IV. Discussion
A. Was Rule 1 Violated?
There are two questions to be resolved. First, we must determine whether Sprint PCS' actions constitute violation of Rule 1. Second, we must determine what sanctions or penalties should be imposed in the event that Rule 1 violation was violated.
There is no dispute that Sprint PCS failed to disclose the information on the two NXX codes sought by the staff in discovery. The question is whether Sprint PCS' actions in connection with these omissions constitute a Rule 1 violation. Sprint PCS' major argument is that the omission was purely unintentional and as such, does not qualify as a Rule 1 violation. Sprint PCS argues that if it had intended to deceive the staff, it would not have made the information available in other contexts, for example, in the above-referenced response to the Director of TD.
Even to the extent we were to presume that Sprint PCS did not intentionally set out to deceive the staff, the results of its actions did have the effect of misleading the staff.
Sprint PCS argues, for example, that it did not conceal the fact that it possessed the Culver City NXX because the assignment of every NXX code in America, including the Culver City NXX, is published in the Local Exchange Routing Guide (LERG) which is a public document. Yet, the Commission does not routinely monitor when and where carriers obtain prefixes, since it is NANPA's responsibility to assign prefixes to carriers. The staff thus does not routinely crosscheck data received at different times for different purposes to confirm that a carrier is telling the truth.
Further, the data response Sprint PCS submitted was directed to the supervisor of the numbering team in TD. The subsequent letter to which Sprint refers, in which it disclosed possession of the Culver City NXX codes, was sent to the Director of TD, and ultimately referred to a staff person not working on the Sprint PCS emergency code request. The two requests for information were unrelated, and the staff person assigned to the Sprint PCS emergency code request could not reasonably be expected to search throughout the division for other sources of Sprint PCS data that might be different from the information Sprint provided in the data response. Finally, the information Sprint PCS disclosed its possession of the Culver City prefix one month after it submitted the data response to TD, thus excluding the existence of that code from the staff's evaluation of the emergency request.
Merely because a party initially withholds information from the staff for a particular purpose and then later discloses the information in some different or unrelated context(s) does not necessarily mean that the initial nondisclosure was purely unintentional. The timing or manner in which information is disclosed could potentially have a material effect on the outcome desired by the disclosing party. If a party is able to simply claim ignorance of the initial omission, the party would benefit from the initial nondisclosure and escape any sanctions or penalties.
In any event, the question of intent to deceive merely goes to the question of how much weight to assign to any penalty that may be assessed. The lack of direct intent to deceive does not necessarily, however, avoid a Rule 1 violation. We address this question further in the section below dealing with the size of the penalty to be assessed.
In the case of its Inglewood NXX code, the reason Sprint PCS offers for not making disclosure was that Sprint PCS did not interpret the data request to be seeking this information. Sprint PCS quotes pertinent language from the request asking for: "...Sprint PCS' utilization data as of May 31, 2000 for all rate centers in the 310 NPA...." Sprint PCS claims it interpreted this wording as limited in scope only to codes that were currently available for assignment to customers. The numbers in the Inglewood rate center were not effective and available for assignment to customers until mid-June 2000. Sprint PCS claims that in conformity with its national reporting policy, utilization reporting is based on effective NXX codes, not on assignment of the code to the carrier.
We find Sprint PCS' explanation for not disclosing the Inglewood NXX in its data response to be unsatisfactory. Sprint PCS' purported interpretation of the staff's data request is unduly narrow. The intent of the staff's data request was to gain a comprehensive picture of how Sprint PCS was utilizing the numbering resources within its possession in the identified rate centers as a basis to evaluate its need for new numbers going forward in time. Utilization is a function of the quantity of numbers assigned to customers in relation to numbering resources within the possession of the carrier. Clearly, the Inglewood NXX code information was within Sprint PCS' possession at the time of the data response even though actual assignments of numbers from the NXX would not become effective until somewhat later. Therefore, Sprint PCS should have identified the Inglewood NXX in order to provide a complete picture of numbering resources in response to the staff request.
Sprint PCS further claims that it believed the Commission already knew that Sprint PCS possessed the Inglewood NXX code in any event because the Commission conducted the lottery granting this code to Sprint PCS. We find this argument unpersuasive as well. Sprint PCS had no basis to presume how Commission staff may or may not apprehend, retain, relay, or crosscheck information gleaned from processing the lottery for other independent data gathering purposes. No party should not take it upon itself to selectively edit responses to staff data requests based on its own presumptions about what the staff may or may not already know from other independent sources. We therefore conclude that failure to disclose numbers in the Inglewood NXX constitutes violations under Rule 1.
We have a similar reaction with respect to the Culver City NXX code. Even though the omitted information concerning the Culver City NXX code was subsequently disclosed to the Director of TD, for example, the disclosure was in a different context that was not responsive to the original staff data request. It is not obvious that the staff handling the Sprint PCS request for codes would necessarily cross check data received from unrelated sources to become aware that previously omitted NXX data had now been provided through some unrelated process.
Finally, we note the significant of the existence of the Culver City and Inglewood codes in the staff's analysis of the emergency code request. The letter denying the code request explained the staff's rejection of Sprint PCS' argument that it could not assign customers numbers in Beverly Hills numbers assigned to adjacent rate centers. The letter explains at some length the staff's belief that the CPUC is not required to afford callers to wireless customers a local calling scope identical to customers of wireline carriers serving the same rate center. Given the importance TD staff attached to Sprint PCS' number holdings in adjacent rate centers, the omission from the data response of information pertaining to the Culver City and Inglewood NXX codes was critical.
In view of its failure to disclose the NXX codes possessed in the Culver City and Inglewood Rate Centers in its response to the TD staff's data requests, we therefore find that Sprint PCS is in violation of Rule 1. Accordingly, we impose penalties as follows:
B. Assessment of Sanctions and Penalties
Decision (D.) 98-12-075, and Public Utilities Code Sections 2107 - 2108, provide guidance on the application of punitive fines.4 As stated in D.98-12-075, two general factors are considered in setting fines: (1) the severity of the offense and (2) the conduct of the utility. In addition, the Commission considers the financial resources of the utility, the totality of the circumstances in furtherance of the public interest, and the role of precedent. (D.98-12-075, mimeo., pp. 34-39.)5
A sanction may be a warning. Alternatively, a sanction might be a fine that is suspended based upon the condition that certain events are fulfilled (e.g., no additional Rule 1 violations within a specific number of months). A fine might be a penalty of not less than $500, nor more than $20,000, for each offense, with every day of a continuing offense a separate and distinct offense. (Public Utilities Code Sections 2107 and 2108.)
Section 2111 of the Public Utilities Code provides for fines and penalties on "every corporation or person, other than a public utility and its officers, agents, or employees, which knowingly violates or fails to comply with...any part of any order, decision, rule, direction, demand, or requirement of the commission... " Thus, under this provision of the code, the Commission has authority to impose monetary penalties on any party that makes false representations to the Commission in violation of Rule 1, whether or not they are a regulated utility.
The Commission also may consider sanctions that may be available as a result of the delegated authority from the Federal Communications Commission (FCC) to engage in area code planning and implementation, as well as to implement number conservation measures within California. Sprint PCS is subject to the rules and requirements of this Commission in order to obtain numbering resources within California. Since we are imposing a monetary penalty, we shall not impose further sanctions on Sprint PCS at this time.
To determine the size of the penalty for Sprint PCS' Rule 1 violation, we shall thus rely on the criteria adopted by the Commission in D.98-12-075 as discussed below. Based on the application of these criteria as discussed below, we conclude that a penalty of $10,000 per violation is appropriate here. In terms of the size of the penalty per offense, an element of discretionary judgment is involved. In view of the severity of the offense, conduct of the utility, financial resources, and prior precedent, we conclude that the amount of the penalty per offense should be set in the middle of the allowable range.
In accordance with Section 2108, we shall apply the $10,000 penalty per violation to each separate offense committed by Sprint PCS. Under Public Utilities Code Section 2108, "every violation of the provisions of this part or of any part of any order, decision, decree, rule, direction, demand, or requirement of the commission, by any corporation or person is a separate and distinct offense, and in case of a continuing violation each day's continuance thereof shall be a separate and distinct offense."
We shall measure the number of offenses at issue here in terms of each separate data element that Sprint PCS failed to disclose in its data response. Since the staff data request for disclosure of Sprint PCS' numbering resources asked for the data in incremental blocks of 1,000 numbers as discrete elements, the failure to provide information on each incremental block of 1,000 numbers shall constitute a separate violation. The two NXX codes in question were comprised of 20,000 individual numbers (i.e., 10,000 numbers for each NXX code), resulting in 20 separate offenses (i.e., 20,000 numbers divided by 1,000 block increments equals 20). The resulting penalty is $200,000 (i.e., $10,000 per offense times 20 offenses).
We address the criteria from D.98-12-075 that we rely upon to assess this penalty as explained below.
1. Criterion 1: Severity of the Offense
In D.98-12-075, the Commission held that the size of a fine should be proportionate to the severity of the offense. To determine the severity of the offense, the Commission stated that it would consider the following factors6:
Physical harm: The most severe violations are those that cause physical harm to people or property, with violations that threatened such harm closely following.
Economic harm: The severity of a violation increases with (i) the level of costs imposed upon the victims of the violation, and (ii) the unlawful benefits gained by the public utility. Generally, the greater of these two amounts will be used in setting the fine. The fact that economic harm may be hard to quantify does not diminish the severity of the offense or the need for sanctions.
Harm to the Regulatory Process: A high level of severity will be accorded to violations of statutory or Commission directives, including violations of reporting or compliance requirements.
The number and scope of the violations: A single violation is less severe than multiple offenses. A widespread violation that affects a large number of consumers is a more severe offense than one that is limited in scope.
Sprint PCS' violation of Rule 1, while serious, did not cause any physical or economic harm to others. In addition, there is no evidence that Sprint PCS significantly benefited from its conduct. Yet, although the violation may have affected few, if any, consumers, it had the potential to deprive other carriers' customers of numbers. The factor that most clearly indicates the violation should be considered a grave offense, however, is our general policy of according a high level of severity to any violation that harms or undermines the regulatory process. This factor must be weighed against the other factors in evaluating the severity of the offense.
We conclude that Sprint PCS' conduct harmed the regulatory process by failing to report material information in response to a staff data request. In this instance, the staff was carrying out its regulatory duties to ensure that scarce numbering resources were properly allocated based upon legitimate need. Without true and complete responses to the data request, the staff's ability to properly assess and act upon Sprint PCS' request for codes was undermined.
2. Criterion 2: Conduct of the Utility
In D.98-12-075, the Commission held that the size of a fine should reflect the conduct of the utility. When assessing the conduct of the utility, the Commission stated that it would consider the following factors7:
The Utility's Actions to Prevent a Violation: Utilities are expected to take reasonable steps to ensure compliance with applicable laws and regulations. The utility's past record of compliance may be considered in assessing any penalty.
The Utility's Actions to Detect a Violation: Utilities are expected to diligently monitor their activities. Deliberate, as opposed to inadvertent wrongdoing, will be considered an aggravating factor. The level and extent of management's involvement in, or tolerance of, the offense will be considered in determining the amount of any penalty.
The Utility's Actions to Disclose and Rectify a Violation: Utilities are expected to promptly bring a violation to the Commission's attention. What constitutes "prompt" will depend on circumstances. Steps taken by a utility to promptly and cooperatively report and correct violations may be considered in assessing any penalty.
In its pleading, Sprint PCS fails to discuss any company rules or processes that it applied to check or confirm the accuracy and completeness of data responses before they were released to the Commission.8 Sprint PCS simply dismisses its own conduct as "excusable neglect." Without any justification as to why company management allowed such neglect to go unchecked, we decline to excuse such neglect.
Sprint PCS also argues that it should not be subject to any penalty because its error was not intentional, and that the company did not set out to mislead the staff. However, the extent to which we assume Sprint PCS' violation was not intentional goes to the weight assigned to the size of any penalty--not to whether or not a violation of Commission rules occurred. Even if a violation may not have been willfully intentional, Sprint PCS still should have made a more concerted effort to verify the accuracy and integrity of the data response prior to its release to Commission staff. A carrier should not avoid responsibility for the truthfulness of its representations to the Commission simply by neglecting to verify the completeness of material statements made by its employees or agents before releasing them to staff.
In this instance, not only did Sprint PCS fail to provide complete information to the staff initially, but the company never brought the nondisclosure to the Commission's attention. Commission staff involved in the Sprint PCS matter did not actually learn of the additional NXX codes until confronted with it in an adversarial court proceeding aimed at legally challenging the Commission's action in denying NXX codes to Sprint PCS. The fact that Sprint PCS disclosed existence of the Culver City NXX code to the Director of TD in response to an unrelated inquiry was not a means of bringing to the assigned staff the omission from the data response. Even though Sprint PCS did not ultimately prevail in its action before the court, the Commission staff was still disadvantaged by not receiving the omitted information earlier. By not being previously apprised of this information prior to the court proceeding, the Commission's perceived credibility and ability to prepare its own case before the court was potentially undermined.
Although theoretically, the staff might have discovered the existence of the additional codes earlier through, for example, Sprint PCS' response to the TD Director or by checking the LERG, such discovery would have been incidental and not as a result of the direct request to Sprint PCS. The relevant point, however, is that staff must be able to rely upon the representations made to it in response to data requests in order to carry out its duties of protecting the public interest effectively. Whether the requested information may be independently available from other sources of which staff may or may not be aware does not relieve a party from its Rule 1 obligations. Sprint PCS was required to provide truthful and complete answers to the data requests propounded and to exercise due professional care to ensure the integrity of information transmitted to the Commission and its staff.
The staff was forced to discover the discrepancy for itself only after reading the affidavit of a company representative in a separate legal proceeding. Moreover, Sprint PCS fails to indicate in its pleading any measures or planned improvements in its internal procedures to assure that more instances of incomplete or inaccurate data responses or reporting do not occur again.
Thus, based upon the criteria relating to conduct of the utility, these failures on the part of Sprint PCS weigh in favor of imposing a greater penalty.
3. Criterion 3: Financial Resources of the Utility
In D.98-12-075, the Commission held that the size of a fine should reflect the financial resources of the utility. When assessing the financial resources of the utility, the Commission stated that it would consider the following factors9:
Need for Deterrence: Fines should be set at a level that deters future violations. Effective deterrence requires that the Commission recognize the financial resources of the utility in setting a fine.
Constitutional limitations on excessive fines: The Commission will adjust the size of fines to achieve the objective of deterrence, without becoming excessive, based on each utility's financial resources.
We conclude that the fine we establish of $200,000 is significant enough to serve as an incentive to deter future violations. Yet, the amount of the fine is conservative enough not to be excessive in view of the financial resources available to Sprint PCS which is owned by Sprint Spectrum L.P., a major telecommunications carrier within California, with assets in billions of dollars.
4. Criterion 4: Totality of the Circumstances
In D.98-12-075, the Commission held that a fine should be tailored to the unique facts of each case. When assessing the unique facts of each case, the Commission stated that it would consider the following factors10:
The degree of wrongdoing: The Commission will review facts that tend to mitigate the degree of wrongdoing as well as facts that exacerbate the wrongdoing.
The public interest: In all cases, the harm will be evaluated from the perspective of the public interest.
Sprint PCS does not appear to have materially benefited from its conduct. Although they did attempt to obtain a scarce numbering resource that could have benefited them had they succeeded. From the broader perspective of the public interest, however, it is essential that the staff have access to true and complete information from carriers in order to carry out Commission responsibilities regarding the efficient utilization of numbering resources. Sprint PCS violation acted to impede the staff from exercising its obligations to protect the public interest. In considering the totality of circumstances and degree of wrongdoing in this case, we conclude that a penalty within the middle of the allowable range is appropriate.
5. Criterion 5: The Role of Precedent
In D.98-12-075, the Commission held that any decision that imposes a fine should (1) address previous decisions that involve reasonably comparable factual circumstances, and (2) explain any substantial differences in outcome.11
As precedent for considering the level of fines against Sprint PCS, we consider past Commission decisions involving Rule 1 violations and assessment of penalties. For example, in D.98-03-073, fines were imposed on Southern California Edison (Edison) relating to its failure to comply with its discovery obligations. In that decision, we required Edison to make restitution to the State of California for the Commission expenses incurred in conducting Law and Motion hearings and all other costs related to addressing Edison's failure to comply with its discovery obligations in the amount of $10,000. Edison was also required to reimburse other parties for their expenses in litigating the discovery dispute in the amount of $38,495.
In D.99-06-051, we considered a range of penalties against Roseville Telephone Company for a pattern of behavior in misleading the Commission in violation of Rule 1. In that proceeding, the ALJ's draft decision had proposed a fine of $78,500. Due to the additional passage of time from the issuance of the ALJ's draft decision to the final Commission decision, the amount of the fine would have grown to $113,500. We also noted that $49,000 was a possible alternative amount for a fine, based upon the minimum permissible statutory penalty of $500 per day for a total of 98 days during which time Roseville misled the Commission. Ultimately, in view of evidence that Roseville had corrected its earlier pattern of behavior, the Commission only issued a warning to Roseville not to repeat such behavior, but declined to impose a fine. Nonetheless, we concluded in D.99-06-051 that imposing the fine as proposed by the ALJ would not necessarily have been unreasonable.
We conclude that the $10,000 per offense standard we adopt for Sprint PCS is within the general parameters we have applied in prior situations such as the two instances noted above. In comparing Sprint PCS' offenses to those of other utilities, we take into account the importance of complete and truthful reporting of data as it relates to number resource utilization. Particularly given the increasingly critical nature of area code planing issues in recent years, it has become vitally important to ensure that numbering data is reported to the Commission accurately and completely so that numbering resources can be allocated efficiently. In this case, therefore, it is justifiable to impose a fine sufficiently large to send the proper message regarding the importance of number reporting integrity. The $200,000 fine accomplishes this purpose. By adopting a penalty of $10,000 per offense, we select a measure in the middle of the permissible range of $500 to $20,000 per offense as provided for by statute. By applying the penalty to each separate offense, the total penalty of $200,000 is large enough to be consequential. We conclude that a penalty of $200,000 is appropriate in view of the particular circumstances involved in this instance.
