VI. DISCUSSION -- LEGAL BACKGROUND, POTENTIAL VIOLATIONS

A. Jurisdiction

The Commission has jurisdiction over Respondents because they have provided a telecommunications service to California customers,79 and over telecommunications lines and facilities located in California,80 and because their charges have appeared on the bills of California consumers.81 As described in the Staff Report, between 89,000 and 125,000 or more California consumers have complained about charges placed on their telephone bills by Respondents.

B. Disclosure Violations - Failure to Adequately Disclose the Total Price for the Service, and Other Information Material to Consumer Choice, Violates Public Utilities Code §§ 451 and 2896.

Two statutes frame the Commission's disclosure requirements.

P.U. Code § 451 requires that all public utilities not only charge just and reasonable rates, but also maintain "just and reasonable service [and] instrumentalities," and that the rules "affecting or pertaining to its charges or service to the public shall be just and reasonable." The Commission has interpreted § 451's reasonableness mandate to require that utilities provide "accurate consumer information by a readily accessible means, refrain from misleading or potentially misleading marketing practices, and ensure their representatives assist customers by providing meaningful information about products and services."82

P.U. Code § 2896(a) requires all telephone corporations to provide customers with "[s]ufficient information upon which to make informed choices among telecommunications services and providers."83

Our judgment under these broad standards may be informed by more specific provisions in adjacent areas of law.84 Pay-per-call services similar to Respondents' DA service, for example, must "clearly and conspicuously disclose ... the total cost ... and any other fees for that service."85 The FCC has generally found that "failing to convey sufficient information as to the carriers' identity, rates, practices, and range of services" constitutes an "unjust and unreasonable" practice under the federal statute most analogous to P.U. Code § 451.86 We will consider the totality of the circumstances when ruling on whether a disclosure is adequate, as suggested by the FCC/FTC Joint Policy Statement for the Advertising of Dial-Around and Other Long Distance Services:

The FTC looks to the "net impression" conveyed to consumers - often described as "the entire mosaic, rather than each tile separately." Even if the wording of an ad may be literally truthful, the net impression conveyed to consumers may still be misleading. The entire advertisement, transaction or course of dealing will be considered. The issue is whether the act or practice is likely to mislead, rather than whether it causes actual deception.87

To the extent the Commission finds that Respondents did not timely, meaningfully, and adequately disclose the true nature and full charges associated with their DA services, their marketing and sale of DA services to California consumers is in violation of P.U. Code §§ 451 and 2896 of the Public Utilities Code. Among other things, the Commission will consider whether an administrative charge that is 33% of the base charge, is so large as to likely surprise consumers and require independent disclosure.88

C. Other Aspects of Respondents' Use of Toll-Free Numbers May Be Unjust and Unreasonable.

As noted above, Respondents control approximately one million toll-free numbers that can be accessed by California consumers. Callers reach Respondents only through these 800 and other toll-free numbers (these terms are sometimes used interchangeably herein). All of these toll-free numbers are defunct. By definition, then, consumers reach the Respondent-controlled 800 numbers in error: either because the party they intended to call no longer controls the numbers or because of a physical dialing error. They are not attempting to reach Respondents.

If Respondents are unfairly taking advantage of consumers who had inadvertently dialed a wrong number, that could constitute an unjust and unreasonable practice prohibited by P. U. Code § 451. P.U. Code § 451 requires that utilities "maintain adequate, efficient, just, and reasonable service [and] instrumentalities ... as are necessary to promote the safety, health, comfort and convenience of its patrons ... and the public."

1. Respondents' Business Model Bears Resemblance to "Fat Finger Dialing" Schemes the FCC Has Previously Prosecuted as Deceptive.

Dialing errors appear to be the primary (if not exclusive) scenario under which consumers hear Telseven/Calling 10's marketing intercept message. "Fat finger dialing" is telecommunications industry parlance for such dialing errors.89 Such schemes often use toll-free numbers; individuals who misdial those numbers are then charged at unexpectedly high rates for services they may or may not have ordered but for the misdial.90

The FCC has attempted to staunch such schemes. In 2002, the FCC proposed a total of $6,560,000 in fines against two operator service providers, One Call Communications, Inc. dba Opticom (Opticom) and ASC Telecom, Inc. dba Alternatel (Alternatel), for perpetuating a "scheme to take advantage of consumers' dialing errors by [involving] access numbers that are similar to nationally advertised access numbers."91 Both were in the collect call (or operator services) business, but did no advertising, instead intercepting callers who misdialed more popular collect call services. The FCC found these practices "particularly egregious" for several reasons:

      [I]t appears that Opticom has willfully and deliberately devised a scheme repeated on numerous access numbers intended to mislead unwitting consumers into using their operator services while the consumer is attempting to dial another OSP. For example, if a consumer trying to dial 1-800-CALLATT misdials by one number, that customer will reach Opticom instead of AT&T. The consumer remains unaware that he or she has misdialed because Opticom fails to identify itself. ... The consumer is even further left in the dark by not being able to obtain rate information that is essential for consumers who wish to make informed choices in a competitive telecommunications market. This is particularly egregious in light of the fact that the rates Opticom charges are significantly higher than the industry average. .. Moreover, it appears that these misdialed numbers, such as 1-800-COOLECT or 1-800-FONCALT, are not advertised as a means of reaching Opticom. Therefore, it appears that Opticom's only customers are those who make a mistake in attempting to dial another OSP's [Operator Service Provider's] access code.92

While the statutes and regulations applicable to operator services speak to businesses that "make telephones available to the public or to transient users,"93 and thus do not precisely fit the DA services offered by Respondents, the Opticom and Alternatel cases share at least two characteristics with Respondents' pay-per-call DA services: the lack of advertising; and the exclusive focus on consumers who have misdialed. In a posted consumer advisory, the FCC added other characteristics of companies that obtain business by marketing intercepts directed at callers who have misdialed 1-800 toll numbers:

      [The] company [has] secured 800 numbers similar to well-known ones (i.e., a company secures the number "800-CALLLAT"). The company is likely hoping that you might accidentally misdial your intended number... Often, the company won't identify itself to you ....

      Surprise! The charge for the misdialed call is two or more times higher than it would have been had you reached the carrier you intended to use.94

Respondents admit targeting callers who do not "intend to reach out-of-service numbers or reach wrong numbers," but nevertheless claim theirs is a legitimate "service."95 Whether Respondents' business methods represent a variation on "fat finger" dialing schemes, and whether they constitute "just and reasonable" service, are questions that this Commission can and will consider under P.U. Code § 451.

2. Respondents May Be Offering a Pay-Per-Call Service in Violation of Federal Law, Which May Constitute Unjust and Unreasonable Service in Violation of Section 451 and Commission Norms.

The FCC and Congress have also been concerned with the misuse of 800 or other numbers "widely understood to be toll-free, in a way that the calling party is charged for information."96 For that reason, the "1996 [Telecommunications] Act added a new prohibition on the calling party `being assessed, by virtue of being asked to connect or otherwise transfer' to a pay-per-call service, a charge for the call to a toll-free number."97

Respondents' service appears to meet the essential requirements of a pay-per-call service as set out in 47 U.S.C. § 228(i)(1)(A) and (B), and thus be subject to the statutory prohibition of a toll-free number tie-in: tThe term "pay-per-call services" means any service-

(A) in which any person provides or purports to provide-

        (i) audio information or audio entertainment produced or packaged by such person; ... or

        (iii) any service, including the provision of a product, the charges for which are assessed on the basis of the completion of the call;

      (B) for which the caller pays a per-call or per-time-interval charge that is greater than, or in addition to, the charge for transmission of the call.

Section 228(b)(5) requires that "any service described in subparagraphs
(A) and B) of subsection (i)(1) be offered only through the use of certain telephone number prefixes and area codes," which the FCC has limited to the 900 area codes.98 For all pay-per-call services coming within the statutory definition, section 228 prescribes further requirements: charges for such services must be clearly disclosed; and charges for such services may be made only (a) pursuant to a written presubscription agreement; or (b) by credit, prepaid, debit, charge, or calling card in absence of agreement; and use of 800 or other toll-free numbers to facilitate the pay-per-call service is restricted, as described above.99

Respondents may rely on an exclusion from the pay-per-call service requirements for "directory services":

Such term does not include directory services provided by a common carrier or its affiliate or by a local exchange carrier or its affiliate, or any service for which users are assessed charges only after entering into a presubscription or comparable arrangement with the provider of such service.100

It appears, however, that the "directory services" referenced here are those offered by to a customer who is presubscribed to a common carrier or local exchange carrier, whereas Telseven and Calling 10 have no pre-existing contractual relationship with the consumers whose calls they intercept. It was this lack of a pre-existing contractual relationship, in part, that led to concern in Washington and California that some "pay-per-call businesses have engaged in practices which are misleading to the consumer, harmful to the public interest, or contrary to accepted standards," and rules that the called party can only charge the calling party if certain requirements are met. .101

3. Respondents May Also Be Hoarding 800 and Other Toll-Free Numbers in Violation Federal Law, Which May Also Constitute Unjust and Unreasonable Service, and a Violation of Section 451 and Commission Norms.

A toll-free number is a telephone number that can be called at no cost to the caller because the recipient pays for the cost of the call.102 All toll-free numbers are contained in a centralized database known as the SMS/800 Database.103 The SMS/800 Database is the repository of information pertaining to whether a toll-free (800, 888, 877, or 866) number is "available" or "in use", and -- if "in use" -- what the subscriber's routing instructions are.104

Subscribers, like Respondents, seeking to obtain a toll-free number must contact a Responsible Organization ("RespOrg"), generally telephone companies that have gone through a certification process and subsequently gained access to the SMS/800 Database.105 The RespOrg then obtains the toll-free number from the SMS/800 Database and manages the record for the number, including billing and routing information,106 as well as information about the subscriber's interexchange carrier.107

As noted above, Respondent Patrick Hines owns a RespOrg, Signal One, through which he and his affiliated businesses have secured access to approximately one million 800 and other toll-free numbers. Respondents' conduct appears to violate FCC Rules that prohibit hoarding of toll-free numbers. The FCC defines hoarding as "the acquisition by a toll-free subscriber from a Responsible Organization of more toll-free numbers than the toll-free subscriber intends to use for the provision of toll-free service."108 The Commission will consider whether Respondents use any of their toll-free numbers in the provision of a toll-free service, or whether they are merely instruments used by Respondents to market their DA services.

The definition of hoarding also includes "number brokering, which is the selling of a toll-free number by a private entity for a fee."109 Section 52.107 of Code of Federal Regulations Title 47 further provides:

(1) Toll free subscribers shall not hoard toll free numbers.

(2) No person or entity shall acquire a toll free number for the purpose of selling the toll free number to another entity or to a person for a fee.

(3) Routing multiple toll free numbers to a single toll free subscriber will create a rebuttable presumption that the toll free subscriber is hoarding or brokering toll free numbers.110

Respondents indeed appear to be routing all of their 800 numbers to servers on the same Nevada platform that services the 101515800 dial-around number, at which point the marketing intercept for Respondents DA service is played.111 Respondents may also be "warehousing" toll-free numbers in violation of federal regulations.112

Regardless of the legal status of Respondents' use of toll-free numbers under federal law, the control of a million toll-free numbers as a means of delivering a potentially deceptive marketing intercept, one the customer is in no way seeking, presents a troubling scenario. We will examine whether this conduct constitutes "adequate, efficient, just, and reasonable service ... necessary to promote the safety, health, comfort, and convenience of its patrons, employees, and the public" under section 451, and whether it meets section 451's requirement "rules affecting or pertaining to [such] charges or service to the public shall be just and reasonable."113

D. Billing Violations - Placing Unauthorized Charges on Consumer Telephone Bills Violates P.U. Code 2890.

P.U. Code § 2890 (a) provides that "A telephone bill may only contain charges for products or services, the purchase of which the subscriber has authorized." Placing unauthorized charges on consumer phone bills is a practice known colloquially as "cramming."114

Cramming continues to be a problem despite the enactment twelve years ago of P.U. Code §§ 2890 and 2889.9,115 and related federal legislation even further back in time.116 The United States District Court for the Northern District of California recently recounted the frustrating history and etiology of this problem:

      [Cramming] highlights the vulnerable underbelly of a widespread and under-regulated practice called LEC billing. LEC billing - or "Local Exchange Carrier" billing - arose out of the court-ordered break-up of AT&T in the 1980s. After AT&T agreed to divest its local phone operations ..., the local phone companies continued to present customers with the convenience of a single telephone bill for both local and long-distance fees, despite the fact that the long-distance services were provided by separate business entities. LEC billing was born. Four years later, the FCC detariffed the billing and collection services provided by local telephone companies, opening the door for LEC billing to be used as a method of charging and collecting payments for a wide variety of services ... Since its inception, LEC billing has attracted fraudsters.117

As is the case here, "[o]ften the charges which are `crammed' on the customer's bill are relatively small, less than $10, and inconspicuously labeled. If one does not carefully scrutinize the telephone bill, the crammed charge could easily be overlooked."118 As the accompanying Staff Report makes clear, disputed charges assessed by Respondents continue to appear on California phone bills, despite industry's claim that it was adopting "even more stringent anti-cramming measures" for billing services, and AT&T's recent assertion that it had "completely discontinue[d] billing" for certain services "because `cramming complaint rates were notably high'."119

Whether a charge has been authorized is in large part dependent on whether the nature of the service and the amount of the charge were fully disclosed. A customer cannot authorize something of which she is uninformed.120 We will thus inquire into whether there was a contractual meeting of the minds between Telseven/Calling 10 and its customers. If the evidence shows that Respondents charged customers for DA services without disclosing sufficient information to allow them to knowingly authorize the charge, Respondents could also be in violation of P. U. Code § 2890.121

We are cognizant of Respondents' possible defense to these allegations under Code § 2890(d)(2)(D), which provides that "evidence that a call was dialed is prima facie evidence of authorization." Customer complaints denying authorization or denying all knowledge of Respondents, however, may rebut that presumption.122 The issue of authorization is a factual, or mixed legal and factual, question in this case.123

E. Billing Violations - Failure to Place Complete and Accurate Information about Their Charges, and Identity of Service Provider, on Consumers' Bills, Violates Public Utilities Code §§ 451 and 2890.

P.U. Code § 2890(d)(2)(B) requires that "any person, corporation, or billing agent that charges subscribers for products or services on a telephone bill" must include in the bill the "name of the party responsible for generating the charge" in addition to the name and number of the "entity responsible for resolving disputes." P.U. Code § 2890(d) states that a "billing telephone company shall clearly identify ... each person, corporation, or billing agent that generates a charge on a subscriber's bill." These sections are consistent with section 64.2401 of Title 47 of the Code of Federal Regulations, which requires that the "name of the service provider associated with each charge [on a consumer's phone bill] must be clearly and conspicuously identified on the telephone bill."

The failure of Respondents to insure that their legal names and full charges are conspicuously disclosed on the bills delivered to California consumers may constitute a violation of P.U. Code § 2890, as well as the "just and reasonable" requirement of P.U. Code § 451.124 The fact that most CAB complainants thought they had been crammed by ILD or BSG/OAN appears to be evidence of the misleading nature of the bill disclosure,125 and to run afoul of the standard that we articulated in D.00-11-015 that the name on the bill make "abundantly clear who the service provider is."126 To that end, we have stated that

The name used on the bill shall be based on the name on the carrier's Certificate of Public convenience and Necessity including any properly registered fictitious business names or, in the case of uncertificated service providers, the name on any FCC certificate or business license.127

Here, the relevant names would be Respondents' legal names Telseven, LLC and Calling, 10 LLC, and perhaps (if we consider the fictitious business name to which we erroneously granted a CPCN) California Calling 10, LLC. None of the bills submitted by CAB complainants disclose these names.128 The bills further confuse the issue by placing the names of Respondents billing agents ILD and BSG in substantially larger and more conspicuous print than the inaccurate reference to Respondents as Calling 101515800.129

Compelling adequate information and disclosure on telephone billing is a subset of efforts at both the federal and state levels to arm the consumer with sufficient information to make sure that they are only being charged for what they have authorized.130 In 1999, the FCC adopted similar truth-in-billing principles to "ensure that consumers receive thorough, accurate, and understandable bills from their telecommunications carriers."131 The FCC promulgated regulations that require disclosure on the bill of sufficient information to allow consumers to "accurately assess that the services for which they are billed correspond to those that they have received."132 But, as the United States District Court in the Northern District of California recently commented, this

approach taken by the FCC was (and remains today) premised on the dubious assumption that consumers scrutinize their phone bills every month before paying them and local phone companies are vigilant about allowing only authorized third party charges to appear on their bills. Fraudsters can easily exploit this dubious assumption.133

Given the fact that many consumers do not scrutinize every line of their bill, it is all the more important that third-party charges accurately and conspicuously identify any party responsible for placing charges on that bill. The Public Utilities Code's consumer protection statutes will therefore be "liberally construed to effectuate [their] object and purpose, and to suppress the mischief at which [they] are directed."134

F. Any USF surcharges Collected from Customers But Not Remitted to the Federal Universal Service Fund Would Constitute an Unjust and Unreasonable Billing and Collection Practice.

The FCC has adopted "rules related to contribution recovery that will ensure that federal universal service line items on customer bills accurately reflect the extent of a carrier's contribution obligations."135 The FCC's regulations provide as follows:

      Federal universal service contribution costs may be recovered through interstate telecommunications-related charges to end users. If a contributor chooses to recover its federal universal service contribution costs through a line item on a customer's bill the amount of the federal universal service line-item charge may not exceed the interstate telecommunications portion of that customer's bill times the relevant contribution factor.136

The "practice of charging its customers more for services than the actual cost of those services, with no indication to the customers that they were doing so, may constitute a deceptive business practice."137 We share the concern evident in AT&T's 2006 correspondence that Telseven may not be actually paying into the USF fund the full amounts it lists on its bills.138 P.U. Code § 2890 requires that all charges on a consumer's bill be accurately described. If the evidence shows that not all monies collected as "Universal Service Fund Fees" were in fact remitted to the USF, the use of that description on the bill would also violate Section 2890.

G. Other Possible Violations of Law

1. Violation of P. U. Code § 1013 (Operating Without a CPCN).

P. U. Code § 1013 requires all telephone corporations to obtain a certificate of public convenience and necessity from the Commission or register with the Commission prior to operation.139 A telephone corporation includes every corporation or person owning, controlling, operating, or managing any telephone line for compensation within this state.140 A "telephone line" includes all conduits, ducts, poles, wires, cables, instruments, appliances, and all other real estate fixtures, and personal property owned, controlled, or operated, or managed in connection with or to facilitate communication by telephone, whether such communication is had with or without the use of transmission wires.141 Resellers of telecommunication services are telephone corporations.142 DA services are considered telecommunications services.143 A telephone corporation that provides telephone services to the public for which any compensation or payment is received is a public utility subject at least in part to the jurisdiction, rules and regulations of the Commission.144

To the extent that Telseven provided a telecommunications DA service to California customers over California telephone lines, and billed California consumers on their local exchange telephone bills, from 2003-2007, it was a public utility within this Commission's jurisdiction and control, and its continued operation was a violation of P.U. Code §§ 1001 and 1013.

2. Failure to Disclose Full Legal Name in an Application for Registration with the Commission.

Regardless of Respondents' intent,145 the failure of Respondents to provide the "full legal name" where required on the Commission's Application form may represent a violation of Rule 1.1 of the commission's Rules of Practice and Procedure, which requires in relevant part:

Any person who signs a pleading or brief, enters an appearance, ... or transacts business with the Commission, by such act represents that he or she is authorized to do so and agrees to comply with the laws of this State; ... and never to mislead the Commission or its staff by an artifice or false statement of fact or law.

The purpose of requiring scrupulous honesty in representations to the Commission is ultimately to protect the public. As a result of Respondents' misrepresentation, the Commission committed an empty act in registering a utility under a fictitious name, and was therefore compromised in its attempts to protect California consumers. Strict liability obtains for failure to comply with such "police power" requirements.146

3. Possible Failure to Pay Surcharges

If Telseven's California revenue in the years 2003-2007 was in fact and law intrastate revenue, Telseven's apparent failure to remit public purpose surcharges and fees to the Commission would have violated P.U. Code §§ 270 et seq, 431-35, 739.3, 879, and 2881, inter alia. The Commission may order payment of outstanding surcharges plus interest, and impose penalties pursuant to P.U. Code §§ 2107 and 2108 in the amount of $500 to $20,000 per offense and/or day.

H. Patrick Hines Liability

Staff alleges that Patrick Hines was an alter ego of Telseven and Calling 10, and should therefore be held jointly and severally liable with them for violations of pertinent statutes and regulations. Alternatively, personal liability may be predicated on a showing that Mr. Hines "participated directly in the practices discussed above, and had the authority to control them."147

The alter ego doctrine is grounded in equity, and said to apply only where two general requirements are met: first, there must be such a unity of interest and ownership that the separate personalities of the corporation and the controlling individuals or companies no longer exist; and, second, a failure to disregard the corporate entity must sanction a fraud or promote injustice.148 The officer, director or shareholder may also be personally liable where he "specifically directed or authorized the wrongful acts."149

Whether the corporate entity should be disregarded, and personal liability attach, depends on the facts of a particular case.150 Courts have considered an array of factors in analyzing alter ego problems, including but not limited to: commingling of funds and other assets; the unauthorized diversion of corporate funds or assets to other than corporate uses; the treatment by an individual of the assets of the corporation as his own; sole ownership of all of the stock in a corporation by one individual or the members of a family; the employment of the same attorney; common addresses and business models; and the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors.151 Common ownership and a common business plan may also be predicates of individual liability for corporate misfeasance.152 Staff believes that several of these factors are present with respect to Hines and the two corporations in question here.153

The Commission believes there is good reason for further investigation of this issue, and will allow staff to complete discovery on the alter ego issue in this proceeding.

I. Role of Third Parties

It appears from staff's report that that the billing agent/aggregators ILD and BSG may have violated our rules under P.U. Code § 2899.9 by failing to provide, or being unable to provide, the names and other information of consumers who called to challenge Respondents' charges on their bills.154 We also find troubling the inconsistencies described by staff regarding the agent/aggregators' reporting of complaints, inquiries and credits.155 We decline at this time, however, to name the billing agent/aggregators as Respondents in this Investigation.

We nonetheless expect that the agent/aggregators, as well as the billing telephone companies, will fully cooperate in this Investigation. Indeed, that is what the law requires.156 In D.99-08-017, the Commission ordered OAN and several other billing agents to

    file with the Commission's Docket Office and serve on all parties, a full accounting their respective transactions with, or on behalf of, Coral Communications, Inc. . . . Such accountings shall include, without limitation, a statement of all amounts billed for Coral/Easy Access, amounts actually collected, amounts refunded to customers, amounts disbursed to Coral/Easy Access, and amounts retained by the billing agent.157

Pursuant to our authority under P.U. Code § 2889.8(g), we will direct the Process Office to add these entities to the service list as "interested parties," and order the billing agents and billing telephone companies involved in this case to provide a similar accounting, including total billings, collections, and refunds associated with Respondents' charges. We ask staff to inform us of whether that has occurred.

J. Remedies

Upon proof of a cramming or related violation, the Commission has the authority to order restitution to any consumer who has been victimized by Respondents or their agents, to make that consumer whole pursuant to section 734. Staff may recommend, and the Commission may consider, penalties pursuant to &_butType=4&_butStat=0&_butNum=4&_butInline=1&_butinfo=CA PUB UTIL 2107&_fmtstr=FULL&docnum=4&_startdoc=1&wchp=dGLbVzW-zSkAA&_md5=c89469495ecf918d59ee5541683c9bf8" target="_top">P. U. Code §§ 2107 and &_butType=4&_butStat=0&_butNum=5&_butInline=1&_butinfo=CA PUB UTIL 2108&_fmtstr=FULL&docnum=4&_startdoc=1&wchp=dGLbVzW-zSkAA&_md5=9bf6595c2be92222e1aaff5530dd8f81" target="_top">2108 in the amount of $ 500 to $ 20,000 per offense per day. In addition, we may consider whether Calling 10 is fit to continue to operate in California as a reseller of telecommunication services pursuant to its Commission-granted authority, under the licensing authority granted to the Commission in &_butType=4&_butStat=0&_butNum=6&_butInline=1&_butinfo=CA PUB UTIL 1013&_fmtstr=FULL&docnum=4&_startdoc=1&wchp=dGLbVzW-zSkAA&_md5=f38ffa289378eb99e7c5bb342686f74d" target="_top">P. U. Code §§ 1001 and 1013(h).

For purposes of enforcement, the Public Utilities Code extends the Commission's jurisdiction over nonpublic utilities that generate a charge on a subscriber's telephone bill. Where the Commission finds that "a person or corporation" has violated §§ 2890 and/or 2889.9, the Commission is authorized to treat that person or corporation as if it were public utility for purposes of fines, contempt citations, and other penalties.158 The Commission also has explicit authority to order any billing telephone company to "terminate the billing and collection services" for any person or corporation failing to comply with these statutory sections.

Finally, we will consider the remedy invoked by the Court in the Inc21 case - a postcard mailing to a discrete subset of Respondents "customers" to determine more precisely what percentage of them knowingly authorized Respondents to place DA charges on their bills, or were/are even aware of who Respondents are.159 We ask the assigned Administrative Law Judge to consider this remedy at an initial
pre-hearing conference.

K. Categorization

This proceeding is categorized as adjudicatory. Pursuant to Rule 8.2(b) of the Commission's Rules of Practice and Procedure, ex parte communications are prohibited. The determination as to category is appealable under Rule 7.6.

Therefore, IT IS ORDERED that:

1. Pursuant to Rule 5.1 of the Commission's Rules of Practice and Procedure, an Investigation on the Commission's own motion is instituted into the operations of Telseven, Calling 10, subsidiary and affiliated business entities, and their beneficial owner Patrick Hines (collectively, Respondents), and specifically whether:

      a. Respondents violated P.U. Code § 451 by marketing DA service in an inherently misleading manner, and adopting rules pertaining to its charges and services that are unjust, unreasonable, or defeat the reasonable expectations of consumers;

      b. Respondents violated P.U. Code §§ 451 and 2896 by failing to provide consumers with information necessary to make informed market choices;

      c. Respondents violated P.U. Code § 451 by selling a pay-per-call service to unpresubscribed customers, without using a 900 number, by marketing such pay-per-call service through toll-free (8xx) numbers, by hoarding and warehousing of toll-free numbers, and/or by conduct otherwise in violation of federal and state rules, all in a way likely to defeat the reasonable expectations of consumers;

      d. Respondents violated P.U. Code § 2890 by causing charges to be placed on consumers' bills for services which the consumer did not request or authorize;

      e. Respondents violated P.U. Code §§ 451 and 2890 by failing to cause their true legal name to be disclosed on consumer bills, and instead allowing their charges to appear associated with fictional names, in small and inconspicuous print, and otherwise in a manner likely to confuse consumers;

      f. Respondents violated §§ 451 and 2890 by collecting more from consumers for "universal service" contributions than actually remitted to federal and/or state universal service funds;

      g. Telseven violated P.U. Code §§ 1000 and 1013 by operating in California without Commission authorization;

      h. Respondents violated Rule 1.1 of the Commission's Rules of Practice and Procedure by stating under penalty of perjury that Calling 10 LLC's "full legal name" was California Calling 10, LLC, a fictional business name;

      i. Telseven violated P.U. Code §§ 270, 431-435, 702, 739, 879 and 2881 for its failure to remit regulatory fees and surcharges on intrastate revenue; and

      j. Patrick Hines is an alter ego of Respondents, or so directed and authorized the acts alleged by staff, such that his personal liability is equitable and appropriate.

2. The Commission will consider whether, pursuant to §§ 701, 734, and 1702 of the Public Utilities Code, any of the following remedies are warranted:

    a. Respondents be enjoined from using 1-800 numbers accessible by California consumers to advertise their DA service to California consumers in a way that is misleading or deceptive;

    b. Respondents be required to conspicuously and clearly disclose the nature and total price of its services, with all fees and surcharges included, both on its 1-800 intercepts and on its DA platform;

c. Respondents be ordered to cease and desist from any unfair, unreasonable, unjust, deceptive, or unlawful operations and practices;

d. Respondents have conditions and restrictions placed on any further operations in California or directed at California consumers;

e. Respondents be enjoined from the use of dial-around numbers that contain "800" or otherwise suggest the service is free, e.g., 101515800, to sell their DA service;

f. Respondents be required to provide an accounting, on an annual basis, of all monies obtained from California consumers, including the total amounts billed to and collected from customers for "UNIVERSAL SERVICE FUND FEES," the total amounts actually paid by Respondents to the state and federal universal service funds, total amounts refunded, credited, or recoursed back to consumers, and all other amounts paid out of the revenue stream from Respondents' DA or DIR ASSIST services;

g. Respondents be ordered to disgorge all profits obtained illegally, and pay reparations, restitution, and/or refunds, pursuant to P.U. Code § 734, to California consumers in the total amount collected from them for Respondents' DA services and related charges, where consumers had not knowingly authorized the services or the amounts charged;

h. Respondents be fined pursuant to P.U. Code §§ 2107 and 2108 for the above-described violations of the Public Utility Code and related Orders, Decisions, Rules, directions, demands and requirements of this Commission; and/or

i. The CPCN granted to "California Calling 10 LLC," a fictional name, be revoked.

3. To facilitate the completion of this investigation, and consistent with the provisions of P.U. Code §§ 311, 314, 581-82 and 584, Respondents are ordered to provide the information requested in Attachment 1 hereto within forty-five (45) days of service of this OII.

4. We direct the Process Office to add the following as "interested parties" to the service list of this proceeding: ILD Corp. and ILD Telecommunications, Inc. (ILD), ACI Billing Services, Inc. and BSG Clearing Solutions (BSG), Pacific Bell Telephone (AT&T); Verizon; and Wholesale Carrier Services (WCS).

5. Respondents and interested parties are ordered to preserve for the pendency of this action all documents which might relate to this action, including but not limited to switch records, reports based on switch records, contracts (including contracts with billing agents/aggregators and third parties relative to Respondents' services and billing), invoices, correspondence, intra- and inter-office memoranda, intra- and inter-office email, electronic archives, all websites and electronic archives of information from past company websites, and consumer complaints and other expressions of dissatisfaction from California consumers. Respondents and interested parties are ordered to cooperate with staff in its investigation.

6. Billing agents ILD and BSG and billing telephone companies AT&T and Verizon are ordered to file with the Commission's Docket Office and serve on all parties, within forty-five (45) days of service of this OII, a full accounting of their respective transactions with, or on behalf of, Respondents. Such accountings should include, without limitation, a statement on an annual basis of all amounts billed on behalf of Respondents, amounts collected on behalf of Respondents, amounts refunded or credited back to customer accounts, amounts retained by the billing agents and billing telephone companies for their services, amounts paid to public purpose funds (universal service and the like), and any other amounts paid out of Respondents' revenue stream, i.e., out of amounts collected on behalf of Respondents for the DA services described herein. We request, to the extent possible, that the billing agents and telephone companies specify the amounts in each of these categories attributable to DA service, administrative fee, and universal service fees or the like.

7. Staff shall continue to monitor consumer complaints against Respondents. We expect staff to bring additional evidence of any related and potentially harmful business practices to our attention. Because of the multiplicity and confusion of corporate names and services described above, and the complexity of Respondents' operations, we grant staff leave to propose the addition of other parties, factual allegations, and potential violations. Such proposals shall be presented to the Assigned Commissioner and Assigned Administrative Law Judge in the form of a motion to amend the OII, and shall be accompanied by a staff declaration supporting the proposed amendments. The cutoff date for advancing evidence of additional violations, for responses if appropriate, for the exchange of testimony, and other procedures as necessary shall be determined by the Assigned Commissioner or Assigned Administrative Law Judge.

8. Many of the attachments to the Staff Report were submitted as confidential materials pursuant to P.U. Code § 583. The Commission authorizes the publication of information from those attachments, to the limited extent that information is found in this OII. As to the attachments themselves, staff shall prepare and serve on Respondents and interested parties by January 7 proposed public and (to the extent appropriate) proposed confidential versions of its Staff Report, and may prepare those in several iterations to the extent that multi-party confidentiality claims must be accommodated. If Respondents or interested parties assert that any portion of the proposed public report should remain unavailable for public review, or that confidential materials should not be provided to other parties, they shall file a written motion for protection of specifically identified portions of the report and attachments, and provide legal support for these assertions, no later than January 28, 2011. CPSD shall reply by February 11, 2011.

9. Staff shall be subject only to that discovery relating to the specific violations alleged in this Order, described in the Staff Report, or added to the scope of this proceeding by subsequent motion.

10. These ordering paragraphs suffice for the "preliminary scoping memo" required by Rule 6 (c) of the Commission's Rules of Practice and Procedure.

11. This proceeding is categorized as an adjudicatory proceeding and is expected to require an evidentiary hearing. Pursuant to Rule 8.2(b) of the Commission's Rules of Practice and Procedure, ex parte communications are prohibited. The determination as to the category is appealable under Rule 7.6.

12. A prehearing conference shall be scheduled for the purpose of setting a schedule for this proceeding, including dates for discovery, amendment to the OII as necessary, exchange of written testimony, disclosure of witnesses, hearings, and briefing as appropriate in this matter. The issue of a postcard survey of Respondents' customers, or some subset of them, as performed in the Inc21 case discussed herein, shall also be considered at the initial prehearing conference.

13. The Commission's Process Office shall effect service on Respondents of this OII by causing a copy of this Order to be personally served on the respondents' designated agent for service in California:

Corporation Service Company

2730 Gateway Oaks Drive, Suite 100

Sacramento, CA 95833

And by delivering by Federal Express, Certified, and/or Priority Mail (such that confirmation of delivery may be verified) copies of the Order to Respondents' principal place of business in Ponte Vedra Beach, Florida, at the following address:

    Patrick Hines

    Telseven LLC

    Calling 10 LLC

14. Respondents Telseven, LLC, Calling 10, LLC, and Patrick Hines are ordered to answer or otherwise respond to this Order within thirty days of service. Respondents and any other person filing a response to this Order shall state in the response any objections to the order regarding the need for hearings, issues to be considered, or proposed schedule.

This order is effective today.

Dated: December 16, 2010, in San Francisco, California.

                                                                                               President

ATTACHMENT 1

OII DATA REQUESTS TO RESPONDENTS

Unless stated otherwise, the following requests seek information and documents for years 2006-2010 inclusive, including any documents created or in effect during that time.

1. Please identify all factual statements in the above OII with which you disagree, and provide documents and evidence supporting your disagreement.

2. Please provide every script used by respondents on any 1-800 number in the last 5 years, and identify as clearly as possible during what period of time the script was used, and on what percentage (or number) of the Telseven-controlled toll-free numbers accessible by California consumers.

3. Please state the total monies or revenues collected from California consumers during the last five years in each of these three categories: DIR ASSIST charges; USF fee; and administrative fees. From these totals, please state all amounts paid to billing telephone companies, billing agents, universal service funds, or any other third parties.

4. Please provide California tax returns and any explanation of a discrepancy between the numbers provided in response to OII DR 3.

5. Please provide an accounting and evidence (including quarterly 499 reports) of amounts paid to USAC for federal universal service contributions, any amounts paid to this Commission, and amounts collected from consumers.

6. For the last two years only, please provide all routing instructions provided by Telseven or any of its affiliates in conjunction with the 1 800 numbers it controls and/or uses in marketing its DA services.

7. With regard to the customer complaints in Staff Report Attachment 27, please provide the complete switch records (containing all data fields) in your possession, and any other evidence in your possession, that supports your contention that the complaining customer in fact dialed the Nevada DA Platform and authorized a charge of $7.14 to be placed on his or her bill.

8. Please provide all invoices sent over the last year by Mr. Harvey Berg for services performed by Mr. Berg for Respondents or their affiliates, including their owner Patrick Hines, or other entities owned by Mr. Hines, relating in whole or in part to the provision by those companies or by other Mr. Hines' entities of directory assistance (DA) service to California consumers.

9. Please provide any contract, letter agreement, email, memoranda or other documents setting forth the terms of Mr. Berg's employment with (or retention by) Calling 10 and/or Telseven as a "regulatory consultant."

10. Please provide any memoranda or other documents setting forth Calling 10/Telseven's policy regarding refunds or credits back to California (and other) consumers, which policy or policies were in effect at any time during the last five years.

11. Please provide any contracts, manuals, memoranda, product descriptions, or other documents relating to the servers and other equipment that constitute the "Nevada platform," including contracts with parties other than WCS (e.g., David Leone and his company or companies).

12. Please provide any correspondence (email or otherwise) relating to the capabilities and/or operation of the servers and other equipment that constitute the Nevada platform.

13. Please provide any memoranda, correspondence (email or otherwise), or other documents relating to Calling 10 or Telseven's use of call detail records (CDRs) as a defense to customer complaints, including but not limited to correspondence between or among Harvey Berg, billing agent/aggregators ILD or BSG, Telseven and/or Calling 10, or any of them.

14. Please provide any correspondence between or among Mr. Berg, billing agent aggregators, Telseven and/or Calling 10, and government agencies, regulators or prosecutors, or any of them, relating to allegations of unauthorized charges on telephone bills.

15. Please provide the transcripts of any depositions given by Messrs. Berg or Hines relating to allegations of unauthorized charges on telephone bills.

16. Please provide documentation of Signal One's acquisition in the last three years of toll-free numbers used by Respondents or other Hines-owned entities for marketing intercepts as described in the foregoing OII.

17. Please provide any correspondence between or among Mr. Berg, billing agent/aggregators ILD or BSG, Telseven and/or Calling 10, any billing telephone company, or any of them, relating to the handling of customer complaints.

18. Please provide any regulatory complaints, inquiries, or civil complaints received by Telseven LLC or Calling 10 LLC over the last 5 years related to more than one allegation of unauthorized charges for directory assistance service, or an allegation of a pattern of conduct that was alleged to be misleading or fraudulent.

79 See D.96-03-020; D.96-10-066, Appendix B, Rule 4 (directory assistance, access to foreign NPAs, access to operator services, and free access to 800 or 800-like toll-free services are all elements of basic telecommunications service).

80 P.U. Code §§ 216, 233-34.

81 P.U. Code §§ 2890 et seq.

82 D.04-09-062 (Cingular), aff'd sub nom Pacific Bell Wireless v. Public Utilities Commission, 140 Cal. App. 4th 718 (2006), Slip Op. at 49, and fn. 31, citing e.g., UCAN v. Pacific Bell, D.01-09-058, ltd rehrg D.02-02-027 (misleading or potentially misleading marketing tactics unreasonable under § 451); National Communications Center Corp. v. PT&T Co., D.91784, (1980) 3 CPUC2d 672 (utility owes customers responsibility to provide all available and accurate information customers require to make intelligent choice between similar services where choice exists); H.V.Welker Inc. v. PT&T Co, D.75807, (1969) 69 CPUC 579 (utility has duty to ensure its representatives inform business customers of options available to meet customers' needs).

83 See, e.g., D.04-09-062 (Cingular), Slip Op. at 54, citing D.02-02-027:

While section 2896 provides a statutory basis for the Commission's requirements regarding the prospective remedies imposed by [D.01-09-058], we need not rely upon section 2896 alone to impose penalties. When misleading or potentially misleading information is provided to customers regarding optional services, such practices clearly violate section 451's mandate that telecommunications carriers provide reasonable service. (D.02-02-027, slip op. at p. 8.)

84 As stated in Greenlining Institute v PUC, 103 CA4th 1324, 1333, fn. 10 (2002), quoting Northern California Power Agency v PUC (NCPA) 5 C3d 370, 378 (1971):

The PUC may, and indeed sometimes must, consider areas of law outside of its jurisdiction in fulfilling its duties. The NCPA court explained, "by considering antitrust issues, the Commission merely carries out its legislative mandate to determine whether the public convenience and necessity require a proposed development."

85 15 USC § 5711(a) (1) (A) ("Telephone Disclosure and Dispute Resolution Act").

86 In re Business Discount Plan, 15 FCCR 14461 (2000), at ¶ 16, quoting from 47 U.S.C. § 201(b) and Telecomm'ns Research and Action Center v. Central Corp, 4 FCCR 2157 (1989).

87 In re Joint FCC/FTC Policy Statement for the Advertising of Dial-Around and Other Long-Distance Services to Consumers, 15 FCCR 8654 (2000), at ¶ 6 (emphasis added).

88 See Staff Report at section III(B)(1), Staff Report Attachment 27 (consumer complaints, bills) and 44 (surcharge amounts). The www.calling10.com web page discloses, under Rates, that "Calling10 charges an administrative recovery fee of $1.65 per call for our directory assistance service. This fee is intended to offset the cost Calling10 incurs in complying with regulatory obligations and includes the cost of complying with the Federal Universal Service Charge." This disclosure is not made on the toll-free marketing intercepts, or on the initial menus of the DA platform.

89 See FCC Proposes Over $6.5 Million in Total Fines Against Two Carriers For Violations of Consumer Disclosure Requirements, press release, 2002 FCC LEXIS 4666; see also http://archive.deseretnews.com/archive/972775/Fat-finger-dialing-targeted.html; http://kansascity.bizjournals.com/kansascity/stories/2003/03/24/daily44.html.

90 See Careless Dialing Could Cost You Money, FCC Consumer Advisory Fact Sheet found at http://www.fcc.gov/cgb/consumerfacts/carelessdialing.html. These schemes may place most at risk Consumers who are prone to dialing mistakes because they are disabled, dyslexic, hearing impaired, or limited-English speakers.

91 See In re One Call Communications, Inc. dba Opticom, September 17/23, 2002 Notice of Apparent Liability, 17 FCCR 18646 (2002), also available at http://fjallfoss.fcc.gov/edocs_public/attachmatch/FCC-02-258A1.pdf ; see also FCC press release, FCC Proposes Over $6.5 Million in Total Fines, supra.

92 In re One Call, supra, 17 FCCR 18646, at ¶ 9. The FCC later settled the charges against both Opticom and Alternatel, and required both companies to make contributions to the United States Treasury and to conduct a "Best Practices Compliance Program" that included, among other things, requirements that the companies properly identify themselves to consumers and offer rate information to all callers to their access numbers so that consumers would not have to take the affirmative step of requesting the rates. See In the matter of OCMC, Inc. d/b/a/ One Call Communications, Inc. d/b/a Opticom; Operator Service Provider Requirements, Order, Release Number: FCC 03-317, 18 FCCR 26474 (2003) ($500,000 fine); In the matter of ASC Telecom, Inc. d/b/a Alternatel; Operator Service Provider Requirements, Order, Release Number: FCC 04-56, 19 FCCR 5160 (2004) ($125,000).

93 47 U.S.C. § 226; 47 C.F.R. §§ 64.703-708.

94 See Careless Dialing Could Cost You Money, FCC Consumer Advisory Fact Sheet found at http://www.fcc.gov/cgb/consumerfacts/carelessdialing.html.

95 See Staff Report section III.B.3 and Staff Report Attachment 26.4 (Telseven letter to ILD, at pg.4, paragraph 2).

96 In re Policies and Rules Governing Interstate Pay-Per-Call and Other Information Services, NPRM and Memorandum Opinion and Order, 19 FCCR 13461 (2004), at ¶ 10.

97 Id. at fn. 16 (emphasis added), citing 47 U.S.C. § 228(c)(7)(E). Section 228 applies, on its face, only to pay-per-call services offered through 900 numbers, which begs the question of whether Respondents' service should be offered over a 900 number instead of an equal access or dial-around number.

98 Id. at ¶ 22 ("Commission requires services meeting the pay-per-call definition to be accessed only through 900 numbers").

99 In addition to the provision of 15 U.S.C. § 5711 quoted above (fn. 85 and accompanying text), 47 U.S.C. §§ 228(c)(8) and (9) provide that pay-per-call charges must be assessed either pursuant to a presubscription agreement that clearly discloses the charges, or paid by credit card where the "service provider includes in response to each call an introductory disclosure message" that

(A) clearly states that there is a charge for the call;

(B) clearly states the service's total cost per minute and any other fees for the service or for any service to which the caller may be transferred;

(C) explains that the charges must be billed on either a credit, prepaid, debit, charge, or calling card;

(D) asks the caller for the card number;

(E) clearly states that charges for the call begin at the end of the introductory message; and

(F) clearly states that the caller can hang up at or before the end of the introductory message without incurring any charge whatsoever.

See also 47 C.F.R. § 64.1501 (same). Respondents' introductory message on their directory assistance platform does not appear to conform with any of these requirements.

100 47 U.S.C. § 228(i)(2).

101 Telephone Disclosure and Dispute Resolution Act, Public Law 102-556, 106 Stat. 4181, section 1(b)(5) (1992), codified at 15 U.S.C. § 5701(b)(5); see also 47 U.S.C. §228; In re Telephone Disclosure and Dispute Resolution Act, 8 FCCR 6885 (1993), at ¶ 11 (defining "presubscription or comparable arrangement" as "a contractual agreement in which ... the service provider clearly and conspicuously informs a consumer of the terms and conditions under which the service is offered"); Cal. P.U. Code § 2884; D.91-03-021, Conclusion of Law 7 (requiring full disclosure and a delay to give the consumer an opportunity to decline the transaction).

102 Toll-free numbers can start with the area codes 800, 888, 877, and 866. Newton's Telecom Dictionary, 24th Ed., 2008, at 66.

103 In re Toll-Free Serv. Access Codes, 22 FCCR 22188 (2007).

104 Id. at 22189.

105 Id.

106 When a customer dials a toll-free number, she is essentially telling the Service Switching Point (SSP) associated with the end office or tandem receiving the call that special processing is in order. Upon recognizing that a call is to a toll-free number, the SSP contacts the appropriate Service Control Point (SCP) to obtain detailed instructions for processing the call. The SCP finds this information by checking the customer record identified by the toll-free number. This record shows the call handling instructions and options chosen by the customer. These options could include choosing multiple carriers for different time periods or routing calls to alternative destinations. Each SCP Owner/Operator has at least one pair of SCPs to assure reliability. Each SCP contains the information necessary for routing calls originating in its service area. Once the SCP has determined the appropriate routing information, instructions are then sent back to the Service Switching Point (SSP) to complete the call. http://www.sms800.com/PublicContent.aspx?Text=SMS^800%20FAQ&URL=Shared%20Documents/Public/About%20SMS^800/SMS^800%20FAQ&Site=Public; see also Newton's Telecom Dictionary, supra.

107 In re Toll-Free Serv. Access Codes, supra, 22 FCCR at 22189.

108 47 CFR § 52.107(a).

109 Id.

110 47 C.F.R. § 52.107(a)(3) (emphasis added).

111 This was the testimony of Telseven/Calling 10's agent Harvey Berg in a November 3, 2010 Examination Under Oath.

112 A rebuttable presumption of "warehousing" by a RespOrg exists if a RespOrg does not have an identified toll-free subscriber agreeing to be billed for each toll-free number requested. 47 C.F.R. §52.105(b)(1), (2); compare In re Toll-Free Serv. Access Codes, 22 FCCR at 22189.

113 Public Utilities Code § 451 provides that "All rules made by [a] public utility affecting or pertaining to its charges or service to the public shall be just and reasonable."

114 The term "cramming" comes from the Legislative history of P.U.Code sections 2889.9 and 2890: "This bill addresses the problem of `cramming,' a practice in which consumers are charged for unauthorized services on their phone bills... (Assembly Bill No. 2142, 3d reading May 7, 1998, Assembly Floor (1997-1998 Reg. Sess.)).

115 Id.

116 See, e.g., 47 U.S.C. § 228, authorizing the regulation of pay-per-call services, which was first enacted in 1994; see also 46 C.F.R. §§ 64.2400 et seq. (Truth-in-Billing regulations, promulgated 1998).

117 FTC v. INC21.com Corp.,supra, 688 F.Supp.2d at 929; see also D.01-04-036 (In re USP&C), in which Commission fined Respondent $1.7 million (never collected) for cramming violations; D.06-02-12 (UCAN v. Cingular Wireless), Slip Op. at 9-10 ("[t]he United States Attorney's Office for the Eastern District of New York subsequently indicted USP&C, along with members of the Gambino crime family, for additional cramming [and racketeering] violations, seeking $430 million in criminal forfeiture"). Respondent later indicted by Justice Department [and convicted] as part of Gambino crime family. [cl]

118 Assembly Bill No. 2142 (1997-1998), supra; see also D.10-10-034, Slip Op. at 33 ("The record shows that customers do not carefully check bills and often pay small charges, even if unauthorized, due to the time and inconvenience of disputing the charge").

119 Joint Comments of AT&T, New Cingular Wireless LLC, et al. (AT&T) regarding proposed new cramming complaint reporting rules in R.00-02-004, at 5-6, as reported in D.10-10-034, Slip Op. at 7-8. BSG similarly reports that before it "will accept billings from a service provider, [it] conducts a comprehensive due diligence process." D.10-10-034, Slip Op. at 14, quoting BSG Comments at 1.

120 D.01-04-035 (In re Coral Communications), Slip Op. at 2, passim (finding cramming violations where "fine print" disclosure inadequate). The Commission there noted the connection between disclosure and authorization:

Other aspects of California contract law support the conclusion that Coral's means of obtaining customer authorization for charges was inadequate. To be enforceable, a contract's terms must be apparent to a reasonable person. If the writing does not appear to be a contract, and its contractual terms are not called to the attention of the person who receives it, the person is not bound by the purported contract. 1 Witkin, Contracts (9th ed. 1987), § 123.

Slip Op. at 26.

121 We recently noted the connection between full disclosure and meaningful authorization in our Order Instituting Investigation of Legacy.

Staff found, in the course of its review of the CAB complaint files, that many complaints characterized as disclosure or unreasonable rates were also cramming complaints. For example, consumers who complained of inadequate disclosure and lack of opportunity to inquire about collect call rates because of Legacy's automated operator system also had no opportunity to authorize or reject the collect calls in dispute. Hence, charges arising out of such calls can also be considered unauthorized charges.

I.10-06-013, Slip Op. at 5.

122 See D.10-06-001 (UCAN v MPower), Slip Op. at 29, citing D.02-10-059 (Qwest Investigation), at 35, n. 35; see also D.10-10-034, adopting new Billing Rules, at Appendix A, Revised General Order 168, Part 4, Rule 3 ("With regard to direct dialed telephone services, evidence that a call was dialed is prima facie evidence of authorization. This presumption can be rebutted with evidence that the call was not authorized").

123 Staff maintains that there was no full and meaningful disclosure of the nature of Respondents' service - i.e., that the called number is defunct, that option 1 "status and history on a number you are trying to reach" tells the customer nothing more than the date on which the number went out of service and is essentially worthless, and that the best the consumer could hope for is a garden-variety DA service, costing however an exorbitant total of $7.14. Staff Report, at sections III(B)(2) and (4).

124 See D.01-04-036 (USP&C), Slip Op. at 10, 14-15 (failure to accurately identify service provider constitutes violation of section 2890).

125 See Staff Report at section III(C), and Attachments 27 (consumer complaints) and 47 (selection of consumer complaint quotes directing initial complaint to ILD and BSG).

126 D.00-11-015, Slip Op. at 14-15.

127 Id. at 20, Ordering Paragraph 1.

128 See Staff Report Attachment 27 for examples of such bills.

129 Perhaps partly for this reason, Telseven and ILD have been named as joint defendants in a Florida class action lawsuit. Eyler v. ILD Telecommunications Inc. and Telseven LLC, 2008 U.S. Dist. LEXIS 101267 (/D. Fla, 2008) (remanding case to Florida State court). See Staff Report at section IV(F) and Attachment 50.

130 In its recent Notice of Inquiry on Truth-in-Billing, the FCC noted the full continuum of disclosure:

The Commission's approach to information disclosure issues has traditionally focused on the formatting of consumer bills, which is relevant after a consumer has already selected a service provider. This Notice asks questions about the information available to consumers at all stages of the purchasing process, including: (1) choosing a provider, (2) choosing a service plan, (3) managing use of the service plan, and (4) deciding whether and when to switch an existing provider or plan.

In re Matter of Truth-in-Billing and Billing Format, CC Docket Nos. 98-170 et alia, 24 FCCR 1138, ¶ 4 (2009).

131 In re Matter of Truth-in-Billing and Billing Format, CC Docket No. 98-170, FCCR 99-72, 14 FCCR 7492, ¶ 5 (1999).

132 47 CFR § 64.2401(b) provides:

(b) Descriptions of billed charges. Charges contained on telephone bills must be accompanied by a brief, clear, non- misleading, plain language description of the service or services rendered. The description must be sufficiently clear in presentation and specific enough in content so that customers can accurately assess that the services for which they are billed correspond to those that they have requested and received, and that the costs assessed for those services conform to their understanding of the price charged.

(Emphasis added.)

133 FTC v. Inc21, supra, Slip Op. at 2, citing the FCC's most recent pronouncement in this area, In re Consumer Information and Disclosure, 24 FCCR 11380 (2009).

134 D.01-04-036, Slip Op. at 10 citing Ford Dealers v. DMV, 32 C.3d 347, 356 (1982).

135 Federal-State Joint Board on Universal Service, Report and Order and Second Further Notice of Proposed Rulemaking, 17 FCCR 24952 (2002), at ¶ 45.

136 47 C.F.R. § 54.712(a) (2009); see also In re Truth-in-Billing and Billing Format, CC Docket
Nos. 98-170 et alia, 20 FCCR 6448, ¶ 1 (2005) ("the burden rests upon the carrier to demonstrate that any line item that purports to recover a specific governmental or regulatory program fee conforms to the amount authorized by the government to be collected").

137 McKell v. Wash. Mut., Inc., 142 CA4th 1457, 1472 (2006) (customers "reasonably would conclude that the fees charged were the costs Washington Mutual incurred, [but] [t]he fees charged were substantially above Washington Mutual's costs").

138 See Staff Report Attachments 26.2C (November 14, 2006 letter at 2-3), 26.3 (December 19, 2006 letter at 2), and 26.4 (January 9, 2007 letter at 1).

139 Section 1013 was adopted as an exception to Pub. Util. Code §§ 1000 et seq. for the benefit of existing telecommunications companies that would otherwise certainly qualify for a CPCN and whose intended operations within California do not involve activities that would require environmental review. The purpose of this section was to make it easier and quicker for competitors to enter the California telecommunications market. Section 1013 was not intended to as a way to avoid Commission review of an applicant's qualifications, especially if there are questions about those qualifications. See discussion in D.03-10-054, In re Application of Consolidated Communications Operator Services, Inc. for Registration as an Interexchange Carrier Telephone Corporation Pursuant to the Provisions of Public Utilities Code Section 1013, found at 2003 Cal. PUC LEXIS 502.

140 P.U. Code § 234.

141 P.U. Code § 233.

142 P.U. Code § 216(c).

143 See D.96-03-020; D.96-10-066, Appendix B, Rule 4.

144 P.U. Code §§ 216, 233-34.

145 Respondents explanation for why they registered under a fictitious business name - "Calling 10 was not available" -- is found at Staff Report Attachment 6.1. Staff notes that a California Secretary of State search for Calling 10 brings up California Calling 10, so the Calling 10 name was clearly not unavailable.

146 Like the consumer protection statutes cited in this OII, Rule 1.1 is a strict liability rule. Such laws are sometimes referred to as public welfare or police power laws, as they involve protection of the public at large. Cf. Investigation on the Commission's own motion into ... Communication Telesystems [CTS], D.97-10-063 (1997) 1997 Cal. PUC LEXIS 912 at *10-11, *16, and Conclusion of Law 6 (slamming of long distance customers); see also D.97-05-089, 1997 Cal. PUC LEXIS 447 at *39-40; see also Donald v. Cafe Royale, Inc. (1990) 218 CA3d 168, 180 (failure to provide wheelchair access in restaurant); Drewry v. Welch (1965) 236 CA2d 159, 175-76 (trespass in removing timber), discussed in D.97-10-063, 1997 LEXIS 912 at *11.

147 FTC v. Inc21, supra, Slip Op. at 17, citing FTC v. Publishing Clearing House, Inc, 104 F.3d 1168, 1170 (9th Cir. 1997).

148 &_butType=3&_butStat=2&_butNum=4&_butInline=1&_butinfo=&_fmtstr=FULL&docnum=5&_startdoc=1&wchp=dGLbVzz-zSkAA&_md5=9b10caf05b3422cbaec1d4a6211eb479" target="_top">Watson v. Commonwealth Ins. Co, (1936) 8 C2d 61, 68.

149 Wyatt v Union Mortgage Co., 24 C3d 773, 785 (2007) ("Directors and officers of a corporation are not rendered personally liable for its torts merely because of their official positions, but may become liable if they directly ordered authorized or participated in the tortuous conduct").

150 D.03-01-079 (Titan Investigation), Slip Op. at 16, citing Alexander v. Abbey of the Chimes, 104 CA3d 39, 46 (1980). In Titan, the alter ego theory was rejected on due process grounds, because the individual alleged to be the alter ego of the corporation had not been named in the original order instituting investigation. Slip Op. at 16-17.

151 Id., citing Associated Vendors, Inc. v. Oakland Meat Co., Inc., 210 CA2d 825, 838-840 (1962) (citations omitted); other factors include: failure to maintain an arm's-length relationship among related entities. the concealment and misrepresentation of the identity of the ownership, management, and financial interest of the business, and use of same address. Id. at 839-40.

152 Wyatt v. Union Mortgage, supra, 24 C3d at 785-86 ("tightly knit, family-oriented business operation" where one individual "owned all or a controlling interest in each of the affiliated corporations").

153 See, e.g., Staff Report at section II(A).

154 See Staff Report at section IV(A)(4). Rule 3 of the Subscriber Complaint Reporting Rules set out in our Decision 00-11-015 requires that each billing agent or aggregator maintain "records of billing disputes" that "include the following information (among other things):

Our recent Decision 10-10-034 reaffirmed these requirements.

155 Staff Report section IV(A).

156 P.U. Code § 2889.8(g) ("... blling agents, and telephone corporations billing for these products or services shall cooperate with the commission in the commission's efforts to enforce the provisions of this article ..."); D.99-08-917 (In re Coral Communications), 1999 Cal. PUC LEXIS 519, *4 ("We put on notice all entities which provide billing and collection services, including LECs and billing agents, that the Commission may direct them to provide information on billing services provided to respondents in future proceedings").

157 Id. Ordering Paragraph 1.

158 P.U. Code § 2889.9(b).

159 See FTC v. Inc21, supra, 688 F. Supp. 2d at 932 ("Inc21 was ordered to send all of its current customers a verification letter asking them to confirm in writing that they authorized their services").

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