V. Operation without a CPCN

Applicant began providing interexchange services prior to receipt of the CPCN sought in this application, in violation of §1001. On October 14, 2003, the assigned Administrative Law Judge (ALJ) learned of the unauthorized provision of services, and asked Applicant for an explanation. Applicant explained that it was advised by its consultant, on approximately June 15, 2003, that it had negotiated a resale agreement with a certificated telecommunications carrier and that the carrier knew that Applicant had applied for, but not yet received, a CPCN. Applicant represented that its consultant did not inform it that it could not begin to offer service. Therefore, Applicant believed it could begin providing service.

Applicant represents that it did not advertise its services. The customers it acquired learned by word-of-mouth that it would be offering services. They consisted of friends and family of Applicant's management, and/or former customers of ITS or ECI. Applicant provided interexchange services to 41 customers. The total amount billed to customers in August, September, and October 2003 was approximately $19,000. Upon being informed that it was operating without authorization, Applicant promptly stopped accepting new customers, and sought the services of an attorney. Applicant states that it did not intend to violate the Commission's requirements, and says that it will take the necessary steps to ensure complete compliance in the future.

It appears that Applicant's violation was inadvertent. However, Applicant could and should have known that it could not provide service until a CPCN had been granted. Applicant is responsible for its actions, including the actions or inactions of persons in its employ. For the reasons discussed below, we will not deny the application because of the violation. In addition, we did not order Applicant to cease providing service to its existing customers in order to avoid interrupting service to those customers. However, we will impose a fine.

The Commission set the basis for future decisions assessing fines in D.98-12-075, Appendix B. In setting the amount of the fine, the Commission considers the severity of the offense, the utility's conduct, its financial resources, mitigating or exacerbating factors, and precedent. In this case, we find provision of service without a CPCN to be a serious offense because such violations cause harm to the integrity of the regulatory process. Here, there is no evidence that the violation caused physical harm to others. In addition, while other carriers apparently lost some customers to Applicant, we find no evidence that any serious economic harm resulted, or that Applicant significantly benefited from the violation. We find signification mitigation in the fact that: (1) the violation was unintentional; (2) Applicant did not advertise its services; (3) when informed of the violation, Applicant promptly ceased accepting new customers; and (4) Applicant took action to avoid further violations by seeking appropriate legal assistance. The purpose of a fine is to deter future unlawful conduct by Applicant and others. Pursuant to § 2107, the Commission may impose fines ranging from $500 to $20,000 for each violation. Applicant's financial resources are approximately $80,000, and the billed amounts for the initial invoices totaled approximately $19,000. Therefore, we believe a fine of $500 will be sufficient to deter Applicant and others from future violations. A fine of this amount is generally consistent with other fines imposed by the Commission for violations of this magnitude.