II. SUMMARY OF STAFF ALLEGATIONS

CPSD Staff has prepared a report and obtained consumer declarations documenting and supporting its investigation to date. The report and declarations are released today and shall be placed in the Commission's public formal file for this proceeding.

A. Company Background

On June 11, 1995, Vycera (then called Genesis Communications International, Inc.) received a certificate of public convenience and necessity as an interexchange telecommunications services reseller from the California Public Utilities Commission in Decision (D.) 95-06-045. On February 23, 1996, Commission Decision (D.)96-02-072 granted Vycera/Genesis authority as a competitive local service reseller. On September 5, 2002, Genesis Communications International, Inc. changed its name to Vycera Communications Inc. On October 3, 2002, the Commission in Decision (D.) 02-10-016 approved Vycera's application (A.) 02-06-022 to change its name from Genesis to Vycera, as a limited facilities-based competitive local exchange carrier. Vycera is owned and operated by its primary shareholders, President and CEO Derek M. Gietzen, and Vice-President and CFO Thalia R. Gietzen.

Vycera markets its services through the use of telephone solicitations, initiating the solicitation with Spanish-speaking consumers in Spanish and offering Vycera's services. Vycera contracts with FTL Communications to perform the third-party verifications required by section 2889.5.

B. Nature of Complaints

Staff's report documents that the Commission's Consumer Affairs Branch received 43 complaints regarding Vycera in 2001, 34 in 2002, and 156 in 2003, for a total of 233 for the last three years. (See Table D of Staff's Report.) CPSD receives monthly Business Office Referral reports (BOR reports) from SBC, which document that SBC received approximately 11,000 "dial tone slams"¹ complaints attributable to Vycera in the last three years. (See Table A of Staff's Report.) SBC also provides the Commission with the number of monthly-recorded long distance slamming allegations, referred to as PIC disputes.² SBC received for approximately 10,000 PIC disputes attributable to Vycera in the last three years.

Consumers complain that Vycera's telemarketers do not thoroughly inform them of the nature and extent of the products or services being marketed, and often find that after purchase, the product or services they are being billed for are not consistent with the products or services described by the telemarketers. Typically, Vycera's telemarketers falsely promise prospective customers that their rates will be lower with Vycera, although they are not. Consumers have also complained that Vycera sales representatives misrepresent themselves as representatives of the consumer's local telephone company; i.e., SBC or Verizon, and do not clearly state that they are calling on behalf of Vycera.

Staff's report indicates that Vycera's third-party verification company, FTL Communications, records a potential subscriber's name, and then in order to verify the subscriber's intent to switch, the subscriber is required to press #2 on the telephone to verify that the information provided by an automated voice (not a live person) is correct, and #4 to decline. The entire process is automated - Vycera does not verify the subscriber's intent to switch orally as required by section 2889.5(a)(3)(C), which states that the TPV company shall obtain and record the subscriber's "oral" confirmation. Furthermore, the option #4 (to decline) is not provided at every step of the automated verification process, but only after certain products or services are mentioned.

Staff requested third party verification tapes (TPV tapes) from Vycera for the consumers Staff interviewed. Staff alleges that Vycera provided TPV tapes to Staff that sound as if they have been doctored, or are functionally inaudible. Staff played the TPV tapes for 4 complainants, who after reviewing the TPV tapes provided written declarations documenting that the TPV tapes are not what they remembered as having heard during the verification process.

Staff's report documents that Vycera automatically includes an inside wire maintenance service called "Line Pro" or "Cable Pro", for a fee of $2.99, without obtaining the subscriber's authorization for such a service, without offering the subscriber the option to decline this service, and without disclosing to the subscriber that the purchase of the service is not required. This practice has been documented by Staff's report and written declarations from consumers.

Consumers further allege that Vycera never provided them with any notice that their telephone service had been switched to Vycera, and that the first time they learned of the switch was when they opened their telephone bill.

Finally, it is of concern that, according to information obtained from Vycera's website and its application, Mr. Derek M. Gietzen was Vice President and General Manager, and Thalia R. Gietzen was Vice President and CFO, of a telephone company called Communication Telesystems International, Inc. In Decision 97-05-089, the Commission found that CTS had committed 39,200 unauthorized switches, fined CTS $19.6 million, and suspended CTS' operating authority for 3 years. It concerns us that Vycera reported to Staff that "none of the officers and directors of Genesis have been officers of any other telecommunications company."