******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) PHILIPPINE LONG DISTANCE TELEPHONE ) COMPANY,) Complainant) ) v.) File No. E-95-29 ) INTERNATIONAL TELECOM, LTD.,) D/B/A/ KALLBACK DIRECT,) Defendant) MEMORANDUM OPINION AND ORDER Adopted: July 1, 1997; Released: July 18, 1997 By the Commission: I. INTRODUCTION 1.The Philippine Long Distance Telephone Company (PLDT) filed the above- captioned complaint against International Telecom, Ltd., d/b/a/ Kallback Direct (ITL), alleging, inter alia, that ITL is in violation of Section 214 of the Communications Act of 1934, as amended (Act), Part 63 of the Commission's rules, and requirements set forth in the Commission's Call-Back Proceeding. Specifically, PLDT alleges that ITL failed to secure Commission authorization prior to providing its call-back, or call reorigination, service to the Philippines. PLDT further alleges that ITL offers call-back to customers in the Philippines where such a service would be illegal, and thus, a violation of the Commission's orders in the Call-Back Proceeding. 2.PLDT's challenge of ITL's provision of international service using call-back in the Philippines depends on whether ITL is subject to regulation as a common carrier. PLDT alleges that ITL is a common carrier acting in violation of both the Act and our Call-Back Proceeding. ITL denies that it is a common carrier, instead claiming that it is providing its service as a private carrier. ITL also claims that PLDT lacks standing to bring its complaint to the Commission. 3.PLDT asks the Commission to direct ITL to terminate immediately its call-back service, to assess a forfeiture against ITL for its unlawful activity, and to award damages to PLDT as may be determined to be appropriate. For the reasons discussed below, we grant PLDT's complaint to the extent described in this Order. II. BACKGROUND 4.Since June 1993, ITL has resold long distance telephone service between points within the United States and international locations using the networks of AT&T and other major common carriers. ITL's international long distance service utilizes the "uncompleted call signaling" configuration of "call-back." Uncompleted call signaling, also known as "code calling," is an activity in which a reseller assigns its foreign customer a specific telephone number in the United States and instructs the customer to call that number whenever the customer wants to place a call, and hang up after a specified number of rings. The reseller's switch then places an outbound call to the foreign customer and provides the customer a U.S. dial tone that can be used to complete calls to the United States or elsewhere. The resulting call is placed at U.S.-tariffed rates, which are generally lower than those of the originating country. 5.In June 1993, ITL filed an application for Section 214 authority to offer its services internationally. Although ITL's application had not been granted prior to the filing of the complaint, ITL actively marketed what it describes as "international long-distance telephone service" through telemarketing and print advertisement in various United States and international publications. While there are some cost variances among rates charged to customers of this service, the usage rates charged to customers in a given location are the same. ITL does not dispute that fact, although it notes that rates may change over time due to fluctuating market conditions. To the extent that overall rates may vary, any such variation is attributable to minor differences in such charges as monthly fees, fees for sub-accounts, or installation fees. Some, but not all, customers may also receive a discounted rate for paying their monthly accounts by electronic funds transfer, rather than by credit card or check. III. DISCUSSION A.Standing 1. Contentions of the Parties 6.As a threshold matter, ITL challenges PLDT's standing to bring the complaint. Specifically, ITL contends that PLDT has suffered no "injury in fact," and that PLDT's interests are not within the "zone of interests" entitled to protection under the Act. ITL claims that this is the appropriate test for the Commission to apply. PLDT responds that it does have standing and refers the Commission to Sections 208 and 3(32) of the Act, regarding who may file a formal complaint. 2.Discussion 7.Section 208 of the Act states, in part, that: Any person, any body politic or municipal organization, or State commission, complaining of anything done or omitted to be done by any common carrier subject to this Act, in contravention of the provisions thereof, may apply to said Commission by petition . . . . No complaint shall at any time be dismissed because of the absence of direct damage to the complainant. As used in this section, the term "person" includes an individual, partnership, association, joint-stock company, trust or corporation, and is broadly interpreted to include "any member of the public" when filing complaints against common carriers. The subject matter of a Section 208 complaint ("anything done or omitted to be done by any common carrier") may include any alleged violation of "a provision of the Act, a Commission order, or a Commission Rule or Regulation." Moreover, common carriers are liable for damages caused by their unlawful acts, and a complainant injured by such acts may complain to the Commission or seek damages in any United States district court. Damages are specifically provided for in such a suit, and may be recovered to the full amount sustained by the complainant. 8.PLDT is a corporation and as such, meets the Section 3(32) definition of "person." As a "person," PLDT has standing to complain to the Commission under Section 208. Nothing in the plain language of Section 208 excludes foreign "persons" from bringing a complaint to the Commission. PLDT's complaint asserts that ITL, as a common carrier, violated the Act by its action or failure to act. Thus, PLDT has standing under Section 208 and the subject of PLDT's complaint meets the requirements of Section 208. 9.ITL is incorrect in claiming that we should apply the more stringent "injury in fact/zone of interests" test for standing set forth in ADAPSO and its progeny. To support its contention, ITL cites to only one proceeding in which the Commission applied the ADAPSO test, General Telephone Co. of California. General Telephone, however, did not involve a Section 208 complaint proceeding against a common carrier. Instead, that case involved an application to construct and maintain broadband transport facilities, in which the applicant challenged the standing of third parties to file petitions to deny the application. Contrary to ITL's claim, the Commission has not applied the ADAPSO test in Section 208 proceedings. Section 208 has its own standing requirement, which, as discussed above, explicitly confers standing upon "any person" to complain of alleged wrongdoing by a common carrier, without regard to injury suffered or direct interest in the matter. B.Common Carriage 1.Contentions of the Parties 10.We must next determine whether, as PLDT alleges, ITL is a common carrier and is therefore subject to the requirements of Section 214 of the Act, Part 63 of our rules, and our relevant orders. Specifically, PLDT contends that since early 1993, ITL has offered international common carrier service using call-back to customers in the Philippines without having first received Section 214 authorization to do so. PLDT argues that such authorization is required by Section 214 of the Act, Part 63 of the Commission's rules, the Call-Back Order, and the International Competitive Carrier order. 11.ITL admits that, although it filed an application for Section 214 authorization in 1993, it was not granted authorization to provide international common carrier services such as those at issue herein at the time of this complaint. ITL argues that the Commission's inaction forced ITL to act as a private carrier, providing its services on a non-common carrier basis until such time as it is granted Section 214 authorization. ITL fails to explain why it should otherwise be considered a private carrier. 2.Discussion 12.The threshold substantive question that the Commission must answer before treating ITL as a common carrier is whether its service is being offered on a common carrier basis. The Communications Act defines a common carrier as "any person engaged as a common carrier for hire." Common carriers may offer their services as facilities-based carriers, or as resellers. Resale has been defined as "an activity wherein one entity subscribes to the communications services and facilities of another entity and then reoffers communications services and facilities to the public (with or without 'adding value') for profit." The Commission has held that "resale is a common carrier activity," and that "any entity reselling international common carrier services for the provision of basic communications service must receive authorization pursuant to Section 214 of the Communications Act of 1934." 13.We conclude that in offering the services at issue here, ITL is acting as a common carrier and not as a private carrier as it claims. Common carriers and private carriers have distinct differences and obligations. A common carrier must "provide a service indifferently to all potential customers," and that service must enable customers to "transmit intelligence of their own design and choosing." A private carrier, on the other hand, may choose its clients on an individual basis, determining in each particular case whether and on what terms to serve, and may design its system to meet its own communications needs rather than those of its customers. Thus, the terms and conditions of a carrier's particular service and the way it holds itself out to the public are the key determinants as to whether a carrier is a common or private carrier. The widespread, general solicitation of customers from the general population, i.e., "indiscriminate offering of service on generally applicable terms," constitutes common carriage. 14.Since June 1993, ITL has provided basic international long distance telephone service by reselling the international switched services of various authorized common carriers between points within the United States and international locations, including the Philippines. ITL does not dispute that it has actively marketed its international long distance services by means of telemarketing and print advertising in various international and United States publications, targeting the general public, not a specific clientele with specialized needs. In addition, ITL had set generally applicable prices and terms of service; it did not tailor each contract to the specific operational needs of its customers. ITL has stated that its prices, terms and conditions of service vary among its customers in the Philippines based on changing market conditions. However, by varying its rates in accord with changing market conditions (thereby affecting the rates charged to all customers), ITL is not tailoring its service terms to the individual needs and requirements of its customers, but to its own fiscal goals. As noted above, the record indicates that any differences that may exist in customer charges are attributable largely to discounts and fee waivers, rather than any hand-tailoring of contracts to meet specific customer needs. 15.Nothing in the record suggests that ITL used its system for its own communications needs. ITL's method of recruiting its customers, its relatively short contract terms, and its indifference to the identity and specific requirements of its customers all support our conclusion that ITL is acting as a common, not a private, carrier. This conclusion is consistent with our previous rulings that other resellers of international long distance telephone services using call-back are providing such services on a common carrier basis. Thus, ITL's reselling of such services is common carriage. 16.Because ITL's provision of international service using call-back is common carriage, ITL is subject to regulation as a common carrier. Accordingly, as a common carrier, ITL is required to secure authorization for the services at issue under Section 214 of the Act, as well as under the Commission's Call-Back Order: "any entity offering a call-back service that involves reselling international common carrier services must receive [Section 214] authorization before providing service." ITL's reasoning for categorizing itself as a private carrier is circular; it admits acting in contravention of established law, but attempts to justify its actions by asserting that it was forced by Commission inaction on its Section 214 application to do business without proper authorization. There was only one lawful option for ITL--to refrain from providing common carrier long distance service until it had secured proper authorization. Because it chose instead to provide common carrier service without first obtaining Section 214 authorization and filing appropriate tariffs, ITL is in violation of Section 214 and the requirements of our Call-Back Proceeding. C.Call-Back in the Philippines 1.Contentions of the Parties 17.PLDT asserts that ITL has been using call-back to provide international service to customers in the Philippines at least since the first quarter of 1993. PLDT notes that the Commission has prohibited U.S. carriers from using various configurations of call-back in a manner that is inconsistent with the laws of the countries in which they operate. PLDT claims that the Philippine government has declared call-back in the Philippines to be illegal. Therefore, PLDT argues, ITL's use of call-back to provide service to the Philippines, a country where it is apparently banned, violates the Commission's international call-back policy. 18.ITL responds that the Commission's procedures for determining whether a U.S. carrier has violated the law of a foreign country, as set forth in the Call-Back Proceeding, were not followed in this complaint. In addition, ITL claims that PLDT, as a private foreign corporation, "does not have standing to bring an enforcement action against ITL for alleged failure to comply with Philippine law." Finally, ITL contends that the Commission has no authority to award damages based on a violation of the laws of a foreign country. 2.Discussion 19.Call-Back Proceeding. In the Call-Back Proceeding, the Commission concluded that international services using the uncompleted call signaling configuration of call-back would be "in the best interests of consumers--and eventually of economic growth--around the world" by promoting competition in international markets and by placing significant downward pressure on foreign collection rates. The Commission also decided, however, that U.S.-based carriers may not offer international service using the uncompleted call signalling configuration of call-back in countries that have specifically prohibited this practice. 20.Philippine Law. The record before us indicates that the Philippine government considered call-back unlawful as early as 1994. On November 22 of that year, the Philippine National Telecommunications Commission (NTC) ordered a company offering international service using call-back to Philippine customers to cease and desist from offering such a service pending a hearing on the merits. On January 16, 1995, the NTC issued a "Memorandum Circular" that directed "[a]ny person, firm, company, association or agency offering, marketing or using any or all call-back, dial-back or any similar services not otherwise authorized by the Commission . . . to cease and desist from any of the above or related activity." Since then, the Philippine government has taken action against several carriers that purported to offer service using a configuration of call-back in the Philippines. Finally, in response to a request from this Commission's International Bureau, the NTC provided a list of ten U.S. companies believed to be carriers against whom the NTC has issued cease and desist orders, further demonstrating the resolve of the Philippine government to prohibit call-back operations in its country. 21.ITL's Services. The record adduced in the instant complaint supports PLDT's assertion that the government of the Philippines has, by law, regulation, or ruling, prohibited call- back in the Philippines. Based on this same record, we conclude that ITL has been providing services via call-back to the Philippines despite the ban on such activity. Because ITL is not providing its service in a manner that is consistent with the laws of the Philippines, as we have required, ITL is violating the requirements of our Call-Back Proceeding. 22.ITL's defense that the Commission's procedures for determining that a U.S. carrier has violated the law of a foreign country were not followed in this complaint is misplaced. Although we have provided certain procedures that may be followed by foreign governments experiencing difficulty in enforcing their national laws and regulations against U.S. providers of international call- back using uncompleted call signaling, these procedures are not relevant in this proceeding because the complaint was initiated by an individual party, not a foreign government. Moreover, the procedures for foreign governments in no way preclude a party from filing a formal complaint pursuant to Section 208 of the Act against a carrier for violation of the Act, the Commission's rules, or any Commission order. PLDT filed its complaint under Section 208, and any argument that the complainant failed to follow the procedures established by the Commission to assist foreign governments in enforcing their call-back regulations is irrelevant to this proceeding. 23.ITL's contention that the Commission may not award damages based on a violation of the laws of a foreign country misses the point. The violation alleged here is of a U.S. law, albeit one that requires compliance with foreign law. We have the authority to award damages when any complainant proves that such damage resulted from violation of the Act, Commission rules, or established Commission orders. To the extent PLDT demonstrates ITL violated the Act or a Commission order, as we have found, and, to the extent PLDT is able to demonstrate damages resulting from these violations, we have the authority to grant such damages. 24.PLDT has also asked us to assess a forfeiture against ITL. While we may, on our own motion, pursuant to Section 503(b) of the Act, 47 U.S.C.  503(b), and Section 1.80 of our rules, 47 C.F.R.  1.80, assess a forfeiture against any person found to have willfully or repeatedly violated any provision of the Act or any Commission rule, regulation, or order; we decline to do so here. Forfeitures are not available as a remedy to a complainant in a formal complaint proceeding. D.Outstanding Motion 25.ITL filed a Motion to Dismiss the Formal Complaint, presenting the same arguments on the issues of jurisdiction, lack of a cause of action, and standing that it has argued throughout this proceeding. We have resolved these issues in favor of the complainant with this order. ITL also raised two issues regarding PLDT's entitlement to damages. Damages issues will appropriately be discussed during the damages phase of this proceeding. Accordingly, we dismiss the Motion to Dismiss as moot with respect to liability issues, and premature as to damages issues. IV. CONCLUSION 26.For the reasons discussed above, we find that ITL has violated the requirements of our Call-Back Proceeding and Section 214 of the Act, 47 U.S.C.  214. We therefore direct ITL to terminate its service using call-back to the Philippines. Further, pursuant to Section 1.722 of the Commission's rules, PLDT may file a supplemental complaint for damages within 60 days after the release of this order. In this supplemental proceeding, the parties will have a full and fair opportunity to build a record on damages. V. ORDERING CLAUSES 27.Accordingly, IT IS ORDERED, pursuant to Sections 1, 4(i), 4(j), 208, and 214 of the Act, 47 U.S.C.  151, 154(i), 154(j), 208, 214, that the complaint filed by PLDT IS GRANTED to the extent discussed herein. 28.IT IS FURTHER ORDERED that ITL SHALL TERMINATE immediately its international service that uses the uncompleted call signaling configuration of call-back to the Philippines. 29.IT IS FURTHER ORDERED that PLDT, in accordance with the Commission's rules, see 47 C.F.R.  1.722, MAY FILE a supplemental complaint concerning damages within 60 days after the release date of this order. 30.IT IS FURTHER ORDERED that the Motion to Dismiss the Formal Complaint, filed by ITL, IS DISMISSED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary