Telecom Trade Associations Seek Reconsideration of FCC’s New “Treble Damages” Forfeiture Policy

Davis Wright Tremaine LLP

Reacting to last month’s Policy Statement by the Federal Communications Commission (FCC), trade associations representing a spectrum of telecommunications providers filed a joint Petition for Reconsideration and for a stay of the FCC’s new policy of imposing penalties of three times the amounts owed but not timely contributed to four FCC-managed funds.

The Policy Statement reevaluated the FCC’s methodologies for calculating fines for violations of the FCC’s rules governing contributions to the Universal Service Fund (USF), the Telecommunications Relay Services (TRS) fund, the local number portability (LNP) fund, and the North American Numbering Plan (NANP) fund. Under the prior approach, the Commission imposed a fine for each unpaid bill within the one-year statute of limitations and, for USF and TRS payment violations, added 50% of the highest amount owed. However, as the Policy Statement explains, the FCC found this process to be “unnecessarily cumbersome,” time consuming, and resource-intensive and thus the FCC sought to improve efficiency and effectiveness in dealing with contribution violations.

Under the new methodology, a violator’s base forfeiture liability will be three times the delinquent contributor’s debts to the USF, TRS, LNP, and NANP regulatory fee programs. In determining the amount of delinquent debt to each federal program, the FCC will consider any debt reflected in unpaid invoices for the regulatory fees (including those that have been referred to debt collection), and information (most likely, regarding mitigating circumstances) provided by the target of an investigation on payments or other credits affecting the debt. Notably, the FCC will not consider as an offset any payments made after a party is targeted for investigation. According to the Policy Statement, the new approach will enable the FCC to perform “significantly more investigations.”

The National Cable & Telecommunications Association, CTIA – The Wireless Association, the United States Telecom Association and COMPTEL have jointly petitioned the FCC to reconsider, arguing that the treble damages forfeiture approach constitutes a substantive rule change that required notice and comment under the Administrative Procedure Act rather than an announcement of policy. The associations also contend that the Policy Statement’s treble damages methodology is an “arbitrary and capricious” effort by the FCC to drive forfeiture amounts as high as possible. They also argue that the treatment of payment and reporting violations as “continuing violations” wrongly fails to acknowledge the one-year statute of limitations in Section 503(b)(6) of the Communications Act. The associations coupled their Petition for Reconsideration with a Petition for Stay, asking that the FCC not apply the new treble damages methodology until it rules on the reconsideration request.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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