Order to Show Cause - Violation of § 2890(b)

To date in this proceeding, we have focused exclusively on the technical details of §§ 2889.9 and 2890, service descriptions and name of the service provider. The overall purpose of these statutes, however, is to prevent, detect, and correct unauthorized billings. In this proceeding, we have received substantial evidence that while USP&C was submitting unauthorized billings to California LECs:

· USP&C's 18-month average customer refund rate with Pacific Bell was 52%;¹³

· USP&C's customer refund rate with GTE from December 1998 to November 1999 was 48%;

· From January to July 1999, 30% of all complaints to Pacific Bell alleging that unauthorized charges had been placed on a customer's local telephone bill were from companies USP&C bills on behalf of; and

· Over 600 customers contacted the Commission to complain of USP&C's billing practices.

Section 2890(b) requires that a telephone bill only contain charges that have authorized by the customer. USP&C appears to have repeatedly violated this statute because it knew or should have known that the customers had not authorized the charges it was submitting to the LECs.

Pacific Bell routinely informed USP&C of the number of complaints Pacific Bell received of unauthorized billing, and of the level of refunds requested by customers. Pacific Bell also repeatedly informed USP&C in writing that its customer complaint levels and customer refund levels were "excessive" and must be "reduce[d] to acceptable levels." The record contains copies of notices dated as early as January 1998. USP&C, however, continued to exhibit high levels of customer complaints and refunds up to the time Pacific Bell terminated its contract. Due to the extended time period over which these billings were presented to Pacific Bell, and Pacific Bell's regular reporting to USP&C of the data, we find that USP&C either knew or should have known that the billings it was presenting to Pacific Bell failed to comply with § 2890(b). Based on this evidence, we order USP&C to show cause:

1. Why USP&C should not be required to disgorge all funds obtained from California customers and retained by USP&C for reserves, in payment of fees, or for any other purpose; and

2. Why USP&C should not fined for violating § 2890(b) by presenting billings with unauthorized charges to California LECs.

In addition to USP&C's apparent violation of § 2890(b), the service providers for whom USP&C was billing also appear to have been violating § 2890(b). Benchmark Communications, Inc., Messenger Com, Inc., Voice Delivery Systems, and Spring Telcom, Inc. were the service providers that submitted the billings, through USP&C, which resulted in the customer complaints and subsequent refunds. Based on our understanding of the billing and collection arrangements between billing agents and service providers, these entities are the ultimate recipients of the funds collected from California customers.¹⁴ For this reason, securing refunds of any wrongfully collected and retained amounts requires that these entities be named respondents to this proceeding.

Therefore, we find that probable cause exists to believe that Benchmark Communications, Inc., Messenger Com, Inc., Voice Delivery Systems, and Spring Telcom, Inc. have violated § 2890(b), and may have retained funds obtained pursuant to such violations. Benchmark Communications, Inc., Messenger Com, Inc., Voice Delivery Systems, and Spring Telcom, Inc. are hereby named as respondents to this proceeding, and are ordered to appear and show cause why they should not:

1. Required to disgorge all funds obtained from California customers in violation of § 2890(b) and retained for reserves, in payment of fees, or for any other purpose;

2. Fined for violating § 2890(b) by presenting billings with unauthorized charges to California LECs; and

3. Required to demonstrate that they have obtained all required operating authority and are otherwise in compliance with all applicable portions of the Public Utilities Code.

¹³ We have reviewed the evidence presented by USP&C that Pacific Bell's customer refund data contains duplicates of refunds and may inappropriately include refunds of taxes and fees. USP&C has not presented any evidence, however, that Pacific Bell has treated it differently from other billing agents. Thus, the data are comparable on a relative basis to other Pacific Bell data. We note also that USP&C's GTE refund rate is in the same range as the Pacific Bell rate. ¹⁴ Less any amounts retained by the billing agents or LECs in payment of their fees or as reserves for refunds.