And Then There Were Four (Nationwide Wireless Carriers)

FCC approval of AT&T acquisition of Leap Wireless reduces roster of nationwide carriers by 20%.

The FCC has taken another giant step toward reconstitution of the old Ma Bell monopoly by approving AT&T’s acquisition of Leap Wireless, which operates nationally under the Cricket brand. Leap was the fifth largest facilities-based wireless carrier in the U.S., so it was surprising that the proposal for it to become part of the second largest carrier elicited so little opposition from anti-trust regulators, the public interest community, or even the remaining smaller competing carriers. The deal received little more than a shrug from the FCC’s Eighth Floor, which let the Wireless Bureau, rather than the commissioners themselves, resolve the matter.   This curious lack of high level interest contrasted sharply with the strong signals from federal regulators that any move by Sprint to acquire T-Mobile (Number Three buying Number Four) would be regarded with extreme disfavor. How come Number Two buying Number Five didn’t even merit a glance?

The transfer of control applications did generate oppositions from Public Knowledge and several entities with idiosyncratic grievances against AT&T. (Full disclosure: Your blogger represented two entities that opposed, or asked that conditions be placed, on the transaction.) The pleadings and counter-pleadings which were volleyed back and forth for six months took a comical turn at one point. Recall that, a couple of years ago, Leap vigorously opposed AT&T’s acquisition of T-Mobile on the grounds that AT&T was refusing to offer reasonable roaming rates to other carriers. But when the same charges were leveled against the AT&T/Leap deal, suddenly Leap fell silent on this point. In addition, Leap has historically characterized itself, repeatedly, as a nationwide carrier in its SEC filings, its FCC filings, and its advertising. But now, suddenly, Leap disavowed that status. Leap also claimed not to compete with AT&T, despite giant billboards all around the country proclaiming how Cricket’s service is less expensive than AT&T’s.

For its part, AT&T had earlier solemnly pointed to Leap as a disruptive and vigorous competitor which elicited competitive responses from AT&T. But now AT&T has done a perfect about- face, declaring with equal solemnity that Cricket has been a competitive non-factor that has not affect AT&T's sales strategies at all.

Clearly, mergers make strange bedfellows.

And the FCC good-naturedly shrugged off all the previous, contrary representations of the two parties as though they had never been worthy of credence anyway.

The staff did examine carefully the red flags that had been raised by both the high spectrum aggregation and the high market share concentration which resulted when Leap’s spectrum and customer base were added to AT&T’s. To handle the spectrum issue, the FCC required AT&T to divest itself of 10 MHz of AWS (or other spectrum designated by AT&T) in about 15 markets. 

The market concentration issues in a number of markets were enough to give the FCC some serious heartburn, but this was easily relieved by a bicarbonate of LTE: AT&T simply agreed to roll out some additional LTE in the most egregious markets, and the FCC said that that benefit made up for the diminution in competition. Promising to roll out LTE has become the palliative of choice for large carriers who must somehow overcome what would otherwise be debilitating negatives caused by their proposed transactions. The instructions for this particular nostrum call for it to be administered at the very last minute in the agency’s deliberative process, thus precluding any interested member of the public from commenting meaningfully on whether the alleged benefits really exist and, if so, whether they really outweigh the harms.

As usual, strident claims by numerous parties that the transaction would seriously worsen access to reasonable roaming rates were disposed of with the comment that anybody aggrieved by the roaming rates being offered could file a complaint with the Enforcement Bureau. AT&T did make a last minute “commitment” to maintain Cricket’s Lifeline service for some indefinite period of time, a commitment that probably made no sense to Lifeline customers who were unaware that their service was even in issue because this aspect of AT&T’s plans had been kept confidential.

One interesting procedural feature of the FCC's action merits comment. The FCC has a “shot clock” by which it has imposed on itself an informal, non-binding expectation that it will act on transactions such as the AT&T/Leap deal within 180 days. This shot clock is not codified in any rule and has no binding effect on anyone. Historically, the Commission has used it exactly as it should be used – as a loose yardstick to keep the examination of complex deals from dragging on too long.

Here, however, the shot clock drove the Wireless Bureau to feverish activity as the 180th day approached – as though the shot clock meant something. A decision was reached on the 179th day, despite a host of new developments, last-minute changes in representations and commitments, and a flood of ex parte submissions, all of which should ordinarily have justified suspending the shot clock – or just ignoring it. The elevation of the shot clock in this case to a moral imperative contrasts sharply with the way the FCC routinely ignores other deadlines for it to act which are actually set forth in the rules and the Communications Act and are, therefore, legal requirements.

So the end result is that the nation has one fewer nationwide cellular carrier and one fewer low cost alternative to the Big Two (or Two-and-a-Half, if we count Sprint). No one will check in a year or two to see if the promised cost savings are ever passed on to consumers, and the competitive pressure that Cricket, for all its faults, put on the Big Two will be gone forever.

The Five-Year Enforcement Shot Clock: Has the FCC Finally Begun to Acknowledge It?

Forfeiture cancellations suggest possible path to clearing backlogged complaints (and enforcement holds).

It appears that the Commission may have taken the first steps – baby steps carefully cloaked from public view, perhaps, but steps nonetheless – toward addressing its hopeless backlog of broadcast complaints. In a series of super-low-key actions in recent weeks, the Media Bureau has quietly cancelled a number of previously assessed forfeitures. The actions have been reflected in terse (and we do mean terse – check out this example) letters that provide no explanation for the cancellations. But based on the answers we got to some informal inquiries, we figure that these cancellations could be the harbinger of considerably more dramatic developments on the complaints front.

It appears that the recent forfeiture cancellations have all involved the same general fact pattern. The Bureau issued a notice of apparent liability (NAL) and/or forfeiture order for violations which occurred significantly more than five years ago. The target licensee responded by arguing that, thanks to 28 U.S.C. §2462, the FCC is statutorily prevented from collecting the fines, so they should be cancelled. That argument has been initially rejected by the Bureau in some cases (here’s an example), but the licensees have pressed their argument before the Commission in applications for review. 

And now, we understand that the Bureau has been directed by higher-ups in the agency to cancel the forfeitures in light of that Section 2462 argument. The Bureau’s cancellation letters are, we are told, the result of that direction.

For readers not familiar with Section 2462, check out Steve Lovelady’s post on the topic from a couple three years ago. Essentially, Congress has told the Department of Justice that DoJ can’t initiate any lawsuit to enforce a civil fine, penalty or forfeiture later than five years after the underlying claims accrue. That’s important because Congress (in 47 U.S.C. §504(a)) has also told the FCC that, if the FCC fines a licensee and the licensee declines to pay – which is an option accorded to licensees by Congress – the FCC can collect only by getting DoJ to sue the licensee to collect the fine. Perhaps more importantly for FCC licensees, Section 504(c) of the Communications Act clearly and unequivocally provides that, if a licensee has not paid the fine and no court has ordered that the fine be paid, then the fact that the Commission may have imposed a forfeiture in the first place “shall not be used, in any other proceeding before the Commission, to the prejudice of the person to whom such notice was issued”.

Get the picture?

If the licensee doesn’t pay the fine voluntarily, the only way the FCC can collect is through a lawsuit. But if the claim underlying that lawsuit arose more than five years earlier, the FCC (acting through DoJ) can’t even start such a lawsuit, much less collect through it. And if the lawsuit can’t get started, then, under Section 504(c), whether or not the rules may have been violated makes no difference: the mere fact that an NAL (or, presumably, forfeiture order) was issued cannot be “used . . . to the prejudice” of the supposed violator.

Truth be told, this is a pretty simple concept, made even simpler by the clarity of the two statutes in question. But historically the Commission appears to have ignored it. You can understand why. 

The Commission has tended to take a leisurely approach to forfeitures. The Communications Act, after all, technically permits the Commission to issue fines for licensee misconduct that occurred at any time during a license term as long as the next license term hasn’t already started. (Remember, Section 2462 relates to collecting fines, not imposing them in the first place.) In order to preserve its ability to issue fines, then, the FCC has imposed the dreaded “enforcement hold” on pending renewal applications, meaning that it has simply declined to grant renewal where the possibility of some violation might exist. By doing this, the FCC has been able to (a) avoid the commencement of a new license term and, thus, (b) keep open the option of maybe someday getting around to considering whether a fine may or may not be appropriate.

(Relevant illustrative factoid:  According to CDBS, there are more than 300 TV renewal applications still pending from the 2004-2007 application season. Our guess is that most, if not all, of those have been hung up on “enforcement holds” – but since the Commission doesn’t generally disclose why any renewal has been held up, your guess is as good as ours.)

By invoking such “holds”, the Commission has been able to avoid resolving, or even addressing, vast numbers of complaints and violations (admitted or otherwise) that have piled up for a decade or more. And since many of those complaints involve issues like indecency, the Commission has also been able to avoid the difficult political and legal considerations attendant to such controversial topics.

Think of all those distasteful chores that you put off by relegating them to the basement, or a closet, or the garage, always with the promise that you really will get around to them someday, but also always with the tacit understanding that that “someday” probably won’t be anytime soon, particularly as the basement/closet/garage gets more and more jam-packed with chores. That’s essentially what the “enforcement hold” has let the FCC do with hundreds of thousands, possibly millions, of complaints.

The five-year shot clock imposed by Section 2462 obviously messes that up big time. If that statute of limitations on collection actions really means what it says, then any complaint filed with the Commission more than five years ago, and any forfeiture proceeding initiated more than five years ago, is at a dead end if the case hasn’t already resulted in payment of a forfeiture or the filing of a collection suit. Logically and legally, the only available course for the Commission would appear to be to summarily toss any such complaint or forfeiture proceeding.

Which is just what the Media Bureau has done with the dozen or so forfeitures which it recently cancelled. And that’s why those mysterious, unexplained cancellations could portend an important shift in the FCC’s handling of old complaints.

Bear in mind that the Bureau had already considered, and rejected, the Section 2462 argument in at least some, if not all, of those cases, insisting instead that the FCC could reach back indefinitely to penalize misconduct. But that’s not what 28 U.S.C. §2462 and 47 U.S.C. §504(c) provide. And we understand that at least some folks in the General Counsel’s office may now recognize and accept that limitation – and that the Bureau’s recent forfeiture cancellations are a result of that recognition and acceptance.

That’s the good news: Some fines have been cancelled for reasons which should lead to further cancellations of previously issued fines or previously-initiated-but-still-pending inquiries.

The bad news is that the Commission may still be reluctant to follow up with those other cancellations.

The Commission appears still to be loath to state conclusively that Section 2462 imposes a five-year shot clock on the FCC collection process. We understand from conversations with folks involved in the Bureau’s recent cancellations that Section 2462 was the reason for those cancellations, but you won’t find any reference to that section in any of the cancellation letters. And to avoid even having to refer to the arguments that had been presented concerning Section 2462, when it issued its cancellation letters the Bureau called on the various beneficiaries of those letters to request withdrawal of their respective, still-pending pleadings in which those arguments had been advanced.

What’s up with that? As best we can figure, the Commission believed that, if it had to dispose of those arguments on their merits, it would have to publicly acknowledge that Section 2462 does indeed impose a five-year shot clock. But if the Bureau instead offered to simply cancel the fines without explanation, it could call upon the affected licensees to withdraw their pleadings, thus obviating the need to address their arguments. And those licensees could be expected to comply happily – they are, after all, getting off the hook for the fines they had been assessed, so why should they care whether the FCC formally acknowledges the reason for that?

The Commission’s reticence is not encouraging, but to some degree understandable. Formal acceptance of the five-year shot clock would affect the Commission both retrospectively and prospectively. 

Looking back, the Commission would be required to sort through its various enforcement files, searching for any complaints, inquiries, etc., that involve potential misconduct that occurred more than five years ago and as to which no collection lawsuit has yet been filed. All such complaints, inquiries, etc. would then have to be summarily dismissed, no questions asked. Back the dump trucks up to the Portals and start tossing files out the window. We’re probably talking about hundreds of thousands, maybe millions, of complaints or other potential violations. Problems involving indecency, sponsorship ID, kidvid reports, public files, etc., etc., etc. Kiss them good-bye and color them gone.

That’s a lot of work in and of itself. And if the Commission were to do that, the result would likely be a public relations nightmare. Various self-appointed guardians of the public interest would almost certainly rise up on their hind legs and complain vigorously about the impropriety of allowing scofflaws – including pornographers! – to avoid any penalty for their supposedly vile misdeeds. And some members of Congress might respond to such complaints by asking pointed questions of the Commission: how, after all, did the FCC get itself into this mess? A preference to avoid this scenario is understandable.

And looking forward, the Commission would be acknowledging that it is in fact subject to a five-year shot clock. That would mean that the Commission would have to veer sharply away from its decades-long lackadaisical approach to enforcement. Instead, it would have to commit staff and resources sufficient to process complaints and related matters on a super fast-track. Suffice it to say that the FCC has seldom demonstrated the inclination or ability to do much of anything on a super fast-track, particularly in the enforcement area.

Remember, Section 2462 requires that the collection lawsuit be initiated within five years. So the Commission would have to investigate potential misconduct, issue an NAL, consider the licensee’s response, issue a Forfeiture Order, maybe address any petition for reconsideration, determine that the licensee wasn’t going to pay, and then convince DoJ to free up attorneys to file the suit, all within five years. A preference to avoid this scenario is likewise understandable.

Such preferences may be understandable, but they are also unrealistic and just plain silly. After all, the law says what the law says, and it’s said it for years. If the recent forfeiture cancellations do in fact reflect an acknowledgement by senior agency officials that the constraints of Section 2462 apply, we can see no valid distinction between those proceedings and the myriad other long-pending complaints, investigations, etc., that have been gathering dust at the Commission for more than five years.

It would be nice if the Commission, in the much-vaunted spirit of transparency, were to issue a public notice or some other statement explaining the recent cancellations, acknowledging the impact of Section 2462 on its enforcement activities, and committing to prompt steps consistent with those statutory obligations. It would also be nice if the Commission were simply to start taking such steps, fanfare or no. Whether it will do so obviously remains to be seen. Let’s all keep our fingers crossed.

FCC "Shot Clock" Presumptions for Wireless Tower Permitting Upheld

Less than hard-and-fast 90- and 150-day time limits for state/local actions on wireless tower permit requests affirmed

Cellular tower builders and wireless companies can breathe a sigh of relief: the “shot clock” presumptions imposed by the FCC on local government permitting processes have been upheld by the U.S. Court of Appeals for the Fifth Circuit. As a result, those presumptions – i.e., that state and local officials should ordinarily take no more than 90 days to act on wireless “collocation” applications and 150 days to act on all other wireless siting applications – remain in effect. But in affirming the Commission’s judgment in the face of challenges brought by two Texas communities, the Fifth Circuit acknowledged that local governments may still be able to rebut the presumptions – and, thus, drag out the permitting process – in individual cases.

The issue of local foot-dragging in antenna siting processes got on the Congressional agenda back in the 1990s. Out of concern that local governments might be reluctant to authorize new or modified transmission facilities in their particular bailiwicks (can you spell NIMBY?) and that such reluctance might in turn stymie the spread of wireless services, Congress weighed in. In the 1996 Telecom Act, Congress required that state and local governments act on requests to “place, construct, or modify” wireless facilities “within a reasonable period of time” after the filing of such requests. 

That statutory mandate, however, proved less than effective because – here’s a surprise – tower builders, wireless operators and municipalities tended to differ over what constituted a “reasonable period of time”. Is a year too short? Is ten years too long? In 2008, more than a decade after the 1996 Telecom Act, CTIA-The Wireless Association® asked the Commission to tie down the concept of “reasonableness” a bit tighter than Congress had. 

After soliciting and considering a broad range of comments, the Commission obliged.

As far as the FCC was concerned, “reasonable” here meant that local governments should be expected to take no more than 90 days to act on collocation requests and 150 days to act on all other requests. In this context, “collocation requests” involve modifications to already existing wireless facilities, including addition of an antenna to an existing tower as long as the change doesn’t involve a “substantial increase in the size of the tower”.

So the pressure is on for localities to act on wireless siting proposals: if they don’t meet the Commission-imposed time limits, the siting proponents have a prima facie argument that the locality is in violation of the Communications Act. That immediately puts the locality on the defensive (although, since the “shot clock” time frames are just presumptions, the local governments do have the opportunity to try to rebut those presumptions).

The Texas municipalities of San Antonio and Arlington challenged the Commission’s declaratory order on a number of grounds, both procedural and substantive. The Fifth Circuit had little trouble brushing all the quibbles aside. 

Actually, the Court needed brush only Arlington’s quibbles aside. In a ruling of key interest to communications law practitioners, the Court dismissed San Antonio’s petition. San Antonio, which did not seek reconsideration at the Commission, did not file its own request for judicial review until after the FCC had disposed of others’ petitions for reconsideration. Too late: the Court reasoned that San Antonio’s time for seeking review ran from the original FCC action date, not the date of FCC action on the reconsideration petitions.   Since the action on those petitions simply affirmed the original decision, the FCC’s reconsideration action was not a separate and independent event opening a new opportunity for appeal by San Antonio.   These procedural niceties keep lawyers awake at night but have the opposite effect on lay readers, so we won’t discuss them further here. The net result was that a couple of arguments raised by San Antonio but not by Arlington could be ignored by the Court.

With respect to the nitty-gritty substantive issue in the case – i.e., are the 90 and 150 day limits valid? – the Court concluded that the FCC’s judgment was reasonable and entitled to the level of deference courts normally afford agency decisions (at least when the judges can make sense out of the agency’s reasoning). Importantly, the Court observed that the FCC’s “shot clock” limits are not absolute. That is, failure by a local government to meet those time limits does not automatically mean that that locality has per se violated the 1996 Telecom Act. Rather, it merely means that the burden shifts to the locality to explain its failure to meet the applicable deadline. Such explanations might, in the Court’s view, hinge on “extenuating circumstances”, or possibly on the wireless applicant’s own failure to submit requested information.  Alternatively, the local government might note that it was acting diligently in its consideration of an application, that the necessity of complying with applicable environmental regulations occasioned the delay, or that the application was particularly complex in its nature or scope. Essentially, the Court seemed to view the Commission’s 90/150-day limits as guidelines, entitled to deference but not absolutely and irrevocably binding in all circumstances.

To get to that point, the Court made reasonably quick work of a variety of procedural complaints advanced by Arlington. While the Commission’s method of dealing with CTIA’s initial request may not have conformed precisely with requirements of the Administrative Procedure Act – when it adopted its declaratory order, was the FCC engaging in “rulemaking”, “adjudication”, or some other activity? – the Court concluded that any FCC deviation from the procedural straight-and-narrow was harmless.

The Court did spend a fair amount of time grappling with Arlington’s argument that Congress hadn’t given the Commission the authority to put specific limits on the “reasonable period of time” language in the 1996 Telecom Act. Truth be told, the scope of the FCC’s authority is not at all clear here, but the Court determined that the statute, and the legislative history underlying it, were ambiguous. Given that ambiguity, the Court concluded that the FCC was entitled to do what it had done below. And, as noted above, the Court was inclined to defer to the Commission’s substantive determination.

Where, then, does the Court’s decision leave us? Wireless operators and/or tower companies are entitled to assume that, once they have filed all information required by a local jurisdiction, the jurisdiction will act on their siting applications within the applicable 90- or 150-day time period. If the local government drags its feet beyond that time frame, the aggrieved party may seek judicial intervention because of the locality’s failure to meet the FCC’s presumptive time limits. The threat of such litigation might be enough to cause the local officials to act on the construction proposal – but there’s no guarantee of that. As the Fifth Circuit seemed to emphasize, the locality could still cling successfully to a variety of excuses or explanations for its tardiness. In the end, the siting proponent will have the burden of persuading the court that the locality’s delay has been unreasonable.

Nevertheless, at least we have a clear starting point with which to mark the approximate outlines of local governmental delay. Ideally, that will prove useful to all concerned.

Hill's Bills Drill Process Ills

House, Senate proposals – S.1784, H.R.3309, S.1780 and H.R. 3310 – look to increase transparency, efficiency, predictability of Commission’s activities

On November 2, Rep. Greg Walden (R-OR), Chairman of the Energy and Commerce Subcommittee on Communications and Technology, and Senator Dean Heller (R-NV) took the wraps off  legislation aimed at improving regulatory process at the Federal Communications Commission (FCC).  Just how might that be accomplished? According to the bills’ sponsors, by imposing a number of procedural constraints on the Commission that would force it to act more transparently, more efficiently, and within more predictable time frames.

As we’ve previously reported, over the last several years FCC process has at times been a source of bipartisan frustration.  Concern about the absence of certainty in how – and how fast – the process will run has developed into a mini-movement to revisit agency process.  Agency practices that have given rise to this alarm include: texts of orders not being released until weeks or months after their nominal adoption; “shot clocks” for agency action that are inconsistently applied (when they exist at all); unilateral control of the Commission’s agenda being wielded by the Chairman (allowing the Chairman to prevent action on matters that a majority of Commissioners might prefer to vote).

And, perhaps, the attention of a divided Congress is more easily attracted to an agency that asserts itself into areas where its statutory authority is at best indirect and, in the eyes of some, even nonexistent (hard to believe? check out the D.C. Circuit’s 2010 Comcast decision on net neutrality).

These bills are not the first evidence of Congressional unrest in this area. Chairman Walden has repeatedly expressed an interest in improving transparency, predictability, and consistency at the FCC.  Other Republican members have been vocal in their dissatisfaction with FCC net neutrality proposals and the conduct of merger reviews.  Democrats, too, have had their say on how to best improve process, including Rep. Anna Eshoo (D-CA), sponsor of the Federal Communications Commission Collaboration Act, aimed at changing the statutory sunshine rules that some say inhibit Commissioners from interacting in the most efficient way.

The latest step has been the introduction in the House and Senate of two pairs of essentially identical bills: S.1784 (Heller) and H.R.3309 (Walden), intended by its sponsors to increase transparency and efficiency in FCC procedures; and S.1780 (Heller) and H.R. 3310 (by Rep. Steve Scalise (R-LA) with Walden as cosponsor), which would consolidate the reporting obligations of the FCC in order to improve congressional oversight and reduce reporting burdens.) Walden’s Communications Subcommittee plans to mark up the legislation on Nov 16. The sponsors have released a summary of the bills’ goals, which you can read here.

In the nitty-gritty details of the bills there are some interesting highlights. When issuing a notice of proposed rulemaking (NPRM), the Commission would have to:

  • provide comment and reply comment periods of at least 30 days each;
  • expressly identify a previous action (e.g., Notice of Inquiry, prior NPRM, court order) in the preceding three years from which the new NPRM is a “logical outgrowth”. Alternatively, the FCC could make a finding that the new NPRM will create no “additional burdens on industry or consumers” or that an NOI would be “impracticable, unnecessary or contrary to the public interest”;
  • include the specific language of the proposed rule or rule amendment; and
  • propose “performance measures” by which the effectiveness of the new/amended rule would be measured.

In adopting new rules or amending existing ones, the Commission would: first have to identify and analyze the “specific market failure, actual consumer harm, burden of existing regulation, or failure of public institutions that warrants the adoption or amendment”; and then provide a “reasoned determination” that the benefits of the proposal would outweigh its costs. Adopted rules/amendments would also have to include “performance measures” based (to the extent possible) on data already collected by the Commission.

Presumably to avoid the problem encountered particularly during the tenure of former Chairman Kevin Martin – when Commissioners complained of not receiving proposals on which they were expected to vote until immediately before the vote was to be taken – the Commission would be required to adopt rules providing for “adequate deliberation”. These would include making the text of agenda items available to the public “in advance” of open meetings.

Out of concern that existing sunshine rules may sometimes create less, not more openness, a bipartisan majority of Commissioners could hold a closed-door meeting if: there were no votes; participation is limited to Commissioners, staff, members of joint boards or their staffs; and an attorney from the Commission’s General Counsel is present.

To prevent a Chairman from unilaterally, and indefinitely, withholding proposals from a vote, the bills would require new FCC procedures allowing a “bipartisan majority” of Commissioners to: direct the staff to prepare draft orders for Commission vote; and then to put such drafts on the agenda for decision.

The Commission would have to develop deadlines for resolving any and all types of requests for FCC action. While the bills provide no guidance as to any particular time periods the sponsors might have in mind, the fact is that any deadlines would likely be preferable to the current situation, where virtually no internal processing deadlines exist at all.

The Commission’s ability to impose conditions on transactions (e.g., assignments of license or transfers of control) would be narrowed substantially. Such conditions would have to be “narrowly tailored to remedy a harm that arises as a direct result of the specific transfer or specific transaction”. Perhaps more importantly, the Commission could impose a condition only if it could impose such a requirement “under the authority of a specific provision of law”. This is presumably directed to the FCC’s recent inclination to achieve indirectly, through “conditions”, goals that it could not achieve directly through regulation. This limitation would apply as well to supposedly “voluntary” commitments made by parties seeking FCC approval. This practice was evident in the approval of the NBC/Comcast merger, where NBC/Comcast agreed to a number of “voluntary” commitments that the Commission itself did not have the authority to impose.

The bills would also require the Commission to prepare a number of reports on various aspects of its operations, including the status of pretty much anything pending before the Commission at any time. A new report, to be submitted to Congress every other year, would broadly assess the state of competition in the “communications marketplace”, a marketplace encompassing any and all communications technologies.

These are broad proposals that would substantially alter, if not the way the current FCC conducts much of its business, then the way future Commissions are required to do business. The prospects for passage are far from clear – and the November 16 markup should further clarify the bill’s level of support – but the fact that that process has been formally initiated should send a clear message to the FCC that change may be on the way.

Enforcement Shot Clocks - Tick Tick Tick . . .

Statutes of limitations apply to FCC enforcement actions

Let’s say you’re a licensee on the wrong end of one (or more) of the several hundred thousand (or more) complaints sitting in piles in the Enforcement Bureau, awaiting some kind of action. You might be frustrated by the glacial pace of the FCC’s processes – after all, many of those complaints have been pending for years. 

But wait – there may be a silver lining to that slow-moving dark cloud hanging over you. 

Federal law – 28 U.S.C. §2462, if you care to look it up – requires that lawsuits to enforce a civil fine, penalty or forfeiture be initiated within five years after the underlying claims accrue. In other words, if the government’s got a claim against you, they’ve got five years to use it or lose it. The good news is that this “statute of limitations” could shield you from financial penalties even if the FCC eventually decides that you violated FCC rules.

Much of the credit for this potential benefit goes to the byzantine procedural maze the FCC must navigate before it can even start to think about suing a broadcast licensee.

The process generally starts when the Commission receives a complaint about an alleged rule violation, or possibly turns up a violation on its own during a field inspection. 

The first step is for the Commission (or one of its Bureaus) to issue a Notice of Apparent Liability (NAL) describing the alleged violation and proposing a penalty amount. The NAL gives the licensee a chance to tell its side of the story. If that story doesn’t convince the Commission to back off (and it almost never does), the next step is a Forfeiture Order recapitulating the facts, addressing any arguments raised in the licensee’s response to the NAL, and ordering payment of the fine within 30 days. 

Just because the FCC “orders” a licensee to pay, the licensee doesn’t have to pony up. Instead, it can sit back and do nothing, and the FCC cannot hold that against the licensee. Rather, the burden is then on the Commission to refer the matter to the Department of Justice (DoJ) to sue the licensee for the amount of the fine. And get this – the trial is what they call “de novo”, which means that the burden is on the government to go back to square one and prove that the licensee really did violate the rules. The licensee, in turn, gets to challenge every element of the FCC’s case. 

Obviously, this multi-step process tends to drag on, with extended delays possible at each step of the way. The final step – i.e., convincing DoJ to sue – is often the ultimate roadblock, since DoJ tends to have better things to do with its scarce litigation resources than to file nickel-and-dime lawsuits for petty violations of obscure regulations.

Working against the FCC all along the way are two statutes of limitations.

The first limits the time within which the FCC may issue an NAL. The Communications Act (47 U.S.C. § 503(b)(6)) specifies that the FCC cannot issue an NAL for conduct which occurred either (a) more than one year prior to the NAL or (b) prior to the commencement of licensee’s current license term, whichever is earlier. The first aspect of that limit – the one-year cap – is straightforward. The second aspect not so much. A licensee’s “current” license term extends until its next renewal application is granted. That means that the FCC can avoid the one-year limit on NALs simply by sitting on the renewal applications of stations against which complaints have been lodged. Stations caught in that posture are said to be subject to an “enforcement hold” on their renewals. This happens routinely, as many TV licensees targeted by, e.g., indecency complaints can attest.

The second limit is the five-year bar imposed by 28 U.S.C. §2462, mentioned above.

Importantly, it appears that that five-year limit counts down irrespective of any procedural devices (for instance, “enforcement holds”) the FCC may deploy to keep the ball in play. That is, while Section 503 may enable the FCC to delay indefinitely the issuance of an NAL, Section 2462 does not appear to be so forgiving. So while the FCC dilly-dallies with its own processing of alleged violations, the clock is still running against the government’s ability to collect even if a violation is ultimately found to have occurred.

All of this should be of interest to any licensee whose renewal application happens to have subjected to an “enforcement hold” arising from a pending complaint (or a violation which the licensee itself reported in its most recent renewal application). Licensees in that situation might want to get out the calendar and start counting the years. Even if the FCC may have tried to keep its options open by not granting the renewal application, the five-year limit in Section 2462 might still pull the rug out from under the Commission.

The first question is: when does that five-year period start for purposes of the statute of limitations? That’s not cut-and-dried. At least one federal court of appeals has assumed that the five-year period begins when the violation occurs – for example, when the allegedly indecent material is broadcast by the target station. An alternate possible starting point would be the date on which the Commission officially learned of the possible violation (by, e.g., receiving a complaint or inspecting the station). 

Unfortunately, the date for calculating the start of the five-year Section 2462 limitation in the context of FCC enforcement actions has not been definitively identified by any court, yet. But while it’s possible that the creative minds at the Commission could conceivably come up with some other alternatives, the two described above are the most obvious. And, indeed, the Enforcement Bureau seemed tacitly to suggest in a couple of high profile indecency forfeiture cases in 2008 (i.e., the “Married by America” and “NYPD Blue” proceedings) that the five-year statute of limitations period begins running on the date of broadcast.

The question has recently been teed up by several licensees who were targeted back in May with five-digit fines for alleged children’s television violations. (We described the NALs in the May, 2010, Memo to Clients.) The licensees have asked that the FCC rescind the NAL’s issued because the supposed violations occurred more than five years ago and were reported to the FCC in the licensees’ respective renewal applications, all of which were filed more than five years ago. The argument is clear: if, because of the passage of time and the operation of Section 2462, the FCC can’t in any event collect any fines even if the violations did occur, then no purpose is served by issuance of an NAL (or Forfeiture Order) at this point. We’ll keep an eye on how that argument fares and report back as developments warrant.