I. SUMMARY
By this Order, the Commission institutes an Investigation into the practices of Telseven, LLC (Telseven),1 its affiliate Calling 10, LLC (Calling 10),2 and their owner Patrick Hines (Hines), an individual (collectively Respondents).
Respondents provide directory assistance (DA) services to consumers nationwide, including California (where DA is an element of basic telecommunications service). Respondents' charges appear on the bills of California consumers. Both corporate Respondents are owned and managed by Hines, have the same de facto place of business in Florida, and employ similar or identical business models. Calling 10, LLC is registered as an interexchange carrier with this Commission (U-7015-C), although Respondents apparently sell no telecommunications services other than unbundled DA.
We are prompted to take this action by a large number of complaints lodged against Respondents by consumers. Respondents' billing agents report receiving between 89,000 and 125,000 (or more) calls from Californians expressing dissatisfaction with the placement of Respondents' charges on their telephone bills.3 The practice of placing
unauthorized changes on phone bills, if proven, is known as "cramming."4 The charges at issue are typically labeled "DIR ASSIST," and are accompanied by "Carrier Administrative Fees" and "Universal Service Fund Fees," totaling in the aggregate more than $7. The Commission's Consumer Affairs Branch (CAB) has also received a number of complaints about these charges. All CAB complainants deny authorizing the charge, most deny all knowledge of ("never heard of") Respondents, and staff assumes that the same is true for the majority of complaints reported by the billing agents.
Respondents claim they disclose that the service costs $4.99 or $5.49 (depending on the script used), and that switch record of a call from the consumer's premises to Respondents' DA platform is proof that the consumer authorized the charge. Staff questions the effectiveness of this disclosure and notes the absence of any initial disclosure of the "administrative" and other fees that push the price from $4.99 to $7.14.
Staff also takes issue with the inherently deceptive aspects of Respondents' business model. Respondents market their DA service exclusively through roughly a million defunct "800" and other toll-free numbers that they control. Respondents appear to capitalize on consumers who mistakenly dial these toll-free numbers, often distinguished from popular numbers (e.g., for banks, utilities, insurance companies, and the like) by only one digit.5 Respondents intercept these calls, tell callers that "the number you have dialed has a new national directory assistance service," and direct them to "dial 10 15 15 8000 for more information on the number you have dialed."
Respondents' business model and conduct may violate a number of provisions of the California Public Utilities Code. Failure to provide a customer with information sufficient to allow informed market decisions violates Public Utilities (P.U.) Code §§ 451 and 2896. The placing of unauthorized charges on a California phone bill violates P.U. Code § 2890. The failure to properly identify the company originating the charges also violates P.U. Code § 2890. The hoarding and warehousing of 800 and other toll-free numbers for the apparent sole purpose of marketing Respondents' DA service may violate federal regulations, and constitute an unjust and unreasonable practice under P.U. Code § 451.
Staff also discovered other potentially illegal conduct, including:
(a) Telseven's provision of public utility DA services from 2003-2007 without a valid Certificate of Public Convenience and Necessity ("CPCN"), which would violate P.U. Code §§ 1001 and 1013; (b) Respondents statement to the Commission, under oath, that the "full legal name" of Calling 10 LLC was the fictitious business name California Calling 10, LLC, possibly a violation of Rule 1.1 of the Commission's Rules of Practice and Procedure; and (c) Telseven's failure to remit regulatory fees and surcharges during the 2003-2007 period, as called for by P.U. Code §§ 270, 431-435, 702, 739, 879 and 2881. In addition, staff believes that the beneficial owner of Telseven and Calling 10, Patrick Hines, may be the alter ego of those corporations, and/or have directed the allegedly illegal acts described herein, and therefore may be held personally accountable for the violations described herein.
Staff has prepared an investigative report (Staff Report) documenting these allegations, a non-confidential public version of which will be made available after the publication of this Order.
The allegations of wide-spread cramming, operating without Commission authorization, and misrepresentation are serious. We note that Respondents' activities have spurred consumer allegations of fraud as reflected on various Internet sites (although often directed towards Respondents' billing agents ILD and BSG/OAN, rather than Telseven or Calling 10, as described further below).6 We observe that there is a substantial gulf between the denial by both CAB and Internet complainants that they had ever heard of or called Respondents, and Respondents' claims that each of these consumers had in fact dialed Respondents' DA service and knowingly authorized the $7 charge. We direct staff to further investigate this discrepancy, and order Respondents, as well as the billing agent/aggregators, billing telephone companies identified herein, and third party Wholesale Carrier Services, to cooperate with staff's inquiries on this and the other factual issues discussed in this Order Instituting Investigation (OII).
1 Telseven at times has done business as Calling 10, Calling 101515800 and perhaps other fictitious business names. These and other facts are found in a report of the Consumer Protection and Safety Division (CPSD) entitled "Investigation Report on Cramming and Related Allegations Regarding Telseven LLC, Calling 10 LLC, and Other Entities Controlled and/or Utilized by Patrick Hines and His Agents (Staff Report). See Staff Report at section II(A)(1).
2 Calling 10 at times has done business as California Calling 10, Calling 101515800, and perhaps other fictitious names. Id. at II(A)(2).
3 Staff Report, at sections I and IV(A)(3), Table 6. The discrepancy in "complaint" numbers occurs because Respondents and their billing agents have reported inconsistent numbers of "complaints," "inquiries," and "credits," classifying many calls as "inquiries" rather than "complaints," even where a credit or refund was given. Id. at section IV(A). We use the word "complaint" as it is defined in the dictionary, i.e., as an "expression of dissatisfaction." See, e.g., http://www.merriam-webster.com/dictionary/COMPLAINT. As discussed below, a high percentage - between 60% and 90% - of calls made by consumers to their billing telephone companies or billing agents regarding Respondents resulted in refunds or "credits." Where an inquiry was accompanied by a refund, staff has inferred that some expression of dissatisfaction was made. Id. Respondents apparently have a policy to issue a credit or refund whenever their charges are "challenged." Id. at IV.A.1, Attachment 72.1C. Attachment with a "C" next to the attachment number are provided as confidential documents.
4 See, e.g., D.02-10-059 (Qwest), Slip Op. at [3] ("caus[ing] various unauthorized charges to be added to the customers' telephone bills" is "known as `cramming' [and] is unlawful").
5 See, e.g., http://abcnews.go.com/Business/Consumer/story?id=3473030; http://edumacation.com/TelSeven; see also discussion below; Staff Report Attachment 72.5C ("Misdials - Turning Lemons into Lemonade"); 72.6 ("One-Off Numbers").
6 See http://800notes.com/Phone.aspx/1-101-515-8000 (complaints against this number, against billing agents ILD and OAN, and against Patrick Hines as person responsible); http://whocallsme.com/Phone-Number.aspx/1015158000/2 (complaints about charges posted by agent aggregator ILD for calls to 101515800 numbers) http://whocallsme.com/Phone-Number.aspx/1015158000/2 (same) http://www.everycall.us/phone-number/1-101-515-8000/ Many of these complaints specifically plead for regulatory intervention, as described below.
