limiting information" must
contain "any necessary disclosures," which must be "clear and
conspicuous." *Id.* \[¶ 12\].

The Commission went on to set out what amounts to a detailed set of
rules interpreting this standard and provided examples of advertisements
that would be deceptive. Compliance with all of these requirements is
mandatory:

(1) "\[A\]dvertisers should exercise the greatest care in ensuring the
    accuracy of their claims related to price, including the clear and
    conspicuous disclosure of information such as minimum per-call
    charges, monthly fees, fees for additional minutes beyond the
    initial calling period, and other information that significantly
    affects the total charge of a particular call or calling plan or
    service," *id*. \[¶ 13\];

(2) "\[A\]ny significant conditions or limitations on the availability
    of the advertised rates should also be clearly and conspicuously
    disclosed," *id.* \[¶ 14\];

(3) "\[T\]he advertiser should clearly and conspicuously disclose
    whether the advertised service includes in-state calls, and the fact
    that such calls are charged at a higher rate if such is the case,"
    *id.* \[¶ 15\];

(4) "Advertisers should . . . exercise care to adequately explain
    phrases such as 'basic rates' in their ads. . . . \[W\]hen making
    claims using such terms as 'basic rates' or 'regular rates,'
    advertisers should be mindful that those terms will be evaluated
    from the point of view of the reasonable consumer, and may be
    deceptive," *id.* \[¶ 16\];

(5) "By representing a competitor's rates, an advertiser is making an
    implied claim that these rates are reasonably current. As in the
    case of any other objective claim, the advertiser must have a
    reasonable basis for this representation," *id.* \[¶ 17\];

(6) "The fact that information about significant limitations or
    restrictions on advertised prices may be available by calling a
    toll-free number or a clicking on a Web site is generally
    insufficient to cure an otherwise decptive price claim in
    advertising," *id.* \[¶ 18\];

(7) "To ensure that disclosures are effective, advertisers should use
    clear and unambiguous language, avoid small type, place any
    qualifying information close to the claim being qualified, and avoid
    making inconsistent statements or using distracting elements that
    could undercut or contradict the disclosure," *id.* \[¶ 20\];

(8) "Disclosures that are large in size, are emphasized through a
    sharply contrasting color, and, in the case of television
    advertisements, remain visible and/or audible for a sufficiently
    long duration are likely to be more effective than those lacking
    such prominence," *id.* \[¶ 28\];

(9) "\[T\]he proximity and placement of disclosures are important
    factors in determining whether they are clear and conspicuous. . .
    The placement of qualifying information away from the triggering
    representation . . . reduces the effectiveness of the disclosure.
    Furthermore, when significant qualifying information about the cost
    of a long-distance plan or service is necessary to prevent the ad
    from misleading consumers, the user of an asterisk will generally be
    considered insufficient to draw a consumer's attention to a
    disclosure placed elsewhere in an ad," *id.* \[¶30\];

(10) "Even if a disclosure is large in size and long in duration, other
     elements of an advertisement may distract consumers so that they
     may fail to notice the disclosure. . . . Advertisers should take
     care not to undercut the effectiveness of disclosures by placing
     them in competition with other arresting elements of the ad," *id.*
     \[¶ 31\]; and

(11) "\[C\]onsiderations specific to television ads include volume,
     cadence, and placement of any audio disclosures. Disclosures
     generally are more effective when they are made in the same mode
     (visual or oral) in which the claim necessitating the disclosure is
     presented," *id.* \[¶32\].

Today, the Commission applies section 201(b) for the second time to a
common carrier's advertising practices. In contrast to the facts in
*Business Discount Plan*, however, there are no allegations of slamming
in this case. Rather, the Commission bases its finding *solely* on its
conclusion that the common carriers here used rate calculations that
were "complicated and confusing," *see* Notice of Apparent Liability ¶
7, and that disclosures the carriers made regarding their promotional
rates were inadequate, *id.* ¶ 13. Based on these determinations, the
Commission concludes that each company is apparently liable for
\$500,000.

***The Commission's advertising rules have not been promulgated in
accordance with the APA.*** Even assuming that common carrier
advertising were an appropriate concern of the Commission, the agency's
rules regarding this issue have not been promulgated in accordance with
the Administrative Procedure Act. The Commission came up with a
brand-new rule in a 1998 enforcement case, greatly expanded on that rule
in a so-called "policy statement," and now appears prepared to apply
this expanded set of standards against common carriers generally.
Affected parties have never had an opportunity to weigh in on the
matter. I explain below why the APA does not permit the Commission to
apply section 201(b) to common carrier advertising without first
conducting a rulemaking.

**1.** As an initial matter, it was inappropriate for the Commission to
apply section 201(b) to common carrier advertising for the first time in
an adjudication, as it did in *Business Discount Plan*. The APA
distinguishes between "rules" and "orders." A "rule" is "an agency
statement of general or particular applicability and future effect
designed to implement, interpret, or prescribe law or policy or
describing the organization, procedure, or practice requirements of an
agency." 5 U.S.C. § 551(4). Rulemaking is the "agency process for
formulating, amending, or repealing a rule," *id*. at §551(5), and the
APA requires agencies to give public notice of a proposed rulemaking and
give interested parties an opportunity to submit comments on the
proposal, *id.* at § 553(b). An "order," by contrast, is the "whole or
part of a final disposition . . . of an agency in a matter other than
rulemaking," and it is formulated through "adjudication." *Id.* at
§ 551(6), (7). Notice and comment are not required. *Id*. at § 554.
(Also exempt from the APA's notice and comment requirements are
"interpretive rules" and "general statements of policy." *Id.* at
§ 553(d)(2).)

The distinction between rulemaking and adjudication is fundamental:
"\[T\]he entire Act is based upon a dichotomy between rule making and
adjudication. . . . Rule making is agency action which regulates the
future conduct of either groups of persons or a single person; it is
essentially legislative in nature, not only because it operates in the
future but also because it primarily concerned with policy
considerations. . . . Conversely, adjudication is concerned with

the determination of past and present rights and liabilities." Attorney
General's Manual on the Administrative Procedure Act 13-13 (1947).

Section 201(b) imposes on common carriers the immensely broad
requirement that their "charges, practices, classifications, and
regulations" be "just and reasonable." 47 U.S.C. § 201(b). But the
provision, by its plain language, does *not* authorize the Commission to
define the scope of a common carrier's section 201(b) obligations
through ad hoc adjudicatory proceedings. Rather, it directs the
Commission to "prescribe such *rules and regulations* as may be
necessary in the public interest to carry out the provisions of this
Act." *Id.* (emphasis added). In other words, to support an action
against a carrier based on an expanded or new understanding of section
201(b), the plain language of the statute requires the Commission first
to promulgate a *rule*, which can be adopted only after public notice
and comment. *See* *American Mining Congress v. Mine Safety & Health
Administration*, 995 F.2d 1106, 1109 (D.C. Cir. 1993) (noting that the
Securities and Exchange Act of 1934 "forbids nothing except acts or
omissions to be spelled out by the Commission in 'rules or
regulations,'" and that "clearly some agency creation of a duty is a
necessary predicate to any enforcement against an \[mine\] operator
\[under 30 U.S.C. § 813(h)\] for failure to keep records").

Even if the Commission were not precluded by section 201(b)'s plain
language from adopting new interpretations of the provision in an
adjudication, policy reasons required it to define the contours of a
common carrier's section 201(b) advertising obligations in a rulemaking.
As the Supreme Court, the federal appeals courts, and this agency itself
have recognized, adjudication is most appropriate when an agency seeks
incrementally to develop the law, rather than fundamentally change it.
For that reason, the Supreme Court has held that "rulemaking is
generally a better, fairer, and more effective method" of announcing a
new rule than ad hoc adjudication. *See* *Community Television of
Southern California v.* Gottfried, 459 U.S. 498, 511 (1983); *see also
Shell Offshore Inc. v. Babbitt*, 238 F.3d 622, 627-28 (5^th^ Cir. 2001);
*Pfaff v. Department of Housing & Urban Development*, 88 F.3d 739, 748
(9^th^ Cir. 1996) ("The disadvantage to adjudicative procedures is the
lack of notice they provide to those subject to the agency's authority.
While some measure of retroactivity is inherent in any case-by-case
development of the law, and is not inequitable per se, this problem
grows more acute the further the new rule deviates from the one before
it. Adjudication is best suited to incremental developments to the law,
rather than great leaps forward."); *Curry v. Block*, 738 F.2d 1556,
1563 (11^th^ Cir. 1984); *First Bancorporation v. Board of Governors*,
728 F2d 434, 438 (10^th^ Cir. 1984); *National Small Shipment Traffic
Conf. v. I.C.C.*, 725 F.2d 1442, 1447- 48 (D.C. Cir. 1984) ("Trial-like
procedures are particularly appropriate for retrospective determination
of specific facts . . . \[while\] \[n\]otice-and-comment procedures . .
. are especially suited to determining legislative facts and policy of
general, prospective applicability."). Even where an agency has
discretion to announce a new rule in an adjudication, there are limits
to this discretion. "Such a situation may present itself where the new
standard, adopted by adjudication, departs radically from the agency's
previous interpretation of the law, where the public has relied
substantially and in good faith on the previous interpretation, *where
fines or damages are involved, and where the new standard is very broad
and general in scope and prospective in application*." *See* *Pfaff*,

88 F.3d at 748 (citing *NLRB v. Bell Aerospace Co.*, 416 U.S. at 267,
295 (1974)) (emphasis added).

The Commission itself has recognized that "issues of general
applicability are more suited to rulemaking than to adjudication," and
numerous occasions it has refused to develop broad new rules in an
adjudicatory context. *See* *Application of Alton Rainbow Corp. and Cox
Radio*, Memorandum Opinion & Order, 1999 WL 566130 \[18\] (1999) ("It is
generally inappropriate to address this argument in a restricted
adjudicatory proceeding, "where third parties, including those with
substantial stakes in the outcome, have had no opportunity to
participate, and in which we, as a result, have not had the benefit of a
full and well-counseled record."); *Application of Great Empire
Broadcasting, Inc. and Journal Broadcast Corp.*, Memorandum Opinion and
Order, 14 FCC Rcd 11145 \[¶ 8\] (1999) (same); *Rulemaking to Amend
Parts 1, 2, 21, and 25 Of the Commission's Rules to Redesignate the
27.5-29.5 Ghz Frequency Band, to Reallocate the 29.5-30.0 Ghz Frequency
Band, to Establish Rules and Policies for Local Multipoint Distribution
Service and for Fixed Satellite Services*, Second Report and Order,
Order on Reconsideration, and Fifth Notice of Proposed Rulemaking, 12
FCC Rcd 12545 \[¶¶ 388-90\] (1997); *Stockholders of Renaissance
Communications Corp. and Tribune Co.*, Memorandum Opinion & Order, 12
FCC Rcd. 11866, 11887-88 \[¶ 50\] (1997); *Formulation of Policies And
Rules Relating to Broadcast Renewal Applicants, Competing Applicants,
and Other Participants to the Comparative Renewal Process and to the
Prevention of Abuses of the Renewal Process*, Second Further Notice of
Inquiry and Notice of Proposed Rulemaking, 3 FCC Rcd 5179 (1988)
("\[I\]t is generally the view that such decisions are better left to
the rulemaking process where all interested parties can participate.
'Rulemaking,' as the Supreme Court and the Court of Appeals have
recognized, 'is generally a better, fairer, and more effective method of
implementing a new industrywide policy than is the uneven application of
conditions in isolated renewal proceedings.'"); *Nextel Communications
Inc.*, Order, 14 FCC Rcd 11678 \[¶ 31\] (WTB 1999) (declining to proceed
through adjudication because to do so would be to establish spectrum
policies of general applicability).

In light of these principles, what the Commission did in *Business
Discount Plan* was illegitimate. In an enforcement action against a
single carrier, it set forth a broad new understanding of section
201(b), generally applicable on a going-forward basis to *all* common
carrier advertising. But section 201(b)'s plain language required it to
conduct a rulemaking before it imposed this new obligation on a carrier.
And even assuming the agency had some discretion to apply a new
interpretation of section 201(b) in an enforcement action, that
discretion is not unbounded. Where fines and damages are involved, and
the new standard is a broad from an agency's previous regulatory
position, as was the case in *Business Discount Plan*, courts have held
that adjudication is not a proper vehicle for announcing new law.

**2.** Not only was the Commission wrong in adopting a new rule
regarding common carrier advertising in *Business Discount Plan*, it
compounded the problem by expanding on that rule in what it labeled a
"policy statement." The agency's detailed description of the kinds of
advertising practices that will violate section 201(b) is not a policy
statement at all, but rather amounts to a set of substantive new rules,
which are subject to the APA's notice and comment requirements. Its
attempt to enforce these rules here is therefore improper.

The APA exempts "policy statements" and "interpretive rules" from the
statute's notice and comment requirements, 5 U.S.C. § 553 (b)(A), while
all other rules -- which the courts have often called "substantive" or
"legislative" rules -- are subject to these provisions. A quick review
of these statutory distinctions is helpful.

Although the precise difference between policy statements and
interpretive rules is the subject of some dispute, *see* *Appalachian
Power Co. v. Environmental Protection Agency*, 208 F.3d 1015, 1021 n.13
(D.C. Cir. 2000), courts have observed that a policy statement "does not
seek to impose or elaborate or interpret a legal norm," but rather
"represents an agency position with respect to how it will treat --
typically enforce -- the *governing* legal norm." *Syncor International
Corp. v. Shalala*, 127 F.3d 90, 94 (1997) (emphasis added). "By issuing
a policy statement, an agency simply lets the public know its current
enforcement or adjudicatory approach. . . . Policy statements are
binding on neither the public, nor the agency." *Id*. (citations
omitted); *see also* *United States Telephone Ass'n v. FCC*, 28 F.3d
1232, 1234 (D.C. Cir. 1994) ("\[T\]he paradigm of a policy statement
\[is\] an indication of an agency's current position on a particular
regulatory issue.").

An interpretive rule, on the other hand, "typically reflects an agency's
construction of a statute that has been entrusted to the agency to
administer." *Id.* "The legal norm is one that Congress has devised; the
agency does not purport to modify that norm, in other words, to engage
in lawmaking. . . . Instead, it is construing the product of
congressional lawmaking 'based on specific statutory provisions.'" *Id.*
For these reasons, "'\[t\]he distinction between an interpretative and
substantive rule . . . likely turns on how tightly the agency's
interpretation is drawn linguistically from the actual language of the
statute.'" *Id.* (citing *Paralyzed Veterans of American v. D.C. Arena
L.P.*, 117 F.3d 579, 588 (D.C. Cir. 1997).

Substantive rules, in contrast to both interpretive rules and policy
statements, *modify* or *add* to a legal norm, based on the agency's
*own authority*. *Id.* at 95. "That authority flows from a congressional
delegation to promulgate substantive rules, to engage in supplementary
lawmaking." *Id.* Because the agency is engaged in lawmaking, the APA
requires it to comply with notice and comment. *Id.*

In determining whether an agency's exercise of regulatory authority
qualifies as a substantive rule, courts begin with an examination of the
applicable statute. Where the authorizing statute is "very general,
using terms like 'equitable' or 'fair,' and the 'interpretation' really
provides all the guidance, then the latter will more likely be a
substantive regulation, because then the agency's rule gives content to
the legal norm in question." *Id.* at 94 n.6 (citing *Paralyzed
Veterans*, 117 F.3d at 588). As the Seventh Circuit has explained:

> When Congress authorizes an agency to create standards, it is
> delegating legislative authority, rather than itself setting forth a
> standard which the agency might then particularize through
> interpretation. Put differently, *when a statute does not impose a
> duty on the persons subject to it but instead authorizes (or requires
> -- it makes no difference) an agency to impose a duty, the formulation
> of that duty becomes a legislative task entrusted to the agency*.
> Provided that a rule promulgated pursuant to such a delegation is
> intended to bind, and not merely to be a tentative statement of the
> agency's view, which would make it just a policy statement, and not a
> rule at all, the rule would be the clearest possible example of a
> legislative rule, as to which the notice and comment procedure . . .
> is mandatory.

*Hoctor v. United States Dep't of Agriculture*, 82 F.3d 165, 169-70
(7^th^ Cir. 1996) (emphasis added).

Also important to the determination whether an agency publication
amounts a substantive rule is whether it prescribes mandatory
requirements. *See Syncor*, 127 F.3d at 95 (holding that an agency's
decision is substantive if it uses language that is "consistent only
with the invocation of its general rulemaking authority to extend its
regulatory reach."). In *Syncor*, for example, the court concluded that
a "notice" issued by the Food and Drug Administration announcing that a
certain category of radioactive drugs should comply with various
statutory requirements was substantive. Although the agency described
this notice as a "policy statement" and as "guidance," the court ruled
that the agency's statement that it had "concluded" that these drugs
"should be regulated" amounted to fundamentally new regulation, which
must be informed by notice and comment rulemaking. *Id.*; *see also
Appalachian Power Co.*, 208 F.3d at 1023 ("\[T\]he entire Guidance, from
beginning to end, reads like a ukase. It commands, it requires, it
orders, it dictates. Throughout the guidance, EPA has given the States
their 'marching orders' and EPA expects the States to fall into line . .
.."); *Sweet v. Sheahan*, 235 F.3d 80, (2d Cir. 2000) ("Legislative
\[*i.e.*, substantive\] rules can impose obligations on members of the
public distinct from, and in addition to, those imposed by statute.");
*United States v. Picciotto*, 875 F.2d 345, 348 (D.C. Cir. 1989)
(holding that rules that "impose obligations" are substantive, whereas
rules that "merely restate existing duties" are interpretive).

Applying these principles here, it is clear that the advertising
guidelines set out in the Commission's so-called policy statement are
substantive rules. First, section 201(b) is a classic example of a
congressional delegation to an agency of lawmaking authority. The
provision requires only that a carrier's "charges, practices,
classifications, and regulations" be "just and reasonable," leaving it
to the agency to supply content to these enormously broad terms. Despite
what the Commission might say, it is certainly not obvious from the text
of the statute that a carrier's "practices" necessarily include
advertising. Indeed, the word "practices," standing alone, is so broad
that it could include virtually any corporate practice. Nor does the
statute, on its face, tell us what "just" or "reasonable" mean.

In its "policy statement," the Commission gave new meaning to these
terms, and in doing so, acted in its lawmaking capacity. The agency
informed carriers that their advertising practices would not meet the
"just and reasonable" standard unless they ensured the accuracy of their
price-related claims, including information regarding minimum per-call
charges, monthly fees, fees for additional minutes beyond the initial
calling period, geographic restrictions on rates, and comparative price
claims. Policy Statement ¶ 12-15. The Commission also concluded that
section 201(b)'s "just and reasonable" standard required advertisers
"clearly and

conspicuously" to disclose "qualifying information," and it explained in
detail the form such disclosures should take. *See id.* ¶ 20-32.

These are plainly new requirements. Even assuming that *Business
Discount Plan* legitimately announced a new rule (which it did not),
that case dealt only with a carrier's misrepresentations in the slamming
context. The carrier there told customers that it was a consolidated
billing service and misled them into changing their long-distance
carrier. The most one may make of that case is that section 201(b)
applies to a carrier's illegal slamming conduct, precluding a carrier
from misrepresenting to customers the type of service the carrier offers
and from fraudulently inducing them to change their long-distance
carrier. *Business Discount Plan* said nothing about the accuracy of
price-related advertising or the need for "clear and conspicuous"
disclosures, or any of the other issues the Commission addressed in its
policy statement.

A second sign that the Commission's "policy statement" is actually a set
of substantive rules is the mandatory nature of these new requirements.
Section B, for example, is entitled "Material Information that *Should*
Be Disclosed in Advertisements for Long-Distance Calling Services." Each
paragraph in Section B states that carriers "should" disclose specific
pieces of pricing information, and carriers are informed that they
"should" also ensure that these disclosures are "clear and conspicuous."

In short, the Commission's so-called policy statement is a substantive
rule in masquerade. The agency created a new regime governing common
carrier advertising, with legal consequences for common carriers. It
went far beyond whatever rule it created in *Business Discount Plan*.
The statement simply does not qualify as a mere interpretation of an
existing rule or a statement of policy regarding the enforcement of
governing law. It is a substantive change in the law. As such, it should
have been promulgated in compliance with the APA's notice and comment
rulemaking procedures. It was not, and this enforcement action is
therefore illegal.

#  The Commission Lacks Jurisdiction to Regulate Common Carrier Advertising Under Section 201(b). *As I have written before, I do not believe Congress intended to delegate to the Commission the authority to regulate common carrier advertising.* See, e.g.*,* Commission on the Verge of a Jurisdictional Breakdown: The FCC and Its Quest to Regulate Advertising*, 8 CommLaw Conspectus 219 (2000); Dissenting Statement,* Joint FCC/FTC Policy Statement for the Advertising of Dial-Around and Other Long Distance Services to Consumers*, 15 FCC Rcd 8654 (2000). By specifically giving the Federal Trade Commission authority to regulate pay-per-call service advertising in the 1992 Telephone Disclosure and Dispute Resolution Act, Congress indicated that it did not think this Commission possessed general jurisdiction to regulate common carrier advertising. In the preemption context, moreover, the federal courts have indicated that the Communications Act does not impose a duty on common carriers regarding advertising. For these reasons, it is my view that the Commission lacks jurisdiction to regulate advertising.*

# 

# *\* \* \* \**

Although it apparently thinks otherwise, this agency does not have
unlimited authority to enforce against parties any standard of conduct
it might think is appropriate. If the Commission wishes to regulate
common carrier advertising under section 201(b), it must put its
proposed position out for comment and be prepared to justify whatever
rule it fashions to the public and to

the courts. It has not done this here, and this enforcement action is
therefore unlawful. I dissent from this decision.

#### 

#### 

[^1]: NOS, is a Maryland corporation, whose principal address is 4380
    Boulder Highway, Las Vegas, NV 89121. NOS also conducts business
    under the following business names: International Plus, O11, INETBA
    (or Internet Business Association), and I-Vantage. ANI is a
    California corporation, whose principal address is 3660 Wilshire
    Boulevard, Suite 400, Los Angeles, CA 90010. ANI also conducts
    business under the business names HorizonOne Communications
    ("HorizonOne") and QuantumLink Communications ("QuantumLink"). All
    of the entities identified herein have in common either the same
    principals or officers. For purposes of this NAL, the term "NOS" or
    the term "ANI" (collectively "companies") includes all of NOS's and
    ANI's respective identified entities, including any of their
    respective successors or assigns.

[^2]: ^    ?^ 47 U.S.C. § 201(b).

[^3]: According to NOS and ANI, the limited residential plans, sold
    under the International Plus and O11 company names, do not employ
    the call unit rate structure but are sold, tariffed, and billed as
    cents per minute offerings. For this reason, the International Plus
    and O11 service plans will not be addressed in this NAL. *See* NOS
    and ANI's September 14, 2000 joint response to our September 28,
    2000 letter of inquiry, Attachment B, page 1 ("Response").

    > NOS and ANI requested confidential treatment of certain
    > information they submitted in response to written requests from
    > the Enforcement Bureau. On November 3, 2000, the Bureau released
    > an Order denying the request for failing to comply with the
    > standards set forth in section 0.459(b) of the Commission's rules.
    > *NOS Communications, Inc.*, DA 00-2479 (Enf. Bur., Nov. 3, 2000),
    > citing 47 C.F.R. § 0.459(b). On November 9, 2000, NOS and ANI
    > filed an Application for Review of the Order. Because, in this
    > NAL, we use only materials submitted by complainants and make no
    > specific reference to information provided by NOS and Affinity
    > under their request for confidential treatment, we decline to
    > address the merits of the pending Application for Review. The
    > Application for Review will be addressed separately.

[^4]: The call unit [may]{.underline} equal a minute under very limited
    circumstances, such as for facsimile calls and during certain
    limited promotional periods.

[^5]: *See* footnote 29, *infra.*

[^6]: *See e.g*, Informal Complaint No. G2000010809, filed December 8,
    1999; Informal Complaint No. P-20826, filed June 6, 2000; Informal
    Complaint No. G2000017422, filed February 23, 2000; Informal
    Complaint No. G2000009619, filed December 3, 1999; Informal
    Complaint No. 00-G6806, filed August 22, 2000; Informal Complaint
    No. G2000015040, filed February 2, 2000; and Informal Complaint No.
    G2000010163, filed December 17, 1999.

[^7]: *See e.g*, Informal Complaint No. G2000016345, filed February 1,
    2000 ("I am at my wits end. I cannot take trying to communicate with
    these people. I believe they are trained to lie and deceive.');
    Informal Complaint No. 00-G6806, filed August 22, 2000 ("Affinity
    always said they couldn't figure out how the rate kept going up. It
    was always the same song and dance. A credit was issued after many
    phone calls to clarify the problem and after months had gone by.
    Sometimes they would offer us a discounted rate if we would excuse
    their errors."); Informal Complaint No. G2000009619, filed December
    3, 1999; and Informal Complaint No. 00-G6806, filed August 22, 2000.

[^8]: *See e.g*, Informal Complaint No. G2000005500, filed November 12,
    1999 ("They are virtually holding my toll free numbers hostage. My
    only choice seems to be to pay the disputed invoice at these
    exhorbitant rates or lose my toll free numbers that I have had for
    so many years."); Informal Complaint No. 00-G943, filed May 24, 2000
    ("I was also told my 800 number has been taken over by NOS. They
    will not allow me to have MCI World Com take over until I pay the
    entire bill."); Informal Complaint No. G2000000524, filed November
    15, 1999 ("I had made several attempts with MCI to have all our
    lines switched to MCI but somehow Affinity would not let go of our
    800 numbers."); Informal Complaint No. P5493, filed January 18, 2000
    ("They have sent me a letter threatening legal action since I only
    paid 75% of my Nov. 18, 1999 invoice as told to do by their customer
    service representative."); and Informal Complaint No. G2000016345,
    filed February 1, 2000 ("I then received my first threatening letter
    from NOS . . . telling me they would shut off my service if I did
    not pay . . . and send me to collections. The frustrating thing is
    that everyone I spoke to in the company directed me NOT to pay the
    bill until the credit was applied.')

[^9]: *See e.g*., Informal Complaint No. 00-G372, filed May 24, 2000
    ("NOS refused to switch me back to my previous long distance
    provider . . . and local toll provider . . . when I was not
    satisfied with its services."); Informal Complaint No. G2000016321,
    filed February 1, 2000 ("I have asked repeatedly to have my long
    distance service terminated, but to date they have not terminated my
    service. I can't find a way to get away from the company.").

[^10]: *See* footnote 3, *supra*.

[^11]: 47 U.S.C. § 201(b).

[^12]: *Business Discount Plan, Inc.*, Order of Forfeiture, 15 FCC Rcd
    14461 (2000) ("BDP"), *recon. granted in part and denied in part*,
    FCC 00-424 (2000); *AT&T Corp.*, 71 RR2d 775 (1992);
    *Telecommunications Research and Action Center and Consumer Action*,
    4 FCC Rcd 2157 (Com.Car.Bur. 1989); *see also* *Joint FCC/FTC Policy
    Statement For the Advertising of Dial-Around And Other Long-Distance
    Services To Consumers*, 15 FCC Rcd 8654 (2000).

[^13]: This opinion is reflected in many of the consumer complaints
    received by the Commission. One complainant writes: "It took me
    about 2 hours to simplify their 'magic formula' (I am a software
    engineer with a strong math background). I didn't like it, because
    it looked to me as a good way for confusing and cheating customers."
    Informal Complaint No. 00-G372, filed May 24, 2000. Another
    complainant writes that NOS's call unit rate structure "turns out to
    be a convoluted formula constructed to gouge customers." Informal
    Complaint No. G2000017422, filed February 23, 2000. Another writes,
    "\[T\]he Total Calling Unit, which doesn't easily translate to cost
    per minute charges but serves to confuse the customer into thinking
    that costs are less than they are." Informal Complaint No. P13117,
    filed March 20, 2000. Still, another complains: "Upon review we
    noticed we were not being billed in minutes, but in 'TCU's'. What's
    that? Who can calculate it?" Informal Complaint No. G2000009309,
    filed December 8, 1999.

[^14]: Although NOS and ANI represent that they widely disseminate
    documents similar to this one to customers and prospective
    customers, they have requested that we afford confidential treatment
    to those they have submitted in response to our requests. *See
    supra*, footnote 3. Since we obtained this document not from NOS or
    ANI, but from a consumer complaint file, the companies' request for
    confidentiality does not pertain to this document. *See* Informal
    Complaint No. G2000007824, filed November 26, 1999.

[^15]: The example states "5 ICUs/1 MCU = \$0.0754." It appears that the
    sum of the product has been divided by 10 and that certain numbers
    have been transposed in error, as \$0.149 x 5 ICUs equals \$0.745
    and not \$0.0754.

[^16]: The example states "85 ICUs = \$1.2665." Again, the sum of the
    product appears to have been divided by 10 to arrive at \$1.2665,
    instead of \$12.665.

[^17]: The example states "95 ECUs = \$1.4155." Once again, the sum of
    the product appears to have been divided by 10 to arrive at
    \$1.4155, instead of \$14.155.

[^18]: The example states that the sum of the charges (\$0.0754 +
    \$1.2665 + \$1.4155) equals \$2.7574.

[^19]: We divided by 10 to bring our calculation in conformity with the
    example.

[^20]: NOS's and ANI's customer invoices detail the duration of each
    call, not in minutes, but in total call units. From the foregoing
    example, the call duration in minutes is a necessary component for
    performing the conversion calculation. Thus, without the call
    duration in minutes, the customer is unable to perform the
    conversion calculation and unable to verify the accuracy of the
    amount, or determine the cent per minute rate, being billed per
    call. One complainant writes that "\[s\]ince the invoice does not
    indicate the amount of time utilized on each call it is not possible
    to calculate the precise charge." Informal Complaint No. P-16219,
    filed April 10, 2000 . Yet another complains that "\[t\]he billing
    was not understandable in a clear and simple manner because it was
    based on \`call units', and not minutes." Informal Complaint No.
    P-20826, filed June 6, 2000.

[^21]: We are continuing to review NOS's and ANI's current plan
    offerings for compliance with section 201(b) and will not hesitate
    to take further action if deemed necessary.

[^22]: Although NOS and ANI represent that they widely disseminate
    documents similar to this one to customers and prospective
    customers, they have requested that we afford confidential treatment
    to the ones they have submitted in response to our requests. *See
    supra*, footnote 3. Since we obtained this document not from the
    companies, but from a consumer complaint file, their request for
    confidentiality does not pertain to this document. *See* Informal
    Complaint No. G2000014881, filed February 1, 2000.

[^23]: In other examples of the rate sheet submitted by NOS and ANI, the
    purportedly limiting or qualifying information directs the consumer
    to a "Welcome Package" for additional information. We believe that
    the fact that additional information might be available elsewhere is
    insufficient to form the required disclosure.

[^24]: The materials submitted by NOS and ANI under a confidentiality
    request include additional rate sheets. Those rate sheets appear
    similarly to mislead consumers.

[^25]: Although NOS and ANI represent that they widely disseminate
    documents similar to this one to customers and prospective
    customers, they have requested that we afford confidential treatment
    to the ones they have submitted in response to our requests. *See
    supra*, footnote 3. Since we obtained this document, not from the
    companies, but from a consumer complaint file, their request for
    confidentiality does not pertain to this document. *See* Informal
    Complaint No. G2000016321, filed February 1, 2000.

[^26]: 47 CFR § 64.1160.

[^27]: *Id.* at (a).

[^28]: *Id.* at (b).

[^29]: We also find that NOS and ANI did not cure the apparent
    violations of section 201(b) by verbal disclosures. Although NOS and
    ANI, in their Response, allege that sales representatives make
    required verbal disclosures during telemarketing calls that the
    pricing offered is in cents per call unit, such disclosures appear
    only relevant to the companies' current plan offerings, which do not
    include a cents-per-minute rate. Additionally, consumer complaints
    further suggest that verbal disclosures did not cure the apparent
    defects. *See* *e.g.* Informal Complaint No. G2000009619, filed
    December 19, 1999 ("I do not recall ever being told by anyone at ANI
    that this was a promotional rate, which would last for 2 months
    only. . . I also do not recall anyone telling me about ANI's policy
    of automatically converting 'minutes' to 'total call units' (TCU's)
    on the third month."); Informal Complaint No. G2000010809, filed
    December 8, 1999 ("My decision to switch to ANI was based on their
    advertised rate. This was further supported during phone
    conversations. . . during which the 7.9 cents per minute rate was
    confirmed. . .'); and Informal Complaint No. G2000006122, filed
    November 17, 1999 ("From my first conversation with NOS, the cost
    per minute for long-distance has been discussed. . . Always I
    received a response with no correction as to the 'per minute'
    term.").

[^30]: 47 U.S.C. §503(b)(1)(B); *see also* 47 C.F.R. § 1.80(a)(2).

[^31]: 47 U.S.C. § 503(b)(2)(B); *see also* 47 C.F.R. § 1.80(b)(2)
    (*Amendment of Section 1.80 of the Commission\'s Rules,* Order, 12
    FCC Rcd 1038 (1997)(inflation adjustment to \$100,000/\$1,100,000);
    *Amendment of Section 1.80(b) of the Commission\'s Rules and
    Adjustment of Forfeiture Maxima to Reflect Inflation*, Order, 15 FCC
    Rcd 18,221 (2000)(inflation adjustment to \$120,000/\$1,200,000)).

[^32]: 15 FCC Rcd 14461 at 14471-72.

[^33]: The total volume of rate sheets submitted by the companies
    appears to number in the hundreds. At the total proposed forfeiture
    amount of \$500,000 per company, this would equal just 12.5
    violations per company if the Commission were to impose a forfeiture
    of \$40,000 per violation.

[^34]: *See CCN, Inc. et al.*, 12 FCC Rcd 8547 (1997).

[^35]: Payment of the forfeiture amount may be made by mailing a check
    or similar instrument payable to the order of the Federal
    Communications Commission, to the Forfeiture Collection Section,
    Finance Branch, Federal Communications Commission, P.O. Box 73482,
    Chicago, Illinois 60673-7482. The payment should note the \"NAL/
    Acct. No.\" referenced above. The response, if any, must be mailed
    to Catherine W. Seidel, Chief, Telecommunications Consumers
    Division, Enforcement Bureau, Federal Communications Commission, 445
    12th Street S.W., Room 3-C365, Washington, D.C., 20554, and must
    include the \"NAL/Acct. No.\" referenced above.

[^36]: The Commission issued an order of forfeiture in the matter last
    July, 15 FCC Rcd 14,461 (2000), and denied a petition for
    reconsideration in December, 2000 WL 1785129 (Dec. 7, 2000).

[^37]: The Commission cited *AT&T Card Issuer Identification Cards.*,
    Letter, 7 FCC Rcd. 7529 (1992), as standing for the proposition that
    it had previously "found unfair and deceptive marketing practices by
    common carriers constitute unjust and unreasonable practices under
    section 201(b)." But that case did not squarely raise the section
    201(b) issue. It concerned statements that AT&T had made in
    literature sent to card holders, telling them that "government
    requirements" required the company to issue new cards and asking
    them to destroy their old cards. The Commission staff determined
    that the language might lead customers to destroy cards issued by
    companies affiliated with AT&T, and it sent a letter of admonishment
    to AT&T. But it never actually addressed the section 201(b)
    question, and the Commission's suggestion that the case supports its
    regulation of common carrier advertising under section 201(b) is
    disingenuous.