Inadvertent errors in applications draw $20K fine for Cricket
FCC enforcement procedures continue to baffle us.
Take the case of Cricket Communications. They are a cell phone company, as you probably know – their ads are hard to miss. To move their phone traffic from place to place, they operate dozens of microwave stations. The FCC rules require licenses for these. If you want one, you have to apply for it, but you need not wait for the license to be granted. Rather, you can begin operating as soon as the application is filed, assuming certain conditions are met. Once the FCC does grant the license, the licensee has 18 months to get its station built and on the air (if it isn’t already), and has 15 days beyond that to certify to the FCC that it has done so. Without that certification, the license cancels automatically.
Cricket had trouble with two of its microwave licenses.
As to one, it filed the construction certification on time, stating it had built the station within the 18 months allowed. But it later found the certification was in error, and had to amend. The new certification showed it had built and begun using the station much earlier, before it had even filed the license application. That amounts to unauthorized operation, which is a violation of FCC rules.
As to the other license, Cricket got the contents of the construction certificate right the first time. But it filed the certificate late, after the 18-months-plus-15-days had elapsed. And this certificate likewise showed that operation had commenced before the application was on file.
The Enforcement Bureau has proposed a fine of $20,000, which is exactly the expected penalty for two instances of unauthorized operation.
That should be the end of the story.
But the Bureau did not stop there. Rather than just cite Cricket for unauthorized operation, it charged Cricket with filing inaccurate information in three instances: the initially incorrect construction certificate, and the two earlier applications that failed to disclose the stations were already operating. The FCC accepted that the slip-ups were inadvertent. But it went on to explain that an inadvertent error is just as actionable as an intentional falsehood. [For more on the difference between intentional misrepresentation and inadvertent inaccuracy, see the endnote, below.]
The accusation of misrepresentation, however inadvertent it might have been, enabled the Bureau to throw around big numbers. The recommended “base” fine for misrepresenting a fact to the FCC is the maximum dollar amount the FCC could assess against Cricket for any offense, including the most heinous. The Bureau asserted it could fine Cricket $150,000 for each violation, or each day of a continuing violation. Get out the calculator. The first construction notice went uncorrected for 31 days, which exposes Cricket to a total of $4.65 million. Factoring in the alleged omissions from the two applications, on a per-day basis, brings the numbers up past $160 million. In practice the FCC rarely imposes per-day fines, but the rules permit it.
Multi-million dollar numbers are obviously out of line with what actually happened. The Bureau must think so. It decided, based on all the facts and circumstances – but with no other explanation – that the appropriate base fine here is $25,000. Then, noting that Cricket had voluntarily disclosed the mistake and moved to fix it, the FCC reduced the fine to $20,000. As we noted, that is the recommended amount for two counts of unauthorized operation.
Back where we started. Since the FCC’s accusation of inaccurate statements had no effect on the outcome, why should anyone care?
The FCC cited Cricket both for (a) unauthorized operation and (b) filing inaccurate information about its operation. If a miscreant knew it had done something wrong and, when asked, chose not to disclose it, the failure to disclose might constitute a second and separate transgression. Here, though, Cricket apparently did not know about the problem when it filed the incorrect papers; once it found out, it promptly owned up and fixed the problem. To charge the company for both its initial unauthorized operation and for its initial reporting mistake, before it learned of the mistake, is unreasonable.
The other problem here is numerical. A separate charge of failure to disclose can escalate a reasonable penalty into the realms of the outrageous. While the FCC did not impose a fine against Cricket in the millions, it did lay out a legal rationale for doing so. And it remains free to invoke that same rationale against someone else.
The FCC places a host of obligations on its licensees. Responsible licensees – and most of them are – struggle mightily to comply. They hire regulatory personnel, retain lawyers and consulting engineers, and conduct regular audits. Even so, errors do slip through. Sanctions are appropriate, in those cases – certainly for a substantive offense, like unauthorized operation, and also for deliberate falsifications, such as lying about qualifications for a license.
But unintentionally wrong information is different. It can cover a wide range: from harmless typos to, say, understating the height of a tower that in fact creates an air traffic hazard. Where the misstatement is merely incident to another offense, as was the case here, it should not play any part in figuring sanctions. In other cases, the fine should bear some sense of proportion to the degree of harm that the error might cause. And the rules should so provide. There should be no talk of $150,000 per day for an unknowing paperwork foul-up that triggers its own sanction. Letting the FCC staff arbitrarily pick numbers out of the air, with no explanation at all, has no place in a well run agency.
[Endnote: The rule at issue here – Section 1.17 –as applied to Cricket, reads like this:
In any investigatory or adjudicatory matter within the Commission’s jurisdiction . . . no person subject to this rule shall . . . (2) In any written statement of fact, provide material factual information that is incorrect or omit material information that is necessary to prevent any material factual statement that is made from being incorrect or misleading without a reasonable basis for believing that any such material factual statement is correct and not misleading.
The misconduct identified here does not involve “misrepresentation” – what many of us know as “lying” – because that requires some element of deceit. No showing of deceit is necessary to trigger Section 1.17. All it takes is the filing of “incorrect” information “without a reasonable basis for believing” that the information is, in fact, correct. This seems to say that any mistake in an application could subject the applicant to a very substantial penalty, even if the mistake is purely unintentional.]