II. BACKGROUND
A. Legacy and Its Operations
Legacy (utility number U-5786-C) is a California corporation located in Cypress, California, and was incorporated in 1996. In Decision 97-06-055, issued in June 1997, the Commission granted Legacy a Certificate of Public Convenience and Necessity ("CPCN") to resell interLATA and intraLATA telephone services in California.2 Legacy operates as: (1) a reseller of interexchange services; and (2) a provider of operator services in California. Legacy provides operator and long distance services to Coin-Operated Pay Telephone (COPT) companies and to hotels and motels. Ninety percent of Legacy's operator services business is provided at outdoor payphones, and ten percent in rooms in hotels and motels.3 Legacy provides service to approximately 150 COPTs owning approximately 60,000 payphones in California as of March 9, 2007. Legacy also provides resold dial tone to approximately 600 payphones in California.4 Legacy's customer billings from 2005 through 2008 are in Table 1 of
CPSD's Report, attached hereto as Attachment B below5.
B. CPSD'S Protest Of Legacy's Application For Expanded Authority Lead To The Discovery Of Cramming Complaints
On November 3, 2006, Legacy applied (in A. 06-11-003) for a CPCN for expanded authority to operate as a facilities-based competitive local exchange telecommunication services provider. CPSD protested Legacy's application on December 14, 2006, on the basis of numerous alleged misrepresentations6 in Legacy's application. For example, CPSD discovered substantial evidence showing that Legacy had been investigated, fined, sanctioned and/or penalized, and had its tariff and registration cancelled or its corporate certificate of authority revoked in 16 states. In addition, CPSD found, and Legacy acknowledged, that Legacy had billed California consumers under tariffs that Legacy had never filed with the Commission, in violation of P.U. Code Section 495; and that Legacy billed consumers at rates higher than permitted in its filed tariffs, in violation of P.U. Code Section 532. Legacy also violated P.U. Code Section 489 by failing to file its tariffs timely.
CPSD served its testimony in the form of an Investigation Report on August 13, 2007. On November 7, 2007, Legacy filed its testimony in response to CPSD's Report. Due to intervening illness, the respondent requested and Administrative Law Judge (ALJ) Patrick granted an extension of time for the scheduled hearing. Prior to hearings being rescheduled, Legacy formally withdrew its application on January 30, 2008, stating that it no longer had an interest in obtaining authority to provide service as a facilities-based competitive local carrier in California. CPSD did not object to the withdrawal of Legacy's application, conditioned upon Legacy's agreement that it would refer to this withdrawal and CPSD's protest in any future applications before this Commission. On April 10, 2008, the Commission approved ALJ Patrick's decision, which granted Legacy's request for withdrawal and CPSD's conditions.7
In the course of reviewing Legacy's CPCN application, Staff found a high number of cramming complaints against Legacy filed by consumers with Legacy's billing aggregator BSG and with the Commission's Consumer Affairs Branch (CAB).
1. Consumer Complaints Filed with Billing Aggregator BSG8
BSG reports 686 complaints against Legacy from 2005 through the first half of 2008. These complaints were predominantly related to unauthorized charges or cramming. Since 2005, the number of consumer complaints reported to BSG against Legacy appears to have declined significantly. These complaints are summarized, infra, at V.A.2.
Legacy was also the subject of numerous complaints to CAB, with a majority of complaints concerning unauthorized charges or cramming, disclosure issues, and unreasonable rates. CAB received 706 complaints from 2005 through 2008. Unlike the declining trend in the number of complaints against Legacy received by BSG, complaints received by CAB appear to have grown from 2005 and held steady through 2007. Legacy acknowledged in response to CPSD's Data Request 1, Question 8 that "A vast majority of the complaints received by CAB about Legacy are operator service rate related."9 Legacy President Curtis Brown confirmed that such complaints pertain to claims of unconscionably high rates and denials of ever having authorized or accepted the collect calls.10
CAB received 706 complaints in the above 4-year period, 180 of which concerned cramming. By comparison, 324 complaints concerned unreasonable rates, and 117 were about the lack of disclosure of rates and/or charges. 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. Legacy's President has admitted that Legacy's automated operator program does not permit California collect call recipients to ask for rates.11 CPSD found that the majority of the Legacy-related cramming complaints reported to CAB concerned collect calls placed from payphones for which Legacy provides operator service.
Given the large number and the nature of consumer complaints against Legacy, CPSD conducted further investigations to determine the scope of Legacy's potential wrongdoing.
2 A LATA - a Local Access and Transport Area - is a geographic region established to differentiate local and long distance telephone calls within the U.S.
3 The CPSD Report, Attachment B, is the source of all Appendices referenced herein. Appendix 1, Deposition of Legacy President Curtis A. Brown., pp. 14-15, lines 27-1.
4 Appendix 2, Deposition of Legacy President Curtis A. Brown, p. 17, lines 3-6; Mr. Brown states that Legacy serves somewhere around 30,000 pay phones in California; also Appendix 3, Legacy Response to CPSD Data Request 1-13, citing 39,255 active lines, (filed under seal); Appendix 4, Legacy Response to Data Request 2-17, listing more than 61,000 separate pay phones in California, (filed under seal).
5 Appendix 5, BSG Clearing Solutions Subscriber Complaint Reports Years 2005 - 2008, (filed under seal). BSG is a subsidiary of Billing Concepts Inc.
6 Appendix 6, CPSD Protest to the Application of Legacy Long Distance International, Inc., filed on December 14, 2006.
7 Appendix 9, Decision 08-04-021 April 10, 2008. In the Decision, ALJ Patrick granted Legacy's request to withdraw its Application for a CPCN as a facilities-based local exchange carrier and granted CPSD's request that Legacy and/or any of its officers, directors, or owners of more than 10% of Legacy outstanding shares shall reference CPSD's protest and this decision in any future application for authorization to provide telecommunications services in California.
8 BSG is a subsidiary of Billing Concepts Inc.
9 Appendix 10, Legacy Responses to Data Request 1-8.
10 Appendix 11, Deposition of Legacy President Curtis Brown, page 140, lines 20-24.
11 Appendix 12, Deposition of Legacy President Curtis Brown, p.189, lines 5-13.
