III. DISCUSSION

Staff reports that Americatel's complaints surged from 1,090 in 2006, 1,681 in 2007, to 18,549 in 2008. This trend was apparently caused by Americatel's agent Bravo's fraud. This causes us concern that Americatel does not have adequate systems and procedures in place to ensure its telemarketers or direct-marketing agents are reliable and established entities with a history of good corporate behavior. We are also concerned that Americatel does not conduct adequate oversight over its agents. We commend Americatel for taking relatively prompt action to sever its ties with Bravo once it verified the fraud. But this does not relieve Americatel of its responsibility to prevent fraud from occurring in the first place. We hold carriers and their agents to the same standards and trust that carriers will protect consumers from unscrupulous marketing agents. We cannot allow such widespread consumer harm to go unredressed; thus we initiate this proceeding to provide a forum to consider penalties, sanctions and any other appropriate remedies including refunds to consumers.

In addition to the fraud by Bravo, a large amount of refunds were issued by Americatel in 2008 as a result of egregious billing errors: the misapplication of the USF surcharge rate and per minute rates for certain calls. Again, this causes us concern that Americatel does not have adequate system and proper procedural oversight. This caused hundreds of thousands of consumers to receive bills effectively doubling their average monthly bills⁸. This proceeding will consider what penalties and other remedies to impose on Americatel as a result of this unacceptable billing error, and ensure that all affected consumers were made whole.

Public Utilities Code section 2890(a) states "A telephone bill may only contain charges for products or services, the purchase of which the subscriber has authorized." Staff may recommend, and the Commission may consider, penalties pursuant to Public Utilities Code section 2107 and 2108 in the amount of $500 to $20,000 per offense per day. If Staff's allegations are true, Americatel is responsible for its agent's (Bravo) widespread violations of Section 2890. In addition, we may consider whether Americatel 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 Public Utilities Code Section 1013(h). We will further ensure that all consumers who have been victimized by Americatel or its agents have been made whole, pursuant to Section 734.

Staff has thoroughly investigated and corroborated its allegations against Americatel. Therefore, by this Order we will provide an opportunity for Americatel to appear before us and show cause why it should not be fined or have other sanctions imposed as a result of the alleged cramming.

Therefore IT IS ORDERED that:

1. An investigation on the Commission's own motion is hereby instituted into the operations of Americatel Corporation (U-5918-C) (Respondent), to determine:

a. whether Respondent or its agents violated PU Code section 2890 by imposing charges on consumers' bills for products or services which the consumer did not request or authorize;

b. whether Respondent should be ordered to pay reparations pursuant to PU Code section 734;

c. whether Respondent should be ordered to cease and desist from any unlawful operations and practices, or have special conditions and restrictions imposed on it, pursuant to PU Code section 761;

d. whether Respondent should be fined pursuant to PU Code sections 2107 and 2108 for violations of the PU Code or other order, decision, rule, direction, demand or requirement of the Commission.

2. Respondent is hereby ordered to appear and show cause why the Commission should not order Respondent to pay fines for widespread cramming violations and to have further conditions placed on its license authority, including possible revocation pursuant to PU Code Section 1013(h), on a date to be set at the Commission's hearing room, 505 Van Ness Avenue, San Francisco, 94102.

3. Staff's report also includes documents obtained from Respondent, which contain proprietary information such as customer-specific information. We will maintain the privacy of any consumer confidential information that may be a part of this proceeding.

4. Staff shall continue discovery and continue to investigate the operations of Respondent. Any additional information that Staff wishes to introduce shall be provided to the Respondent in advance of any hearings in accordance with the schedule directed by the assigned Administrative Law Judge. Staff need only respond to discovery requests directed at Staff's investigation of the Respondent and Staff's prepared testimony offered in this proceeding.

5. Staff shall monitor consumer complaints made against Respondent. We expect Staff to bring additional evidence of any alleged harmful business practices by Respondent to our attention (e.g. new types of violations). Staff may propose to amend the OII to add additional Respondent or to raise additional charges. Any such proposal shall be presented to the Commission in the form of a motion to amend the OII and shall be supported by a Staff declaration supporting the proposed amendments or additional named Respondent.

6. This ordering paragraph suffices for the "preliminary scoping memo" required by Rule 7.1(c) of the Commission's Rules of Practice and Procedure. This proceeding is categorized as an adjudicatory proceeding and will be set for hearing. The issues of this proceeding are framed in the above order. A prehearing conference shall be scheduled for the purpose of setting a schedule for this proceeding including dates for the exchange of written testimony, determining which of the Staff's witnesses will need to testify, and addressing discovery issues. This order, as to categorization of this proceeding, can be appealed under the procedures in Rule 7.6. Any person filing a response to this order instituting investigation shall state in the response any objections to the order regarding the need for hearings, issues to be considered, or proposed schedule. However, objections must be confined to jurisdictional issues that could nullify any eventual Commission decision on the merits of the alleged violations, and not on factual assertions that are the subject of evidentiary hearings.

Service of this order on Respondent will be effectuated by serving a copy of the order and Staff's report by registered mail on the Respondent' designated agent for service in California.

This order is effective today.

Dated February 4, 2010 at San Francisco, California.

MICHAEL R. PEEVEY

President

DIAN M. GRUENEICH

JOHN A. BOHN

TIMOTHY ALAN SIMON

NANCY E. RYAN

                  Commissioners

I1002003 Investigative Staff Report on Americatel Corp

⁸ Ibid.