BEFORE THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF CALIFORNIA

Utility Consumers Action Network (UCAN),

Complainant,

vs.

Mpower Communications Corp. dba TelePacific Communications fka Mpower Communications aka TelePacific Holding Corp and related entities collectively “TelePacific” (U5859C),

Defendants.

C. 08-08-008

JOINT STIPULATION OF FACTS IN C. 08-08-008

UTILITY CONSUMERS’ ACTION NETWORK Art Neill 3100 5th Ave., Suite B San Diego, CA 92103 Telephone: (619) 696-6966 Facsimile: (619) 696-7477 E-mail: art@ucan.org Attorneys and Representatives for Complainant Dated: January 15, 2009

GOODIN, MACBRIDE, SQUERI, DAY & LAMPREY, LLP John L. Clark 505 Sansome Street, Suite 900 San Francisco, CA 94111 Telephone: (415) 392-7900 Facsimile: (415) 398-4321 E-mail: jclark@goodinmacbride.com Attorneys for Defendant

F I L E D01-15-0904:59 PM

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BEFORE THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF CALIFORNIA

Utility Consumers Action Network (UCAN),

Complainant,

vs.

Mpower Communications Corp. dba TelePacific Communications fka Mpower Communications aka TelePacific Holding Corp and related entities collectively “TelePacific” (U5859C),

Defendants.

C. 08-08-008

JOINT STIPULATION OF FACTS IN C. 08-08-008

In accordance with the ruling of Assigned Administrative Law Judge Kirk

McKenzie made on the record at the prehearing conference held herein on December 1,

2008, and his telephonic ruling of January 15, 2009, granting an extension of the filing

date, Utility Consumers Action Network (“UCAN”) and Mpower Communications Corp.

(“Mpower”) hereby submit this stipulation that, for the purposes of this proceeding, the

following facts are agreed to be true:

STIPULATED FACTS

1. On June 6, 2005, Olga Kormuskina signed a service agreement (the

“Agreement”) with Mpower on behalf of Edelweiss Flowers (“Edelweiss

Flowers”) providing for Mpower’s provision of various services, including,

among other things, one DSL Internet access line and DSL modem, and three

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plain old telephone service (“POTS”) lines. Exhibit A hereto is a true and

correct copy of the Agreement.

2. Shortly after Mpower and Edelweiss Flowers entered into the Agreement,

Mpower, in accordance with its general practice, provided Edelweiss Flowers

with a “welcome kit” describing the services to be provided under the

Agreement. The welcome kit included a notice entitled “Consumer Alert re:

Fraud Resulting in International Long Distance Charges” (“Consumer Alert”).

Exhibit B hereto is a true and correct copy of the Consumer Alert.

3. On May 16, 2006, Ms. Kormuskina and Ms. Stepanova completed a “Business

Name Change Form” and an “Assignment and Assumption Agreement”

provided by Mpower for the purpose of transferring responsibility under the

Agreement from Edelweiss Flowers, which, in the meantime, had been

incorporated under the name “Edelweiss Flower Salon, Inc.” to Ms. Stepanova,

who thereafter operated the business as a sole proprietorship under the name

“Edelweiss Flower Salon” (hereinafter referred to either as the “Customer” or

“Ms. Stepanova”).

4. During the period from August 1, 2006 through August 31, 2006, a Brother

MFC 7220 combined printer, scanner, and fax machine (“fax machine”) was

connected at the Customer’s premises to one of the POTS lines provided by

Mpower. This POTS line was identified by telephone number 858-751-0376

(the “fax line”). The fax machine was also connected at the Customer’s

premises to a computer running Windows that, in turn, was connected at the

Customer’s premises to the DSL Internet access line. Ms. Stepanova asserts

that Windows Firewall and another antivirus program, which Ms. Stepanova

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believes was Norton Antivirus, was installed on the computer. The Customer

asserts that none of the Customer’s lines was connected to a PBX and that the

customer did not have voicemail; Mpower has no basis for a belief to the

contrary.

5. In early September 2006, the Customer received a billing statement from

Mpower that included charges identified on the bill as having been made from

the fax line, totaling $1,043.13 ($1148.20 after taxes, fees and surcharges) for

seventeen international calls listed as “NBR Called” “881-9900060115” and

“Place” “Iridium Sate” from August 16 through August 23, 2006. The calls

were charged at $14.67 per minute. Exhibit C hereto is a true and correct copy

of the bill.

6. The calls were completed by Mpower pursuant to its International 214 license

issued by the Federal Communications Commission (“FCC”) under File No.

ITC-214-19970731-00440. The charges for the calls were incorrectly labeled

by Mpower’s billing system as having been placed to an Iridium Satellite phone

instead of to a GlobalStar satellite phone, which was the international

destination indicated by the called numbers. Under Mpower’s published price

sheets for such calls, the billed rate of $14.67 per minute was the appropriate

rate to be charged for calls to GlobalStar satellite phones, while the published

rate for calls to Iridium Satellite phones would have been $2.95 per minute. A

true and correct copy of the published price sheet showing the $14.67 rate is

attached as Exhibit D.

7. Mpower’s customer service records indicate that on September 11, 2006 at

10:40 a.m., Ms. Stepanova contacted Mpower and disputed the charges for the

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satellite calls stating that she did not make the calls. Ms. Stepanova also

requested a block on international dialing for her account. A credit request was

submitted by the Mpower customer service representative to the appropriate

staff.

8. Mpower’s customer service records indicate that on the same day, September

11, 2006, Mpower’s staff accessed the Customer’s account record at 2:12 p.m.,

and reported the following:

“RECEIVED CREDIT REQUEST FOR INTERNATIONAL FRAUD CALLS…. CREDIT REQUEST DENIED.... PER NEW POLICY NO CREDIT FOR FRAUD CALLS”

9. Mpower’s investigation on September 11, 2006, only involved checking the call

records. The call records indicated that the calls were directly dialed over the

fax line.

10. Mpower’s customer service records indicate that Ms. Stepanova called Mpower

on September 20, 2006, at 10:11 a.m., to ask how much credit she would

receive for the disputed charges. She was told that she would not be receiving

any credit because of Mpower’s new policy regarding fraudulent calls.

11. Mpower’s customer service records indicate that Ms. Stepanova called Mpower

again on September 20, 2006, at 10:24 a.m., and was told to fax her dispute to

Mpower for review. Ms. Stepanova faxed a written complaint to Mpower at

1:11 p.m. the same day. Exhibit E hereto is a true and correct copy of the

written complaint.

12. Mpower’s customer service records indicate that following receipt of the

complaint, Mpower confirmed that, under its policy, credit should not be given

to the Customer, and on September 29, 2006, Ms. Stepanova was advised by

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telephone that no adjustment would be made to the billed charges and that if she

failed to pay the charges her service could be disconnected.

13. On or about October 1, 2006, the Customer received a billing statement for

$2180.01 ($2336 after taxes, fees, and surcharges) including charges for an

additional eleven calls listed as “NBR Called” 881-9900060115 and “Place”

Iridium Sate from August 25 through August 31, 2006. Exhibit F hereto is a

true and correct copy of the bill.

14. These calls were completed by Mpower pursuant to its International 214 license

issued by the FCC under File No. ITC-214-19970731-00440. The charges for

the calls were incorrectly labeled by Mpower’s billing system as having been

placed to an Iridium Satellite phone instead of to a GlobalStar satellite phone,

which was the international destination indicated by the called numbers. Under

Mpower’s published price sheets for such calls, the billed rate of $14.67 per

minute was the appropriate rate to be charged for calls to GlobalStar satellite

phones, while the published rate for calls to Iridium Satellite phones would have

been $2.95 per minute. A true and correct copy of the published price sheet

showing the $14.67 rate is attached as Exhibit D.

15. On October 9, 2006, a second written complaint was faxed by Ms. Stepanova to

Mpower, which reiterated her dispute regarding the satellite phone charges on

the September 1, 2006 bill and also disputed the new international satellite

phone charges billed on October 1, 2006. Exhibit G hereto is a true and correct

copy of the second written complaint.

16. Mpower’s customer service records indicate that on October 10, 2006,

following receipt of the complaint, Mpower’s staff began a review of the

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Customer’s account at 11:25 a.m., and that at 11:42 a.m., Ms. Stepanova called

Mpower to inquire about the disputed charges and asked to be connected to a

supervisor. Ms. Stepanova was advised by the customer service representative

that time was needed to review the account and was placed on hold, but the

connection was inexplicably interrupted before Mpower could respond to her

inquiry.

17. On October 17, 2006, the Customer’s attorney, Lawrence T. Dougherty, spoke

with Elaine Calloway of the fraud analysis department at Mpower. After

speaking with Ms. Calloway, Mr. Dougherty sent a letter the same day to

Mpower summarizing the dispute and insisting, on behalf of the Customer, that

neither Ms. Stepanova nor anyone else with access to the Customer’s service

had made the calls for which the disputed charges were assessed. In addition,

Mr. Dougherty included a check in payment of undisputed charges. Exhibit H

hereto is a true and correct copy of the letter.

18. On October 19, 2006, an Mpower collections representative called Ms.

Stepanova regarding both the current balance and the past-due balance owed for

the Customer’s service and Ms. Stepanova disputed the charges.

19. On or about October 20, 2006, Mpower’s fraud department began a review of

the alleged fraud. The fraud department’s review indicated that if the calls were

not completed by persons located at the Customer’s premises, then it was likely

that the calls were made through a fraudulent scheme. In the following months,

the fraud department noted that six other Mpower customers had made similar

complaints to Mpower regarding allegedly unauthorized charges for calls

completed to GlobalStar satellite telephone numbers. In addition, during

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conference calls with other carrier representatives who participated with

Mpower in an informal industry security task force, Mpower learned that

customers of other carriers had been similarly affected by an alleged fraudulent

scheme to complete calls to GlobalStar numbers. No minutes of the discussions

with the security task force were kept and Mpower has no documents regarding

the discussions that took place. Mpower has no information by which it could

identify or quantify the other carriers or their customers who may also have

been victims of such activity.

20. Mpower subsequently contacted GlobalStar, but GlobalStar asserted that it did

not have call records matching those billed by Mpower to the Customer.

Mpower made Global Star, which was not a member of the security task force,

aware of the apparently fraudulent scheme identified by the task force, but was

unable to obtain further information from GlobalStar. Mpower did not engage

in call tracking or monitoring attempts after the discovery of the potential fraud

other than recording customer complaints. However, following Mpower’s

contact with GlobalStar, Mpower has not received contact from any customers

complaining of further allegedly fraudulent calls to the GlobalStar numbers.

21. The Customer has not identified the root cause of the allegedly fraudulent calls;

however, Ms. Stepanova has asserted that none of the Customer’s authorized

employees made the disputed satellite calls and that several of the calls were

made outside of normal business hours and on days when the Customer’s shop

was closed. Further, none of the phone numbers listed for the disputed charges

on the September 1 and October 1, 2006 bills had ever previously been called

by the Customer or Edelweiss Flowers, and Ms. Stepanova asserts that neither

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she nor other persons having authorized access to the Customer’s service during

the period in question had knowledge of these phone numbers prior to their

appearance on the Customer’s phone bill.

22. Based on its investigation, Mpower believes that if the calls billed to the

Customer were not made by persons located at the Customer’s premises, it is

most likely that they were completed through “modem hacking” (i.e.,

manipulating a telephone customer’s modem connection to complete calls).

The exact nature of any modem hacking that may have occurred in the

Customer’s case, as well as in the six other affected customers’ cases, is

unknown. One reported method involves the use of a high speed internet

connection by an outside third party to access a computer and dial out calls

through a POTS line that is connected to the computer, through a fax modem or

dial-up Internet modem. Based on the equipment in use at the Customer’s

premises at the time the satellite calls for which Mpower billed the disputed

charges, it is likely that this would have been the method used to make any

fraudulent calls. It is also possible that fraudulent calls could have been

completed through other methods, such as through unauthorized hardwire

connections to the Customer’s inside wiring if the network access point was not

adequately secured by the Customer. A recent inspection of the Customer’s

premises indicates that the network access point, while not inside the

Customer’s rented space, is within a locked room in the building in which the

Customer’s premises is located.

23. On October 30, 2006, during the course of Mpower’s ongoing investigation

relating to potential fraud involving calls to GlobalStar numbers, Mpower called

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Ms. Stepanova and confirmed that, in accordance with its fraud policy, it would

not issue a credit for the satellite calls billed on September 1, 2006 in the

amount of $1043.13.

24. After the Customer failed to pay the amounts billed for the disputed charges, the

Customer’s services were all suspended for nonpayment on November 28,

2006.

25. On November 30, 2006, a request was made on behalf of the Customer to

terminate the Agreement because the Customer did not want to continue paying

for service that had been suspended for nonpayment of disputed charges it

believed were unauthorized.

26. On December 1, 2006, Ms. Stepanova contacted Mpower indicating that she

had filed a police report regarding the unauthorized charges and requested that

service be reconnected until the matter was cleared up. Ms. Stepanova was

advised that Mpower would not do so. A true and correct copy of the police

report is attached hereto as Exhibit I.

27. On December 15, 2006, Ms. Stepanova contacted Mpower again to dispute the

charges.

28. On December 20, 2006, Mpower billed the Customer for $1349.58 in early

termination fees as a result of cancellation of the Agreement. A true and correct

copy of the bill is attached hereto as Exhibit J.

29. On January 30, 2007, Ms. Stepanova filed an informal complaint with the

Commission’s Consumer Affairs Branch (“CAB”).

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30. On February 27, 2007, the Law Office of Scott & Associates contacted the

Customer by letter demanding payment in the amount of $5132.88. A true and

correct copy of the letter is attached hereto as Exhibit K.

31. On March 1, 2007, CAB acknowledged receiving Ms. Stepanova’s informal

complaint. A true and correct copy of the acknowledgment is attached hereto as

Exhibit L.

32. In a letter dated March 6, 2007, Mpower responded to CAB regarding Ms.

Stepanova’s informal complaint. A true and correct copy of the response is

attached hereto as Exhibit M.

33. In a second letter to CAB dated March 19, 2007, Mpower made changes to the

first letter to confirm the total amount in dispute but erroneously stated the

disputed satellite charges as being $1,043.13 instead of $3,223.14, which

resulted in the amount of unpaid monthly recurring charges and local usage

being reported as $2740.17, instead of $261.17 Mpower also corrected the

contract termination date, which was incorrectly stated in the first letter as being

June 23, 2008 instead of June 23, 2007. A true and correct copy of the second

letter is attached hereto as Exhibit N.

34. Mpower did not provide CAB with information it had learned about the alleged

scheme involving the making of fraudulent calls to GlobalStar phone numbers;

nor did it communicate such information to the Customer or to any of the other

six customer who Mpower believed may have been victims of such scheme.

35. When a customer, such as Ms. Stepanova, contacts Mpower regarding alleged

fraud, the customer is provided Mpower’s then-current “Fraud Guideline,”

which, in part, instructs the customer to work with the customer’s vendors to

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identify the root causes of the alleged fraud. The Customer was provided a

copy of Mpower’s Fraud Guideline on October 30, 2006 and Mpower requested

that the Customer attempt to identify the root cause of the suspected fraud. A

copy of the Fraud Guideline provided to Ms. Stepanova is not available; but it

did not address “modem hacking.” A copy of Mpower’s current Fraud

Guideline is attached hereto as Exhibit O. Versions of the Fraud Guideline have

been published on Mpower’s website as early as May 2007.

36. Ms. Stepanova asserts that she had never received or seen any version of

Mpower’s Fraud Guideline or any information regarding modem hacking until

after the disputed charges were billed.

37. Ms. Stepanova and other authorized representatives for the Customer contacted

Mpower multiple times in October, November, and December 2006

communicating Ms. Stepanova’s position that the subject calls were

unauthorized and that the charges should be removed from the Customer’s

account.

38. The other six customers who Mpower believes may have been victims of the

fraudulent calling scheme that may have affected the Customer were initially

pursued for payment. The total dollar amount of related usage charges,

including those billed to the Customer, was $5,331.93. One of the other six

customers who complained of the charges was given a credit at the discretion of

Mpower in order to settle the matter after the Customer began taking action that

Mpower believed would unduly disrupt its relationships with other existing and

future customers.

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39. Mpower’s belief, as to these other six customers, is that it the calls were not

made by someone who was physically located at the customer’s premises, then

such calls were most likely the result of modem hacking. Mpower’s belief as to

these six customer is founded on essentially the same information as that upon

which its belief as to the Customer is based.

40. The other six customers did not receive a copy of the Fraud Guideline until after

they complained to Mpower about the allegedly fraudulent calls.

41. Mpower does not claim to have knowledge of what the affected customers,

including the Customer, did or did not do to protect against modem hacking or

other unauthorized access to their inside wiring or other customer premises

equipment. However, Mpower’s position is that if the disputed calls were made

through modem hacking or other unauthorized access to their inside wiring or

other customer premises equipment, then the customers, by definition, did not

take sufficient steps to prevent or “adequately secure” the customers’ equipment

from being hacked.

42. UCAN made the following data request and received the following response

regarding information from Mpower to customers regarding protecting against

hacking.

UCAN data request - “Please explain what steps you recommend that

your small business customers without PBXs or computerized phone

systems of any type take to protect against potential hacking of their phone

service. In providing an answer, please provide any pamphlets or written

information you provide to customers to inform them about steps they can

take to protect against hacking. Please also provide any internal

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memorandum, reports or documents that address proactive steps that can

be taken by small business customers without PBX to protect against

hacking.

Mpower’s response - It is Mpower’s position that “while carriers such as

Mpower try to alert their customers to possible sources of fraud, they are

not in a position to make specific recommendations.”

43. UCAN is the sole complainant in C.08-08-008.

Respectfully submitted this 15th day of January, 2009, at San Francisco,

California.

UTILITY CONSUMERS’ ACTION NETWORK Art Neill 3100 5th Avenue, Suite B San Diego, CA 92103 Telephone: (619) 696-6966 Facsimile: (619) 696-7477 E-mail: art@ucan.org By /s/ Art Neill Art Neill Attorneys and Representatives for Complainant

GOODIN, MACBRIDE, SQUERI, DAY & LAMPREY, LLP John L. Clark 505 Sansome Street, Suite 900 San Francisco, CA 94111 Telephone: (415) 765-8443 Facsimile: (415) 398-4321 E-mail: jclark@goodinmacbride.com By /s/ John L. Clark John L. Clark Attorneys for Defendant

2989/005/X106123.v2

CERTIFICATE OF SERVICE

I, Lisa Vieland, certify that I have on this 15th day of January 2009

caused a copy of the foregoing

JOINT STIPULATION OF FACTS IN C.08-08-008

to be served on all known parties to C.08-08-008 listed on the most recently

updated service list available on the California Public Utilities Commission

website, via email to those listed with email and via U.S. mail to those without

email service. I also caused courtesy copies to be hand-delivered as follows:

ALJ A. Kirk McKenzie California Public Utilities Commission 505 Van Ness Avenue, Room 5115 San Francisco, CA 94102

I declare under penalty of perjury that the foregoing is true and

correct. Executed this 15th day of January 2009 at San Francisco, California.

/s/ Lisa Vieland Lisa Vieland

2989/005/X106183.v1

Service List C. 08-08-008 Last Updated 12/4/08

ART NEILL art@ucan.org JOHN L. CLARK jclark@goodinmacbride.com A Kirk McKenzie mck@cpuc.ca.gov

PUC/X106185.v1