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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** IIBefore the IIIFederal Communications Commission IVWashington, D.C. 20554 V In the Matter of ) ) VI Notice of Apparent Liability ) ) VII PREFERRED ENTERTAINMENT, INC. ) File No. 920EF0027 ) VIII Licensee of Point-to- Point Microwave ) IX Stations WPJA878, WPJB917, WPJC516, ) X WPNA242 and WPNB782, Chicago, Illinois ) XINOTICE OF APPARENT LIABILITY FOR FORFEITURE Adopted: May 21, 1999 Released: May 25, 1999 XII By the Commission: XIIII.INTRODUCTION XIV 1. The Commission has before it the results of an investigation by the Wireless Telecommunications Bureau's Enforcement and Consumer Information Division into apparent misconduct by Preferred Entertainment, Inc. ("Preferred"). By this Order, we find Preferred apparently liable for forfeiture in the amount of $100,000. For the reasons stated below, we conclude that Preferred apparently violated Section 301 of the Communications Act of 1934, as amended, and Section 101.5(a) of the Commission's Rules, by operating 21 unlicensed microwave paths and two unlicensed frequencies on a licensed microwave path for periods ranging from one month to 21 months. XV II.BACKGROUND III 2. Preferred operates a wireless cable television system in Chicago, Illinois. Preferred uses FCC licensed Private Operational-Fixed Service ("OFS") microwave facilities for service transmission to multiple dwelling units where its service is then disseminated over cable to individual users. Preferred states that on March 13, 1998, the company's management and outside counsel determined that it was operating numerous unlicensed OFS microwave paths. On March 13, 1998, Preferred began an investigation to determine the scope of the company's unlicensed microwave operations and on March 23, 1998, disclosed its unlicensed microwave operations to the Commission in the following filings: IV (a) applications for authority to transmit from four licensed transmitter sites to ten unlicensed receive sites; V (b) applications for authority to transmit from two unlicensed transmitter sites to five unlicensed receive sites; and VI (c) an Emergency Request for Special Temporary Authority to transmit to an unlicensed receive site and on two unlicensed frequencies to two authorized receive sites. VII VIII 3. After the March 23, 1998 filings, Preferred audited its FCC licensing files and conducted a site-by-site inspection of its microwave facilities and determined that it was operating five additional unlicensed microwave paths. On May 22, 1998, Preferred disclosed these five unlicensed paths to the Commission in two Emergency Requests for Special Temporary Authority. IX III.DISCUSSION X A. Preferred's Unlicensed Microwave Operations XI XII 4. In response to a Commission inquiry regarding Preferred's unlicensed microwave operations, Preferred states that in September 1996, the employee responsible for its FCC licensing, James Yard, was reassigned to develop a digital high-speed Internet product. Preferred claims that its licensing irregularities were "primarily the result of Mr. Yard's reassignment . . . ." Twenty-one of Preferred's 23 licensing violations post-date Mr. Yard's reassignment. Preferred acknowledges that "Mr. Yard did not take sufficient steps to ensure" proper FCC licensing following his reassignment. The company states that "Mr. Yard's absence from the frequency coordination and licensing process resulted in miscommunications and mistakes that led to activation of microwave links without appropriate FCC authorization." XIII 5. During the period of the company's licensing violations, three Preferred employees had primary responsibility for FCC licensing. Two licensing violations commenced during Mr. Yard's tenure. Andrew Flessner, a Microwave Network Technician, assumed Mr. Yard's FCC licensing duties in September 1996 and left Preferred on August 14, 1997. Fifteen licensing violations commenced during Mr. Flessner's tenure. Guy Walker, Mr. Flessner's supervisor and then Preferred's Operations Manager, assumed responsibility for FCC licensing upon Mr. Flessner's departure. Mr. Walker left Preferred seven months later in March 1998. Six licensing violations commenced during Mr. Walker's tenure. Mr. Walker's FCC licensing responsibilities were assigned to Paul McCarthy, Preferred's current Operations Manager. XIV 6. Preferred states that the company did not intend to operate unlicensed microwave links. It states that the employees responsible for FCC licensing incorrectly assumed that Preferred's requests for frequency coordination were regularly forwarded by its frequency coordinator, Comsearch, to the company's FCC's counsel and that timely FCC filings were being made. Preferred's personnel turnover, its employees' faulty assumptions about the actions of the company's frequency coordinator and its FCC counsel, and the company's failure to properly train and supervise employees responsible for FCC compliance do not absolve its violations of Section 301 of the Act and Section 101.5(a) of our Rules. We therefore find Preferred apparently liable for such violations. XV B. Forfeiture Amount XVI 7. Under Section 503(b) of the Act, 47 U.S.C.  503(b), a forfeiture can be imposed against any applicant or licensee that willfully or repeatedly fails to comply with any section of the Communications Act or a Commission Rule. For purposes of Section 503(b), the term "willful" means that the violator knew it was taking the action in question, regardless of whether it intended to violate the Act or Rule in question. Pursuant to that definition, we conclude that Preferred willfully violated Section 301 of the Act and Section 101.5 of our Rules 23 times by operating 21 microwave paths and two microwave frequencies, as described above, without Commission authorization. 8. Violations of Section 301 of the Act and Section 101.5(a) of our Rules undermine the integrity of the Commission's licensing process. Preferred committed 23 separate "continuing violations" under Section 503(b) of the Communications Act ranging from one month to nearly two years. The Commission may consider each day of a continuing violation as a separate violation for purposes of computing a forfeiture. The Commission's Forfeiture Guidelines provide a base amount of $10,000 for operation without an instrument of authorization for the service and a base amount of $4,000 for using an unlicensed frequency. Preferred is subject to a statutory maximum forfeiture of $75,000 for each continuing violation. Because of the substantial number and long duration of the violations described above, we believe that an assessment of a base forfeiture amount of $200,000 is appropriate here. XVII C. Mitigation 9. Preferred has, however, requested reduction of any forfeiture imposed in this proceeding. In determining the amount of a forfeiture penalty, the Commission is required to consider "the nature, circumstances, extent, and gravity of the violation and, with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and other such matters as justice may require." We exercise our discretion to reduce the forfeiture amount taking into consideration the following factors. First, there is no evidence that, prior to committing the violations that are the subject of this Notice, Preferred failed to comply with FCC licensing requirements. Second, upon discovery of its licensing irregularities Preferred's management acted swiftly to prevent further problems and adopted policies and procedures designed to ensure compliance with our licensing Rules. Third, Preferred voluntarily disclosed its unlicensed operations to the Commission and contemporaneously applied for authority to operate the microwave facilities. We also consider Preferred's ability to pay any forfeiture. We believe that a reduction of the forfeiture from $200,000 to $100,000 appropriately reflects the factors to be considered under Section 503(b)(2) of the Act, including the nature, circumstances, extent and gravity of the violations. In determining the amount of the forfeiture, we also have taken into consideration the Commission's Guidelines for Assessing Forfeitures and all materials submitted by Preferred. IV. CONCLUSION 10. ACCORDINGLY, pursuant to Section 503(b) of the Communications Act of 1934, as IV amended, 47 U.S.C.  503(b), and Section 1.80 of the Commission's Rules, 47 C.F.R.  1.80, PREFERRED ENTERTAINMENT, INC. IS HEREBY NOTIFIED OF ITS APPARENT LIABILITY FOR FORFEITURE in the amount of one hundred thousand dollars ($100,000) for V its apparent willful and repeated violation of Section 301 of the Communications Act of 1934, as amended, 47 U.S.C.  301, and Section 101.5(a) of our Rules, 47 C.F.R.  101.5(a), as described above. VI 11. IT IS FURTHER ORDERED, pursuant to Section 1.80(f)(3) of the Commission's Rules, 47 C.F.R.  1.80(f)(3), that within thirty (30) days of the release date of this Notice, Preferred Entertainment, Inc., SHALL PAY the full amount of the proposed forfeitureor, pursuant to Section 1.80(j)(3) of the Commission's Rules, 47 C.F.R.  1.80(j)(3), present additional evidence showing why a forfeiture should not be imposed or why the amount should be adjusted downward. Upon receipt of such evidence, we will consider all relevant factors VII 12. IT IS FURTHER ORDERED that a copy of this Notice shall be sent by Certified Mail, Return Receipt Requested to Preferred Entertainment, Inc., 6260 Joliet Road, Countryside, IL 60525-7428. VIIIFEDERAL COMMUNICATIONS COMMISSION IX Magalie Roman Salas X Secretary