3. Summary of the Joint Stipulation

As noted above, the parties submitted their Joint Stipulation of Facts in mid-January 2009. Although the sections of this decision that discuss the parties' contentions quote particular provisions of the Joint Stipulation at length, we summarize its key provisions below in order to give an overview of the issues. The Joint Stipulation can be accessed on the Commission's website at http://docs.cpuc.ca.gov/efile/STP/96277.pdf.

The service agreement between Mpower and Edelweiss's original owner was signed in June 2005. It stated that Mpower was to provide Edelweiss with one DSL access line and a DSL modem, as well as three POTS lines, one of which was eventually used for a fax machine. (Joint Stipulation ¶ 1.) Shortly after the service agreement was signed, Mpower also sent Edelweiss a "welcome kit," which contained information Mpower provided to new customers. The Edelweiss welcome kit contained the following warning about toll fraud:

Please be aware that there is a new fraud trend involving international long distance. If you use your own voicemail and/or PBX[⁶] system and it has a paging feature, it may be susceptible to hackers. These hackers are redirecting voicemail pages to fraudulent telephone numbers in various foreign countries. If you do not take steps to safeguard your voicemail and/or PBX systems from this potential threat, you may be held responsible for fraudulent long distance calls. We encourage you to contact your supplier immediately to protect your business. (Id. ¶ 1, Exh. B.)

In early September 2006, Mpower sent Edelweiss a bill that included charges for 17 international calls made through GlobalStar satellite facilities from the flower shop's fax line. The calls were billed at $14.67 per minute and totaled $1,043.13 (before taxes, fees and surcharges). (Id. ¶ 5.) On September 11, 2006, Ms. Stepanova contacted Mpower, disputed the charges, and requested a credit for the amount of the calls. On the same date, Mpower personnel checked Edelweiss's call records, which showed that the disputed calls had been directly dialed over the flower shop's fax line. (Id. ¶¶ 7, 9.)

Ms. Stepanova called Mpower again on September 20, 2006 to inquire how much of a credit she would receive on the disputed calls. She was told that pursuant to a new policy, she would not be receiving any credit for the allegedly fraudulent calls. She was also asked to fax a written complaint about the billing dispute to Mpower, which she did later that day. (Id. ¶ 11.) On September 29, 2006, Ms. Stepanova was again advised by phone that she would not receive a credit for the disputed calls, and that her service would be disconnected if she did not pay the bill promptly. (Id. ¶ 12.)

On or about October 1, 2006, Ms. Stepanova received another bill for the Edelweiss fax line that included charges for 11 more international calls placed through GlobalStar satellite facilities. The satellite calls were charged at $14.67 per minute and totaled $2,180.01 (before taxes, fees and surcharges). On October 9, 2006, Ms. Stepanova faxed another written complaint to Mpower, which disputed the charges on the October bill as well as those that had appeared on the September bill. (Id. ¶¶ 13, 15.)

The next day, October 10, Mpower began a review of the Edelweiss account. Later that day, Ms. Stepanova telephoned Mpower about the disputed charges and asked to be connected with a supervisor. She was told the account review would take some time and was placed on hold, but she apparently hung up before Mpower's staff could get back to her. (Id. ¶ 16.)

Within the next week, Ms. Stepanova hired an attorney. On October 17, the attorney spoke with Elaine Calloway in Mpower's fraud department about the billing dispute, and also sent a letter reiterating that no one at Edelweiss had made the disputed calls. The attorney also enclosed a check for the undisputed amounts due. (Id. ¶ 17.)

On October 20, 2006, shortly after receiving the attorney's letter, Mpower's fraud department began an investigation of the alleged fraud. The Joint Stipulation states the following about the fraud investigation:

The fraud department's review indicated that if the calls were not completed by persons located at [Edelweiss's] premises, then it was likely that the calls were made through a fraudulent scheme. In the following months, the fraud department noted that six other Mpower customers had made similar complaints to Mpower regarding allegedly unauthorized charges for calls completed to GlobalStar satellite telephone numbers. In addition, during conference calls with other carrier representatives who participated with Mpower in an informal industry security task force, Mpower learned that customers of other carriers had been similarly affected by an alleged fraudulent scheme to complete calls to GlobalStar numbers . . . (Id. ¶ 19.)

Mpower also contacted GlobalStar, which stated that its call detail records did not match those on which Mpower had based its bills to Edelweiss. Nonetheless, after this contact, Mpower received no further complaints from customers about fraudulent calls placed to GlobalStar numbers. (Id. ¶ 20.)

The Joint Stipulation states the following about Ms. Stepanova's claims that the disputed calls were not made from her premises, and the evidence Mpower has unearthed on that issue:

The Customer has not identified the root cause of the allegedly fraudulent calls; however, Ms. Stepanova has asserted that none of the Customer's authorized employees made the disputed satellite calls and that several of the calls were made outside of normal business hours and on days when the Customer's shop was closed. Further, none of the phone numbers listed for the disputed charges on the September 1 and October 1, 2006 bills had ever previously been called by the Customer or Edelweiss Flowers, and Ms. Stepanova asserts that neither she nor other persons having authorized access to the Customer's service during the period in question had knowledge of these phone numbers prior to their appearance on the Customer's phone bill. (Id. ¶ 21.)

The Joint Stipulation also offers the following explanation of how Mpower thinks the alleged fraud may have occurred:

Based on its investigation, Mpower believes that if the calls billed to the Customer were not made by persons located at the Customer's premises, it is most likely that they were completed through "modem hacking" (i.e., manipulating a telephone customer's modem connection to complete calls). The exact nature of any modem hacking that may have occurred in the Customer's case, as well as in the six other affected customers' cases, is unknown. One reported method involves the use of a high speed internet connection by an outside third party to access a computer and dial out calls through a POTS line that is connected to the computer, through a fax modem or dial-up Internet modem. Based on the equipment in use at the Customer's premises at the time the satellite calls for which Mpower billed the disputed charges, it is likely that this would have been the method used to make any fraudulent calls . . . (Id. ¶ 22.)

The Joint Stipulation also acknowledges that after pursuing Ms. Stepanova to pay the disputed charges, Mpower suspended her service for nonpayment on November 28, 2006. (Id. ¶¶ 18, 23, 24.) Two days later, Ms. Stepanova requested that her agreement be terminated because she did not want to continue paying for service that had been suspended. (Id. ¶ 25.) On December 20, 2006, Mpower billed Ms. Stepanova for $1,349.58 in early termination fees as a result of her decision to cancel her service agreement with Mpower. (Id. ¶ 28.)

Mpower continued to pursue Ms. Stepanova for payment after her service agreement was terminated, and even after she had filed an informal complaint with the CAB on January 30, 2007. On February 27, 2007, the Law Office of Scott & Associates sent Edelweiss a letter on behalf of Mpower demanding $5,132.88 in payment on the past due accounts, and noting that if payment was not made, "legal action may be initiated." (Id. ¶ 30; Exh. K.) The Joint Stipulation does not indicate whether Ms. Stepanova paid the amount demanded in response to this letter.

⁶ "PBX" stands for private branch exchange.