FCC Enforcement Bureau Hands Canadian National Railway Company a $5.25 Million Fine for Violating Ownership and Licensing Rules


On September 10, 2014, the Federal Communication Commission’s (“FCC” or the “Commission”) Enforcement Bureau announced that it negotiated a Consent Decree with Canadian National Railway Company (“CN”) that resolved an investigation into whether CN acquired wireless radio licenses in the United States without prior FCC approval, and operated wireless radio stations without prior authorization by the Commission.  Through the Consent Decree, CN agreed to pay a civil penalty of $5.25 million, and implement a three-year compliance plan to ensure future compliance with the Commission’s ownership and licensing rules.  The Enforcement Bureau’s (“Bureau”) Consent Decree with CN appears, yet again, to be another indication of the Bureau’s more stringent enforcement policies that our firm has previously discussed.

This Advisory will briefly discuss the parameters of the CN Consent Decree, and why all FCC license holders should pay attention to the ramifications of the agreement.

Section 310(d) of the Communications Act of 1934, as amended (the “Act”), and section 1.948 of the Commission’s rules require the Commission’s consent prior to any transfer of control or assignment of license.  Similarly, Section 301 of the Act, and section 1.903(a) of the Rules prohibit the use or operation of any radio transmitting equipment within the United States without the prior consent of the Commission.

In 2012, CN discovered that it had attained control of various wireless radio licenses without the Commission’s prior consent as the result of acquiring a number of American railroad companies over the course of several years following the company’s privatization in the early 1990s.  After commencing an internal investigation of all FCC authorizations under the company’s control, CN disclosed its violations to the Commission.  The Bureau responded to CN’s self-reported violations by conducting an investigation into CN’s compliance with the Act and the Commission’s rules.

The Bureau’s investigation revealed that, between 1995 and 2013, CN consummated over a dozen substantial and pro forma transactions involving several hundred licenses without having obtained prior consent from the Commission.  Most of these unauthorized transactions and authorizations continued until 2013, when the Commission’s Wireless Telecommunications Bureau granted CN’s requests for Special Temporary Authority for many of its wireless radio stations.  However, the Bureau’s investigation did not reveal any interference complaints from CN’s unauthorized operations, and noted that the unauthorized operations of its wireless radio stations were conducted in order to improve the safety of CN’s railways.  Nevertheless, the Consent Decree, and the $5.25 million civil penalty, was the result of the Bureau’s findings.

The CN Consent Decree is demonstrative of the kind of treatment FCC license holders can currently expect from the Enforcement Bureau.  The agreement illustrates, yet again, that businesses and other entities who self-report their violations to the Commission cannot expect any sort of leniency or special treatment by the Bureau.  However, the still hefty $5.25 million civil penalty is arguably much less than what the Bureau could have imposed, if the Bureau applied its’ “continuing violations” internal precedent – which normally vastly compounds the forfeiture amount for a given violation.  Still, given the background of the Consent Decree – that CN self-reported its violations to the Commission – the Bureau here is indicating that it will not hesitate to impose stringent monetary penalties to the greatest extent possible no matter the existence of mitigating circumstances.

Thus, clients and all other FCC license holders should take great care in ensuring that all of their telecommunications operations, not just wireless radio stations, are compliant with the Commission’s rules governing ownership and authorized operations – or face harsh treatment at the hands of the Enforcement Bureau.

Should you have any questions regarding this Advisory, the FCC’s ownership and operations rules, or the FCC’s new enforcement policies, please contact Jonathan S. Marashlian at jsm@commlawgroup.com, or by phone at 703-714-1313.

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