FCC Cancels Proposed AT&T E-Rate Fine

Said proposed fine was time-barred

The FCC has voted to cancel a proposed fine against AT&T for violating the FCC’s E-rate rules, agreeing with AT&T that the statute of limitations had expired on the alleged offense of overcharging for service and “clarifying” that ongoing negative effects from a violation don’t make that violation an ongoing one. 

The vote was 4-1 with Democratic commissioner Jessica Rosenworcel voting against and Democrat Geoffrey Starks concurring, which is a yes, but with caveats. 

The decision was confined to procedural grounds and did not get into the issues with the pricing that AT&T had raised in its defense,

Related: FCC Delays Changes to E-Rate Application

In 2016, the FCC under chairman Tom Wheeler proposed fining AT&T for overcharging two school districts for service. The E-Rate program, which subsidizes advanced communications service to schools and libraries, prevents participants from charging a price above that charged to others for similar service.  

On July 27, 2016, the FCC issued the notice of apparent liability for $106, 425, the difference between what AT&T charged and what it should have under the rule. 

The Wheeler FCC said the violation was continuing because AT&T had not corrected the price and had “retained the excessive reimbursements.” 

Related: Senate Dems Introduce $4 Billion E-Rate Bill

AT&T argued the that the statute of limitations on the alleged violation had expired June 1, 2016, since by FCC rules an NAL has to be issued within a year of the violation, which AT&T said was a year from when it had last issued the bill on June 1, 2015.  

The FCC Wednesday (Aug. 12) issued the cancellation of the forfeiture, saying that the statute of limitations was indeed triggered by that June 1, 2015 billing date, when AT&T charged the “non-compliant” prices, and so the NAL had been time-barred. 

“A continuing violation may be deemed to occur where the offending conduct is ongoing, rather than when it is limited to a discrete event,” the FCC concluded, in this case that being the June 1, 2015 bill. “Just because the incidental consequence flowing from offending conduct continues does not mean that the conduct itself should be deemed ongoing,” the commission concluded. “In short, the mere existence of such continuing consequences, standing alone, is not a basis for finding a continuing violation of the underlying offense of failure to charge the Districts the lowest corresponding price.” 

Related: Dems Try to Attach E-Rate Bill

While AT&T had argued the NAL was barred on procedural grounds, it also argued the FCC was wrong on substance.

AT&T argued at the time that the FCC’s application of the lowest corresponding price requirement for the E-rate program was “factually wrong.”

While the Enforcement Bureau alleged that AT&T should have provided school districts at issue with rates based on one-year contracts, the schools were buying the service on a month-to-month basis. The issue is similar to the lowest unit rate broadcasters have to charge for political ads, where last-minute political ad buys are more expensive than the same spots and dayparts bought in advance.

“Contract term is a regular and routine distinction in rates, and the Commission has previously expressed the view that length of contract is a valid basis to price services differently among customers,” said AT&T at the time.

AT&T also said the FCC was wrong in suggesting AT&T should have provided the schools the rates it charges consortia, when the FCC itself has said that such consortia allow for better rates than the individual entities could get on their own.

AT&T called the Enforcement Bureau NAL a troubling example of rulemaking through enforcement.

“I do not disagree with today’s outcome, but I want to emphasize how much more needs to be done to give the lowest corresponding price rule the teeth it needs,” said Starks of the FCC’s decision that the NAL was barred on procedural grounds.  The commission did not get into the substantive issues AT&T had raised. 

Starks did say he wished the FCC had gotten into some of the substantive issues. “I would have expected the Commission to be in a position to say something about the merits of this case to give all parties a modicum of guidance and allow school districts to set firm pricing expectations,” he said,

Rosenworcel’s was not a condemnation of the NAL reversal per se, but instead a defense of the merits of the FCC’s initial approach under Wheeler.   

“I respect my colleagues’ decision today to conclude that this prior effort was procedurally untimely,” she said. “However, I supported the underlying NAL and continue to believe that there are merits to our earlier approach. In particular, I believe our initial decision would support greater accountability with respect to universal service funds than the course the agency adopts today. That is because our prior approach recognized that some violations of our rules should be treated as continuing until they are remedied. In addition, our earlier approach sought to count infractions from the date of universal service disbursements. This could be a more transparent point for action than the one we adopt here involving counting from when schools are billed by a provider. The agency may not become aware of billing until well after an infraction has taken place and as a result the approach in today’s decision could make enforcement of our rules more difficult. For this reason, I choose to dissent.”