**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of ) File No. EB --00-IH-0057

)

**Matrix Telecom, Inc.** ) NAL/Acct. No. X32080022

## 

## NOTICE OF APPARENT LIABILITY FOR FORFEITURE

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

By the Commission:

## I. INTRODUCTION

1\. In this Notice of Apparent Liability for Forfeiture (\"NAL\"), we
find that Matrix Telecom, Inc. has apparently violated Section 254(d) of
the Communications Act of 1934, as amended (the "Act"), and Section
54.706 of the Commission's rules by willfully and repeatedly failing to
make required contributions to universal service support programs. [^1]
Based on our review of the facts and circumstances in this case, we
conclude that Matrix is apparently liable for a forfeiture in the amount
of \$113,000.

# 

# II. BACKGROUND

### 

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

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

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

3\. Matrix, a provider of interstate telecommunication services, does
not appear to dispute its liability for universal service contributions
and has paid a portion of the amount it owes for universal service.
USAC's records reflect that since January 1999, Matrix has made over
fourteen payments to USAC, totaling more than \$1.3 million. During that
period, however, Matrix has missed eight monthly payments and failed to
cure its arrearages. As a result, USAC's records indicate that, as of
April 17, 2000, Matrix owed over \$1 million in universal service
payments.

4\. In February 2000, the Enforcement Bureau sent a letter to Matrix
explaining that Matrix was the subject of a potential enforcement
action. [^7] In its response, Matrix states that it "wishes to ensure
full compliance with the Commission's Rules and seeks to retire its
outstanding universal service obligation as soon as practicable."[^8] In
a follow-up letter, Matrix explained that Platinum Equity Holdings, LLC
acquired Matrix from Netlojix Communications, Inc. (formerly Avtel) on
November 30, 1999 and a new management team is now in place.[^9] Also in
that letter, Matrix reported that it had presented USAC with a payment
plan designed to cure its current arrearage in thirty-six months. Matrix
represented that each month it will pay an amount equal to its current
monthly obligation and an additional \$21,500 toward the amount it is in
arrears. Matrix has been making payments pursuant to this plan since May
2000.

**III. DISCUSSION**

5\. We conclude that Matrix is apparently liable for forfeiture for
willful and repeated violations of Section 254 of the Act and the
Commission's rules governing universal service contributions. Since
early 1999, Matrix has paid only a portion of its universal service
obligations. As noted above, Section 254(d) of the Act and Sections
54.706 and 54.709 of the Commission's rules require that interstate
telecommunications carriers make universal service contributions in the
amount calculated by USAC. [^10] We find that Matrix's failure to make
the required contributions is both willful and repeated. The term
"willful" means that the violator knew that it was taking the action in
question, irrespective of any intent to violate the Commission's
rules,[^11] and "repeated" means more than once.[^12] Considering the
record before us, it appears that Matrix knowingly failed to make
universal service payments in the full amounts set forth in USAC's
monthly invoices.

6\. Section 503(b)(1)(B) of the Act provides that any person who
willfully or repeatedly fails to comply with the Act or the Commission's
rules shall be liable for a forfeiture penalty.[^13] Section
503(b)(2)(B) of the Act authorizes the Commission to assess a forfeiture
of up to \$110,000 for each violation, or each day of a continuing
violation, up to a statutory maximum of \$1,100,000 for a single act or
failure to act.[^14] In assessing a forfeiture, we take into account the
statutory factors set forth in Section 503(b)(2)(D) of the Act, which
include the nature, circumstances, extent and gravity of the violation,
and, with respect to the violator, the degree of culpability, any
history of prior offenses, ability to pay, and such other matters as
justice may require.[^15]

7\. Although Matrix's delinquency has continued since early 1999, we
limit the scope of this NAL to Matrix's apparent failures to make the
contributions assessed in USAC invoices for November and December
1999,[^16] each of which sought a monthly contribution of \$149,614 for
the universal service programs. Although, in the past, we have
sanctioned carriers for failure to make the required universal service
contributions for only one month of a continuing violation, we expressly
stated that:

> \[I\]n light of the accumulating record of non-compliance, we are
> prepared to impose substantially greater forfeitures in the future. .
> . . \[O\]ur future notices likely will cover greater periods of
> non-payment than a single month . . . \[and\] will be based on some
> variant of \[our\] formula, which includes, as a component of the
> forfeiture, one half of the unpaid contribution amount for the period
> in question.[^17]

8\. Taking into account the factors listed in Section 503(b)(2)(D) of
the Act,[^18] as well as Commission precedent, we find Matrix apparently
liable for a forfeiture of \$113,000. This forfeiture consists of three
components. First, we have assessed a base figure of \$40,000 as a
general fixed penalty of \$20,000 for each of the two violations at
issue.[^19] As we noted in the [Conquest Forfeiture Order]{.underline},
it is necessary to set a base figure designed to deter delinquencies
regardless of their amount.[^20] Second, consistent with the [ConQuest
Forfeiture Order]{.underline}, we have added to the base amount of
\$40,000 an amount equal to one half of the unpaid \$299,228 universal
service contributions for the months of November and December1999, or an
addition of \$149,614.[^21] We have imposed this component of the
forfeiture to illustrate that a delinquent carrier's culpability and the
consequential damage it causes to the goal of universal service may vary
with the size of the contributions it fails to make.[^22]

9\. Finally, for the reasons explained below, we have applied a downward
adjustment of \$76,614, approximately 40% of the sum of the first two
components. The Act and the Commission's rules provide a framework for
adjusting the forfeiture amounts imposed depending on the facts and
circumstances of the particular case.[^23] Although Matrix has
repeatedly failed to pay in full outstanding balances when due, Matrix
has acknowledged its liability for the amounts assessed, and has made
significant efforts to rectify its failure to make required universal
service contributions. As noted, since January 1999, Matrix has made
over fourteen payments totaling over \$1.3 million toward its universal
service obligations. Further, Matrix has submitted a plan designed to
cure its arrearage. We consider Matrix's significant efforts to pay to
be a factor warranting a downward adjustment of the amount of the
forfeiture. We also consider its submission of a plan to cure its
outstanding balance and commencement of payments on that plan to be an
additional factor warranting a downward adjustment.

10\. Although Matrix's failure to make payment in other months
represents separate violations of the Act and our rules, we are not
imposing any sanction for these apparent violations at this time.
Nevertheless, we note that these violations could form the basis for
additional notices of apparent liability.[^24] If Matrix continues to
violate our universal service rules, such violations could result in
future NALs proposing substantially greater forfeitures, or could result
in issuance of a show cause order to revoke Matrix's operating
authority.[^25]

## IV. ORDERING CLAUSES

11\. Accordingly, IT IS ORDERED THAT, pursuant to Section 503(b) of the
Act,[^26] and Section 1.80 of the Commission's rules,[^27] Matrix
Telecom, Inc. is hereby NOTIFIED of its APPARENT LIABILITY FOR A
FORFEITURE in the amount of one hundred thirteen thousand dollars
(\$113,000) for violating the Act and the Commission\'s rules requiring
regular contributions for universal service.

12\. IT IS FURTHER ORDERED THAT, pursuant to Section 1.80 of the
Commission\'s rules,[^28] within thirty days of this NOTICE OF APPARENT
LIABILITY Matrix Telecom, Inc. SHALL PAY the full amount of the proposed
forfeiture or SHALL FILE a written statement seeking reduction or
cancellation of the proposed forfeiture.

13\. Payment of the forfeiture may be made by credit card through the
Commission\'s Credit and Debt Management Center at (202) 418-1995 or by
mailing a check or similar instrument, payable to the order of the
Federal Communications Commission, to the Forfeiture Collection Section,
Finance Branch, Federal Communications Commission, P.O. Box 73482,
Chicago, Illinois 60673-7482. The payment should note the NAL/Acct. No.
referenced above.

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

15\. The Commission will not consider reducing or canceling a forfeiture
in response to a claim of inability to pay unless the respondent
submits: (1) federal tax returns for the most recent three-year period;
(2) financial statements prepared according to generally accepted
accounting practices ("GAAP"); or (3) some other reliable and objective
documentation that accurately reflects the respondent's current
financial status. Any claim of inability to pay must specifically
identify the basis for the claim by reference to the financial
documentation submitted.

16\. Requests for payment of the full amount of this Notice of Apparent
Liability under an installment plan should be sent to: Chief, Credit and
Debt Management Center, 445 12th Street, S.W., Washington, D.C.
20554.[^29]

17\. IT IS FURTHER ORDERED THAT a copy of this NOTICE OF APPARENT
LIABILITY shall be sent by Certified Mail Return Receipt Requested to
Thomas K. Crowe, Esq. counsel for Matrix Telecom, Inc., 2300 M Street,
N.W. Suite 800, Washington, D.C. 20037.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

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

[^2]: 47 U.S.C. § 254(d).

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

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

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

[^6]: 47 C.F.R. § 54.713.

[^7]: Letter from David H. Solomon, Chief, Enforcement Bureau, to Matrix
    Telecom, Inc. dated February 16, 2000.

[^8]: Letter from Thomas K. Crowe, Esq., counsel for Matrix to David H.
    Solomon, Chief, Enforcement Bureau, dated March 10, 2000.

[^9]: Letter from Todd Murcer, Manager of Business Development, Matrix
    Telecom, Inc. to Suzanne M. Tertrault, Assistant Chief, Enforcement
    Bureau, dated May 30, 2000.

[^10]: 47 U.S.C. 254(d); 47 C.F.R. §§ 54.706, 54.709.

[^11]: *See* [Jerry Szoka]{.underline}, 14 FCC Rcd 9857, 9865 (1999);
    [Southern California Broadcasting Co.]{.underline}, 6 FCC Rcd 4387
    (1991).

[^12]: *See* [Hale Broadcasting Corp.]{.underline}, 79 FCC 2d 169, 171
    (1980).

[^13]: 47 U.S.C. § 503(b)(1)(B); 47 C.F.R. § 1.80(a)(2).

[^14]: 47 U.S.C. § 503(b)(2)(B); 47 C.F.R. § 1.80(b)(2).

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

[^16]: According to USAC's records, Matrix's November universal service
    contribution was due on December 16, 1999 and its December
    contribution was due on January 14, 2000.

[^17]: [ConQuest Operator Services Corp.]{.underline}, 14 FCC Rcd 12518,
    12528 (1999) ("[ConQuest Forfeiture Order]{.underline}").

[^18]: 47 U.S.C. § 503(b)(2)(D).

[^19]: *See* [ConQuest Forfeiture Order]{.underline}, 14 FCC Rcd at
    12527 (The Commission determined that \$20,000 should be the general
    penalty for failure to pay the assessed universal service
    contribution in a timely manner).

[^20]: *See* [id.]{.underline}

[^21]: [Id.]{.underline} *See also* [Operator Communications,
    Inc.]{.underline}, 13 FCC Rcd 16082, 16087 (1998)

[^22]: *See* [Conquest Forfeiture Order]{.underline}, 14 FCC Rcd at
    12,527, ¶ 19.

[^23]: *See* 1.80(b)(4) of the Commission's rules and accompanying note,
    47 C.F.R. 1.80(b)(4). *See also* [Forfeiture
    Guidelines]{.underline}, 12 FCC Rcd at 17100-01 ("\[T\]he adjustment
    factors we evaluate in considering the actions of the violator
    include egregious misconduct, ability or inability to pay,
    intentional violations, prior violation of the same or other
    requirements, good faith or voluntary disclosure, and history of
    overall compliance. 47 U.S.C. § 503(b)(2)(D). In sum, although the
    base amount is the starting point in assessing a forfeiture, the
    forfeiture may be decreased below the base amount or increased to
    the statutory maximum when the adjustment criteria are considered
    based on the facts of the case").

[^24]: [ConQuest Forfeiture Order]{.underline}, 14 FCC Rcd at 12527.

[^25]: *See* [CCN, Inc. *et al*.]{.underline}, 12 FCC Rcd 8547 (1997)
    (the "Fletcher Companies").

[^26]: 47 U.S.C. § 503.

[^27]: 47 C.F.R. § 1.80.

[^28]: [Id.]{.underline}

[^29]: *See* 47 C.F.R. § 1.1914.