Notice of Apparent Liability issued today by the Federal Communications Commission against AT&T for numerous alleged violations of microwave point-to-point license rules after a lengthy investigation by the Enforcement Bureau, but the two Republican Commissioners took the Commission and Bureau to task for failing to provide transparent factual bases and justifications for both the base violations and also the grounds for proposed upward adjustments.  Commissioner Ajit Pai made a point of concurring and Commissioner Michael O’Reilly concurred in part and dissented in part.

The Notice described a multi-year investigation which ostensibly raises the question why the Commission only issued the Notice now, after more than 80% of the licenses that allegedly were operating in violation of the rules could no longer be the direct subject of forfeiture proceedings due to the applicable one-year statute of limitations.  This matter had a humble beginning. In October 2011, the Wireless Telecommunications Bureau referred to the Enforcement Bureau the matter of a single AT&T microwave license in Puerto Rico that was operating on an unauthorized frequency.  Following a Letter of Inquiry issued by the Bureau in 2012, settlement negotiations ensured regarding this and one other license.  In September 2013, however, AT&T disclosed “inconsistencies between the licensed parameters and the constructed facilities of a large number of common carrier fixed point-to-point microwave licenses that it acquired from 2009 through 2012” from Centennial Communications Corporation and Verizon Wireless. The Notice notes that the Bureau then “expanded its investigation,” and that AT&T took almost another year to complete its investigation of 691 acquired licenses. 240 of these licenses, per AT&T, more than one-third of the total, required modifications to bring them into compliance with how they were, in fact, being operated – at least fifty of the modifications were major.  The Notice is silent as to when most of these modifications were filed relative to the period of investigation, and notes that since January 30, 2014 — the start of the relevant statute of limitations period for the NAL – the remaining 34 of these out-of-compliance licenses were either cancelled, the subject of major or minor modification filings, or yet require modifications to be filed.

The Notice sliced and diced in several ways the extent of AT&T’s alleged non-compliance revealed by the investigation to have occurred over the past four to five years, noting that 59 licenses were operated at variance from their authorized parameters in violation of Section 301 of the Communications Act of 1934, as amended, and FCC rules.  Major modifications of microwave licenses in such cases include changes to antenna locations (> 5 seconds in latitude or longitude), increases in transmit antenna height by more than 3 meters, changes in transmit antenna polarization, and changes in transmit antenna azimuth by greater than 1 degree, for example.  In addition, 190 of the licenses were the subject of untimely minor modifications, which can include changes to address less severe variances from licensed parameters or correcting incorrect license contact information.

But in the end, due to the timing of the NAL and the one-year statute of limitations, the Commission’s window of opportunity remained open only to impose a penalty with respect to 34 of the licenses.  For 26 of those, the Commission found that AT&T had operated in an unauthorized fashion and imposed a base forfeiture amount of $104,000 (applying the base forfeiture amount of $4000 per violation).  For the remaining eight licenses, faulting AT&T for failing to file timely notices regarding minor modifications, the Commission imposed another $24,000 (applying the $3,000 base amount per violation).  The Notice then proceeded to propose a quintupling of the fine due to “the totality of the circumstances,” citing the extended period of AT&T’s unauthorized operation or failure to make minor modifications for the 240 licenses that were part of the investigation.  The Commission criticized AT&T, “a sophisticated licensee” for its failure to conduct a “more timely technical review of newly acquired licenses” and delayed filing of corrections for up to five years, particularly in light of the number of acquired licenses.  The Commission also justified the upward adjustment to $640,000 because AT&&T’s multi-billion dollar scale warranted a larger penalty to “ensure an effective deterrent.”  No downward adjustment was merited, the Notice said, because of AT&T, as sophisticated licensee, was well aware of the rules that were allegedly violated. The Notice added that, regardless of a licensee’s sophistication, all Commission licensees are responsible for knowing the applicable regulatory obligations.  In addition, the Commission found AT&T’s years-long delays in filing conforming major modification applications and minor modification notices to be inexcusable (even allowing for some transition issues after the acquisitions).  The Commission underscored that, for all licensees, corrective measure taken after an investigation has begun “do not nullify or mitigate past violations.”

In separate statements, Commissioners Pai and Reilly took aim at the NAL, but in somewhat different ways.  Both men criticized the Bureau for not providing certain details, such as which 34 licenses were the subject of the alleged violations within the statutory period or what specific apparent violations occurred with each of the licenses, rendering it difficult to know how “egregious” AT&T’s conduct actually was.  Interestingly, Commission Pai noted that, depending upon the alleged violations regarding each of the licenses at issue, which he suggested the Commission itself had not yet pinned down, the base forfeiture ”might actually be too low.”  At the same time, he was displeased with the lack of consideration given to the “voluntary” disclosure by AT&T of its conduct which led to the expansion of the investigation.  Commissioner O’Reilly was even more hard hitting, hinting that the upward adjustment, about which he dissented, may largely be an unwarranted penalty for violations occurring outside the statutory period, although he acknowledged certain precedent to take such violations into account.  He concluded that if the upward adjustment is based on “apparent” violations outside the one-year period, he has “deep concerns” since the Commission failed to act on those possible violations.

In short, the statements of the Republicans signal that there may be much more that will have to be brought to light before this proceeding is completed.  Yet the Notice does not reveal the extent to which AT&T, in the course of the investigation, may have all but conceded that the violations occurred or, alternatively, is prepared to fight.  AT&T has 30 days to respond to the alleged violations and the proposed forfeiture amounts.  If AT&T does fight and this results in a final forfeiture order, this proceeding has the potential of forcing the Bureau and Commission to inject more transparency and method in how they set base forfeitures and make adjustments to those amounts in enforcement proceedings, including the extent to which alleged violations outside the statutory period will count.