Managing Partner Interviewed for Law360 Article – GOP Criticism Unlikely To Deter Aggressive FCC Enforcement


By Margaret Harding McGill

Law360, Washington (November 25, 2015, 5:41 PM ET) — The Federal Communications Commission is facing criticism from Republican lawmakers and getting pushback from industry over its eye-popping fines and other enforcement actions, but telecommunications attorneys say it’s unlikely the agency will alter its aggressive tactics in response.

The FCC’s Enforcement Bureau levied a record-setting $100 million proposed fine against AT&T this summer and has followed that up with several other multimillion-dollar fines, many approved by a party-line 3-2 vote. Republican senators demanded an explanation for what they called “seemingly arbitrary” fines earlier this month, and companies ranging from AT&T to prepaid calling card providers are digging in for a fight with the agency. But the criticism is unlikely to dissuade the FCC, attorneys said, and might actually encourage the trend.

“I don’t see any daylight between the chairman and the Enforcement Bureau,” said Marc S. Martin, chairman of Perkins Coie’s communications industry group. “I think they’re of a unified mind in enforcement of the FCC rules. I think they believe they have the support of the administration and large constituencies in the spirit of consumer protection. That there are those that oppose it and fight it, they may very well view that as a validation rather than cause to take a different approach.”

The letter from five Republican senators last week said the Enforcement Bureau does not “consistently follow through” with the collection of its fines. The FCC has not moved forward on roughly $94 million in proposed fines levied against a dozen providers of subsidized phone service in 2013 and 2014. The proposed fines accuse the companies of providing duplicate Lifeline service in violation of the one-line-per-household rule.

Enforcement Bureau Chief Travis LeBlanc wrote a blog post Wednesday outlining the unit’s enforcement process and how fines are collected. He noted that the Enforcement Bureau has collected 86 percent of the actual fines it has imposed over the past two years, totaling $98 million so far this year. In 2011, LeBlanc wrote, the Bureau only collected 54.9 percent of the money owed in issued fines.

LeBlanc also said that the Notices of Apparent Liability against the Lifeline providers have been referred to the FCC Inspector General.

“The IG is also tasked with reviewing potential misuse of Universal Service Funds and works with the Department of Justice on these matters to ensure similar cases are handled consistently,” LeBlanc said in the post.

Notices of Apparent Liability are the documents that detail the FCC’s case against the companies, as well as the proposed fines.

The IG’s office does not have the statutory authority to levy fines and is instead charged with looking for waste, fraud and abuse in commission operations and in commission programs, said Jay Keithley, assistant inspector general in charge of investigations and counsel to the IG.

If the office looks at what it has received and sees evidence of fraud, it would investigate and refer the case to a U.S. attorney or to the FBI for prosecution, Keithley said.

“The motivation for the FCC to refer these NALs to the IG may be … so they can say that they’re having an independent party review them,” said Danielle Frappier, co-chair of the communications practice at Davis Wright Tremaine LLP and leader of the firm’s Lifeline program team.

It appears the senators are trying to build a narrative that the FCC’s enforcement efforts are more about the headlines than the follow-through with fine collection, but collection of final FCC fines is left up to the U.S. Department of Justice, Martin said.

“They’re using the failure to collect to cut against the FCC approach,” Martin said. “But they’re really two different things. The collection effort is really undertaken by Justice so it’s a little ironic that they seized on that issue because in some ways that’s the way Congress set it up.”

The senators’ letter also questioned the FCC’s track record in responding to consumer complaints, noting that 564,000 consumer complaints have been lodged during Tom Wheeler’s two-year tenure as FCC chairman.

That point resonated with members of the prepaid calling card industry that were collectively hit with $30 million in fines earlier this year, said Jonathan Marashlian, managing partner at communications-focused Marashlian & Donahue PLLC.

Marashlian represents Locus Telecommunications, one of at least three companies that have asked the FCC to reconsider the $5 million fine that each is facing for using marketing materials that were allegedly misleading about the charges that would be incurred for using the calling cards.

The FCC did not identify a single consumer complaint about Locus’ marketing material, Marashlian said.

“Congress is chiding the commission for not addressing actual, real consumer complaints, and the commission is off here on a tangent extending its authority to regulate an area that it does not have the rules to regulate where there hasn’t been a single customer complaint filed with the commission,” Marashlian said.

In addition to the petitions for reconsideration in the calling card fines, a company facing a proposed $718,000 fine for allegedly blocking personal mobile Wi-Fi hot spots at the Baltimore Convention Center has also vowed to fight the FCC over the fine, either at the agency level or in court.

And AT&T mounted a strident response to the $100 million fine the FCC proposed against it this summer, warning the agency that the fine would not withstand judicial scrutiny.

“When the fines are in the tens of millions of dollars, companies are going to find it either necessary or worthwhile for them to litigate this and what we will have is an independent judicial review of the FCC’s legal analysis,” said Steve Augustino, a partner at Kelley Drye & Warren LLP who focuses on telecommunications and enforcement matters.

In the AT&T case, the FCC accused the company of violating the 2010 Open Internet Order’s transparency rule by failing to adequately inform unlimited data plan customers about its data speed-reduction policy.

The unprecedented size of the fine, and the fact that it involved net neutrality rules, likely caught the attention of lawmakers, Martin said.

“Particularly in that case, it’s rules the Republicans already believe to be an overreach,” Martin said. “So it’s not surprising that they would push back and seek more information about how they came up with their enforcement decisions and penalties.”

It’s also not surprising that the criticism comes on the eve of an election year, he said.

Republicans in the House sent their own letter regarding the FCC’s Enforcement Bureau in October. The letter asked the U.S.Government Accountability Office to review the FCC’s management of the Enforcement Bureau.

It’s not uncommon when one party controls Congress and the other controls the presidency for lawmakers to take advantage of their oversight role, but the focus on the FCC’s enforcement tactics is more unusual, Martin said.

“When you take strong stands on enforcement, you’re going to attract criticism and different audiences will react differently,” Martin said. “I’m sure there are constituencies cheerleading the effort, viewing it as championing consumer protection. But there are others that maybe represent the industry perspective that view it as overreach.”

The criticism from lawmakers is unlikely to have an impact on the direction of the FCC’s Enforcement Bureau, Marashlian said, adding that it will take the election or a court review to make an impact.

“My personal view is that the current Democratic commission and the current Enforcement Bureau are unlikely to be persuaded to make any meaningful changes in the course of the next 12 months,” Marashlian said. “However, the criticisms coming out of Congress are certainly going to be taken to heart by whoever comes in and leads the commission in the next administration.”

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