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Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of )
)
The Commission's Forfeiture ) CI Docket No. 95-6
Policy Statement and )
Amendment of Section 1.80 )
of the Rules to Incorporate )
the Forfeiture Guidelines )
REPORT AND ORDER
Adopted: June 19, 1997
Released: July 28, 1997
By the Commission:
TABLE OF CONTENTS
Paragraph No.
I. INTRODUCTION 1
II. BACKGROUND 2
III. DISCUSSION 5
A. Forfeiture versus the traditional
5
case-by-case approach
B. Proposal Modifications
9
(i) Use of the same base forfeiture amount for
similar
12
violations in different services
(ii) Revisions to the proposed base forfeiture amounts
18
C. Adjustment Factors Percentage Ranges
25
D. Other Issues 28
E. Other Matters 50
IV. CONCLUSION 53
V. ADMINISTRATIVE MATTERS 54
A. Regulatory Flexibility Analysis
54
B. Ex Parte Rules -- Permit but Disclose Proceeding
55
VI. ORDERING CLAUSES 56
APPENDICES
Appendix A. Amendment to Rules, Forfeiture Guidelines
Appendix B. List of Commenters
Appendix C. Final Regulatory Flexibility Analysis
I. INTRODUCTION
1. This Report and Order adopts an amendment to Section
1.80 of the Commission's Rules to add a note to this rule that
incorporates guidelines for assessing forfeitures. By this rule
making proceeding, we adopt, with revisions, the Forfeiture
Policy Statement and guidelines that were vacated by the court's
decision in United States Telephone Association v. FCC, 28 F.3d
1232 (D.C. Cir. 1994) (USTA).1
II. BACKGROUND
2. In 1989, Congress amended the Communications Act of
1934 (the Act) to increase substantially the maximum dollar
amounts for forfeitures that the Commission could impose under
Section 503(b) and under other sections of the Act.2
Specifically, Section 503 of the Act sets forth maximum
forfeiture amounts for violations by licensees or regulatees in
three categories: broadcasters and cable operators
("broadcast"), common carriers ("common carrier"), and other
licensees, entities and members of the public that do not belong
to the previous two categories ("other").3 On August 1, 1991,
the Commission released the Policy Statement, Standards for
Assessing Forfeitures, 6 FCC Rcd 4695 (1991) (Policy Statement),
to assist both the Commission and licensees in adjusting to the
statutory increases. Prior to the statutory increases, the
Commission determined forfeiture amounts on a case-by-case basis
using relevant precedent. The Policy Statement modified this
approach by establishing base forfeiture amounts for a wide range
of violations. The base forfeiture amount for each type of
violation was calculated as a percentage of the statutory maximum
for the service involved for each violation or each day of a
continuing violation as set forth in Section 503(b). The
guidelines further provided that the base forfeiture amount could
be increased or decreased by the adjustment criteria that
corresponded to the statutory factors that the Commission is
required to consider in assessing a monetary forfeiture penalty.
47 U.S.C. ' 503(b)(2)(D).4 To determine the degree of the upward
or downward adjustment, the guidelines recommended percentage
ranges for each adjustment criterion.
3. On reconsideration, petitioners argued that the Policy
Statement was invalid because it was a substantive rule adopted
without notice and comment rule making procedures required by the
Administrative Procedure Act and not a general statement of
policy. See 5 U.S.C. ' 553. The Commission disagreed, noting
that the Policy Statement expressly stated that the Commission
retained discretion in individual cases and did not consider the
Policy Statement a binding rule. Policy Statement
Reconsideration Order, 7 FCC Rcd 5339 (1992), denying
reconsideration of 6 FCC Rcd 4695 (1991). In 1993, after
reviewing how the Policy Statement functioned in practice, the
Commission made several modifications to the Policy Statement to
ensure both consistency and flexibility in applying the
forfeiture amounts and adjustment criteria in individual cases.
Again the Commission reiterated that it retained discretion to
deviate from the guidelines in specific cases. 1993 Policy
Statement, 8 FCC Rcd 6215 (1993), (1993 Policy Statement). In
1994, the United States Court of Appeals for the District of
Columbia Circuit vacated the Policy Statement (including the
reconsideration order and 1993 Policy Statement), on the ground
that it was a rule promulgated without notice and comment and
therefore invalid. United States Telephone Association v. FCC,
28 F.3d 1232 (D.C. Cir. 1994). Following the court's decision,
the Commission and its staff returned to determining forfeiture
amounts on a case-by-case basis, using the statutory factors set
forth in Section 503(b) of the Act.
4. In the Notice of Proposed Rule Making (NPRM),5 we
followed the court's requirement that the Commission's forfeiture
policy statement be put out for notice and comment. We proposed
to adopt the same forfeiture guidelines set out in the original
Policy Statement, but requested comments on all aspects of that
proposal. In addition, we requested specific comment on the
following issues:
A. Whether the Commission should use guidelines to assess
forfeitures instead of the traditional case-by-case approach;
B. Whether the guidelines proposed in the notice of proposed
rule making should be modified;
C. Whether adjustment factor ranges should be adopted.
Additionally, we sought comment on our proposal to apply any
newly adopted Forfeiture Policy Statement and guidelines to all
pending forfeiture proceedings which were initiated after the
effective date of the Forfeiture Policy Statement. We received a
total of 17 comments, 1 informal comment, and 8 reply comments in
response to the NPRM.6
III. DISCUSSION
A. Forfeiture versus the traditional case-by-case approach
5. In general, most commenters supported the concept of a
guideline-based forfeiture system rather than a case-by-case
approach in assessing forfeitures. Ten commenters and one reply
commenter explicitly or generally supported the concept of a
guideline-based forfeiture system: ARRL at 9-11; Bell Atlantic
at 4; MCI at 1; USTA at 1; Infinity at 2; MariTEL at 5; PageNet
at 7-10; AMTA at 3; PCIA at 1; Southwestern Bell at 2; Motorola
at 1. In particular, MCI Telecommunications Corporation (MCI)
noted that a schedule of fines with discretionary adjustment
ranges should translate into public benefit through fair and
prompt resolutions of violations. MCI Comments, 1. The United
States Telephone Association (USTA) also indicated that
forfeiture guidelines can contain information that may deter
violations of important rules and assist the Commission in
developing priorities among different violations. USTA Comments,
2. One commenter supported the case-by-case approach simply
because it believed the Commission could not oversee a procedure
that encompassed both flexible guidelines and staff discretion.
Brown and Schwaninger Comments, 2. Three commenters raised
specific concerns about the potential adverse effect that the
guidelines may have on businesses and their goal to provide
universal services, and claimed that forfeiture guidelines would
thus be inconsistent with Section 303(r) of the Act, 47 U.S.C. '
303(r), which provides the Commission with broad rule making
authority to further the public interest, convenience and
necessity. Emery et al.7 at 6. Emery et al. suggest that the
Commission not proceed with this rule making because the
Republican Party's "Contract with America" imposes a moratorium
on all rule making. Thus, Emery et al. contend that the issuance
of any rules would be invalid and contrary to the express wishes
of Congress. See Emery Comments, 9. An informal commenter, Mr.
William L. Dougan, stated that the guidelines and forfeitures
violate the United States Constitution because he cannot get a
license for low power operation on FM frequencies. Letter from
William Dougan to Secretary, FCC, April 4, 1995, at 1- 2. San
Bernardino Coalition of Low Power FM Broadcasting (San
Bernardino), which also favors a registration program. See San
Bernardino Reply Comments, para. 14.
6. We have considered the specific concerns raised by some
of the commenters regarding the Commission's exercise of its
discretion under a guideline-based system. We are satisfied that
our procedures, as set out in paragraphs 25 and 26, will allow
the Commission to apply its guidelines in a consistent and fairly
uniform manner, while retaining discretion to look at the
individual facts and circumstances surrounding a particular
violation. We have also addressed the concerns raised by Emery
et al. regarding the effects of the proposed base forfeiture
amounts on the provision of universal services. We have devised
a forfeiture policy that does not make any distinctions among the
various common carriers (see discussion in paragraphs 13, 14 and
15). Specifically, the procedures set out in paragraph 25 are
sufficient to provide the subject of an NAL with consideration of
any mitigating factors that should be considered prior to
imposition of a final forfeiture. We also do not believe our
forfeiture guidelines will undercut universal service objectives
of the Act. We also note that the moratorium mentioned by Emery
et al. was not enacted into law. With respect to the concerns
raised by Emery et al. however, we note that Congress enacted
legislation that provides an opportunity for Congressional review
of all major rules promulgated by agencies. The Contract with
America Advancement Act of 1996, Pub. L. No. 104-121 ' 110 Stat.
847 (1996).
7. We reject the constitutional objections to the
guidelines or to the adoption of any policy statement as raised
by Mr. Dougan or San Bernardino. The Commission may, consistent
with the First Amendment, impose forfeiture penalties for
violations of its licensing rules, even when its licensing scheme
does not provide for certain types of transmissions. See
National Broadcasting Co. v. United States, 319 U.S. 190, 209-217
(1943).
8. We therefore agree with the commenters that adoption of
forfeiture guidelines is warranted. Guidelines will provide the
needed measure of predictability to the process and uniformity to
our administrative sanctions while retaining flexibility for the
Commission to act appropriately in particular cases. For this
purpose, we hereby adopt a base forfeiture amount structure that
will serve as a guideline for determining forfeiture liability
amounts for specific violations of the Act and the Commission's
Rules. As was our intent with the prior Policy Statement, these
guidelines will not be binding on the Commission, the staff or
the public. We retain discretion to take action in specific
cases as warranted.
B. Proposal Modifications
9. Many commenters concluded that, although guidelines are
beneficial to the forfeiture process, the guidelines as proposed
were not rational and equitable.8 The National Association of
Broadcasters (NAB) along with several common carriers, both
wireline and wireless, including MCI, Southwestern Bell Telephone
Company (Southwestern Bell), MobileMedia Communications
Incorporated (MobileMedia), USTA, Personal Communications
Industries Association (PCIA), WJGMariTEL Corporation (MariTEL),
and Paging Network (PageNet), urged the Commission to consider
modification of the vacated schedule of forfeitures.9 Commenters
further contended that many of the assumptions underlying the
forfeiture guidelines are outdated. For example, MobileMedia
stated that a Further NPRM was needed because Commercial Mobile
Radio Service (CMRS) licensees and Personal Communication Service
(PCS) licensees were not in existence when Congress increased the
statutory forfeiture amounts and were not mentioned by the
Commission in the instant NPRM. MobileMedia Comments, 2-3.
10. American Mobile Telecommunications Association,
Incorporated (AMTA), echoing comments submitted by Southwestern
Bell, noted that as "service offerings merge among various
classes of licensees, these widely-differing base amounts no
longer make regulatory sense, nor do they reflect the
Commission's goal of regulatory parity."10 In the face of
convergence of the cable TV and telephone industries,11 Bell
Atlantic contended that "[a]s competition among the various
industries accelerates, the legal requirements of providing
balanced incentives coincide to dictate that the penalties be set
based on the nature of the offense, and not the identity of the
transgressor." Bell Atlantic Comments, 3-4. In addition,
commenters urged the Commission to consider new ways to implement
a policy rather than merely proposing the same guidelines that
the court rejected. In implementing any guidelines, commenters
asked the Commission to address or clarify how the guidelines
affect issues such as the use of different base amounts for
similar violations in different services,12 the use of different
statutory maxima to justify different base amounts,13 the use of
upward and downward adjustment factors,14 the method for
ascertaining ability to pay a forfeiture, and the weight to be
given to a previous violation in subsequent enforcement or
transactional proceedings involving the same licensee. 15
11. Inasmuch as the NPRM in this proceeding asked for
comments on all aspects of the Commission's forfeiture policy,
including the "other" category, and given that CMRS and PCS are
both common carrier services, we believe that a Further NPRM
concerning the need to include new services is unnecessary.16
Upon review, however, we are persuaded that the guidelines should
be revised. The following paragraphs discuss the two main
revisions that we have made to the proposed guidelines and the
reasons for these revisions.
i. Use of the same base forfeiture amount for similar
violations in different services.
12. Most commenters objected to the proposed system of
imposing different base forfeiture amounts for similar violations
depending upon the service provided by the violator.17 They
argued this structure was arbitrary because the Forfeiture Policy
Statement failed to provide an explanation for the different base
forfeiture amounts.18 USTA pointed out that the court found that
the Commission did not provide any rationale for this action.19
Other commenters pointed out that the availability of mitigating
factors did not remedy the Commission's error in not providing a
reasoned analysis for the different base forfeiture amounts among
services. See, e.g., Emery Comments, 17; USTA Comments, 4, n. 3.
They also argued that neither the language of the 1989 statutory
amendment nor its legislative history provided support for the
Commission's action establishing different base forfeiture
amounts for each service, or higher base forfeiture amounts when
the violation occurs in a service that has a higher maximum.
Commenters argued that in setting different forfeiture amounts
based on the identity of the violator rather than the nature of
the violation, the Commission violated basic and fundamental
principles of regulatory parity. See e.g., MCI Comments, 3.
Several commenters also pointed out that, with upcoming changes
in ownership rules and the technical and legal ability of
different licensees to provide the same type of communication
service, implementing different base amounts as proposed would
result in dissimilar forfeiture amounts for similar violations
based solely on the identity of the licensee providing the
service. PageNet Comments, 2-3; Southwestern Bell Telephone
Company (Southwestern Bell) Comments, 3; Bell Atlantic Comments,
3-4. Bell Atlantic argued that, contrary to the Commission's
assertions in the NPRM, adoption of the forfeiture schedule as
proposed would not "allow for comparable treatment of similarly
situated offenders," but would levy forfeitures against common
carriers that are four times the amount levied against broadcast
or cable TV companies for the same or similar violations. Bell
Atlantic Comments, 2-3.
13. Some common carriers, including commercial mobile radio
service providers argued that the Commission has no basis for
imposing higher forfeitures for common carrier violations.20
Emery et al. argued that the 1989 statutory change only creates a
higher statutory maximum for common carriers, and no legislative
history or language in the statute supports the Commission's
proposal that common carriers be treated more severely than
broadcasters. They also contended that adoption of a forfeiture
policy which made no distinctions between large and small common
carriers would also violate the Commission's mandate and
fundamental purpose as stated in Section 1 of the Act: to
promote communications services and competition.21
14. In light of the problems outlined, most of the
commenters suggested that the Commission implement a uniform
forfeiture system, imposing fines according to the nature of the
violation rather than the type of violator. In the alternative,
if the guidelines must be based on the type of violator as well
as the nature of the violation, several commenters propose that
the Commission make distinctions among the types of violators
(e.g., large common carriers versus small CMRS) within a group of
licensees that provides the same type of communication service.22
Some commenters suggested that the guidelines be based on the
degree of injury or harm rather than a percentage of the maximum
amount. Emery et al., for example, urged the Commission to look
at the various approaches it took prior to implementing the
Forfeiture Policy Statement. It argued that the amounts imposed
were more reasonable because less serious violations were
assessed on a flat-rate approach and serious violations involving
aggravating circumstances were assessed the per diem statutory
maximum, which was then no more than $2,000. 23 Two commenters
even suggested that one base amount be used for all violations,
as was done with tower lighting and marking violations. 24
15. While we continue to believe that our prior approach
was lawful, we have determined that it would be a fairer approach
for the forfeiture guidelines to adopt uniform base forfeiture
amounts for similar violations regardless of the nature of the
service involved. We believe that this decision is fully
supported by the record established by the commenters, and will
result in a generally fairer approach to forfeiture proceedings
in most cases.
16. Our decision reflects consideration of the issues of
fair treatment raised by several commenters. First, we reviewed
the recommendation made by several commenters that CMRS and other
services not mentioned in the original Policy Statement be
treated in the "other" category rather than in the "common
carrier" category.25 Although Section 332 provides that CMRS
licensees are common carriers under the Act,26 these commenters
argued that it is unfair to now impose higher base forfeiture
amounts when these entities would receive smaller fines under the
earlier Policy Statement as private carriers that were in the
"other" category. MariTEL Comments, 3. Alternatively, if the
Commission does not treat them as belonging to the "other"
category, CMRS commenters argued that a new category should be
created for these services. We find this argument unpersuasive.
Section 332(c)(1) requires that CMRS providers will be treated as
common carriers for purposes of the Act.27 Accordingly, CMRS
providers will be treated as common carriers for purposes of
Section 503 of the Act and our forfeiture guidelines. As a
second issue of fair treatment raised in this proceeding, PageNet
contends that the proposed forfeitures did not address the
discriminatory effect that would result against Radio Common
Carrier (RCC) paging carriers because they are licensed on a
transmitter basis rather than a market basis as are Personal
Communications Service (PCS) licensees. PageNet Comments, 2.
We believe, however, that this concern relates to licensing
procedures that are not within the scope of this rule making
proceeding.
17. We recognize that Congress established different
statutory maxima for broadcasters and for common carriers than
for other persons who violate our rules. We believe this
permits, but does not require, a forfeiture schedule that
distinguishes among these categories of entities. As discussed
below (see para. 24), however, we believe that there are better
ways to achieve Congress's explicit intention that forfeitures
serve as "a meaningful sanction to the wrongdoers and an
effective deterrent to others." see Omnibus Budget Reconciliation
Act of 1989, H.R. Conf. Rep. 386, 101st Cong., 1st Sess., 434
(1989).
ii. Revisions to the proposed base forfeiture amounts.
18. The majority of commenters took issue with the base
forfeiture amounts. Some commenters suggested that the amounts
proposed for each violation were unreasonably high, did not deter
violations, evidenced a punitive rather than a remedial purpose,
and only served to hinder entities who were often unaware of the
regulatory requirements.28 In particular, Emery et. al. argued
that the proposed base forfeiture amounts of 40-80 percent of the
statutory maxima were contrary to the Commission's history of
assessing reasonable forfeitures to ensure substantial compliance
by licensees and therefore, the amounts should be reduced. In
support, they noted that common carrier forfeitures issued before
the statutory increase were seldom more than 25 percent of the
maximum, and that forfeitures assessed after the statutory
increase but before the implementation of the prior policy
statement were no more than 0.5 percent of the new one million
dollar maximum. Emery Comments, 11-12. NAB and MCI also agreed
that the base amounts suggested in the proposed forfeiture
guidelines were too high and should be reduced by 50 percent with
the exception of tower safety violations. NAB Comments, 5; MCI
Reply Comments, 3.
19. The legislative history of Section 503 of the Act
demonstrates that, Congress recognized the need to authorize the
Commission to impose forfeitures sufficiently high to deter
violations and constitute a meaningful sanction when violations
occur. Specifically, in 1978, Congress increased the
Commission's forfeiture authority, stating:
The maximum amount of forfeitures permitted for single
and multiple violations is unrealistically low to be an
effective deterrent for highly profitable
communications entities or to provide sufficient
penalty to warrant the Attorney General's or the
various U.S. district attorneys' attention for
prosecuting forfeitures within the Federal district
courts.
Sen. Rep. No. 580, 95th Cong. 1st Sess. 3 (1978), reprinted in
1978 U.S.C.C.A.N. 109, 111. Similarly, in 1989, Congress
further increased the Commission's forfeiture authority stating
its intent that forfeitures "serve as both a meaningful sanction
to the wrongdoers and a deterrent to others." See H.R. Conf.
Rep. 386, at 434 (1989). We believe that the increases in our
forfeiture authority as well as the accompanying legislative
history of our forfeiture authority support our determination
that forfeiture amounts should be set high enough to serve as a
deterrent and foster compliance with our rules.
20. As noted before, however, we have also determined that
the guidelines for base forfeitures adopted here will not reflect
distinctions based on the traditional classification of
broadcast, common carrier, and other services. Consistent with
our policy of protecting the public and ensuring the availability
of reliable, affordable communications, we based the guidelines
on the degree of harm or potential for harm that may arise from
the violation. Thus, the dollar amount for the violation,
regardless of service, generally starts at the same amount. Our
experience in assessing forfeitures, however, has shown that
although the type of violation is the same, each case will
present its own unique facts. In particular, the identity of the
licensee or the nature of the service are not wholly irrelevant
to a determination of the seriousness of the harm. We cannot,
for example, say that the degree of harm resulting from a
violation of operating power limits committed by a full power
broadcast station is identical to the degree of harm resulting
from the same violation by an amateur radio operator. Nor can
we conclude that the prospect of a $10,000 forfeiture for a
particular offense will have the same deterrent effect on a small
computer vendor, a moderately-sized radio common carrier, and a
$10 billion per year local telephone company or interexchange
carrier. Accordingly, as discussed below, we will use the
adjustment factors to assess the forfeiture amount in light of
all relevant facts.
21. In order to develop base amounts that could apply to
all services, we concluded that the uniform base amounts could
not be higher than the statutory maxima for any service.
Inasmuch as the statutory maxima for broadcast, cable and common
carrier are higher than for the remaining services, the statutory
maxima for services other than broadcast, cable and common
carrier was used as the common denominator. Thus, the uniform
base forfeiture amounts generally adhere to the higher end of the
statutory maximum of $10,000, which is the maximum forfeiture
amount per violation that may be assessed against entities that
are not classified as broadcasters, cable operators, or common
carriers.29 Consistent with these parameters, the uniform base
forfeiture amounts adopted here and set forth in Appendix A
reflect reductions in most of the forfeiture amounts that were
proposed in the NPRM. We have made, however, two exceptions to
our determination to use the $10,000 statutory maximum as a basis
for establishing uniform base forfeiture amounts. First, we have
set the base forfeiture amount for misrepresentation at the
statutory maximum for the particular type of service provided by
the violator. Regardless of the factual circumstances of each
case, misrepresentation to the Commission always is an egregious
violation. Any entity or individual that engages in this type of
behavior should expect to pay the highest forfeiture applicable
to the service at issue. Indeed, the revocation of the license
may well also result from misrepresentation. 47 U.S.C. '
312(a)(1). Second, we have made an exception for violations that
are unique to a particular service. In establishing guidelines
for base forfeiture amounts for these violations, we have used
case precedent developed by the Commission since the Court
vacated the Policy Statement and, where no precedent exists, we
have determined base amounts that reflect the level of
egregiousness, based on the degree of harm, that we attach to the
particular violation.
22. We believe it is important to make the following
general observations about the base forfeiture amounts adopted
here. First, any omission of a specific rule violation from the
list set forth in Appendix A should not signal that the
Commission considers any unlisted violation as nonexistent or
unimportant. The Commission expects, and it is each licensee's
obligation, to know and comply with all of the Commission's
rules. Indeed, we believe that the rigorous enforcement of the
minimum regulatory requirements resulting from the recent
amendments to the Communications Act will become critical to the
preservation of the open competitive markets that the recent
amendments seek to create. 30 Although we have adopted the base
forfeiture amounts as guidelines to provide a measure of
predictability to the forfeiture process, we retain our
discretion to depart from the guidelines and issue forfeitures on
a case-by-case basis, under our general forfeiture authority
contained in Section 503 of the Act. See para. 24 infra.
23. Second, we note that the base forfeiture amounts set
forth in Appendix A may appear high for entities that fall within
the statutory classification of "other," for whom the statutory
maximum is $10,000 per violation. In other words, base
forfeiture amounts are indeed very close to the maximum
forfeiture that may be assessed against these entities. We
believe, however, that the system of uniform base forfeiture
amounts can be applied in a fair and equitable manner, with
respect to all licensees, permittees, regulatees, and members of
the public. Under the Act, many of the services in the "other"
category, e.g., citizen band (CB) radio, domestic ship radios and
aircraft radios are licensed by rule. See Section 307(e)(1) of
the Communications Act of 1934, 47 U.S.C. ' 307(e)(1). See also
Section 403 of the Telecommunications Act of 1996, Pub. L. No.
104 -104, 110 Stat. 56 (1996). Except for egregious violations,
it has been our general practice to issue warnings to first time
violators who are not licensed on an individual basis. Thus,
this type of violator would receive a forfeiture only after it
has violated the Act or rules despite the prior warning. We
believe that the continuation of this practice of warnings to
entities licensed by rule, except in egregious cases involving
harm to others or safety of life issues, decreases any adverse
impact that the adopted base forfeiture amounts may have on these
entities.
24. Third, on the other end of the spectrum of potential
violators, we recognize that for large or highly profitable
communications entities, the base forfeiture amounts set forth in
Appendix A are generally low. In this regard, we are mindful
that, as Congress has stated, for a forfeiture to be an effective
deterrent against these entities, the forfeiture must be issued
at a high level. See para. 19, supra. For this reason, we
caution all entities and individuals that, independent from the
uniform base forfeiture amounts set forth in Appendix A, and
pursuant to Section 503(b)(2)(D) of the Act, 47 U.S.C. '
503(b)(2)(D), we intend to take into account the subject
violator's ability to pay in determining the amount of a
forfeiture to guarantee that forfeitures issued against large or
highly profitable entities are not considered merely an
affordable cost of doing business. Such large or highly
profitable entities should expect in this regard that the
forfeiture amount set out in a Notice of Apparent Liability
against them may in many cases be above, or even well above, the
relevant base amount.
C. Adjustment Factors Percentage Ranges
25. Several commenters31 also took issue with the
Commission's guidelines for applying upward and downward
adjustment factors in determining a reasonable forfeiture amount.
They contended that under the vacated guidelines, violations were
seldom considered "minor violations" that would require
reductions of 50 percent to 90 percent of the base amount and
reductions were, therefore, illusory. For example, NAB indicated
that a downward adjustment for a minor violation should apply
when a rule encompasses multiple requirements, for example,
maintaining all necessary records in the "public files", 47
C.F.R. ' 73.1212. NAB Comments, 6-7. Additionally, some
commenters contended that forfeitures should be upwardly adjusted
only when the violator knows that it has deliberately violated
the Commission's rules. See e.g., PageNet Comments, 8.
26. We agree with the commenters that there were
difficulties associated with applying the adjustment factor
ranges. Although the percentage ranges were designed as
guidelines for adjusting the forfeiture based on the statutory
criteria, the ranges still afforded the Commission and its
Bureaus and Offices wide discretion to apply a specific
percentage within the particular range at issue. To reflect more
clearly the Commission's discretion to increase or reduce a
forfeiture penalty as much as warranted based on the unique facts
of each case, we have determined that the percentage ranges for
the upward and downward adjustment factors should be eliminated.
Thus, the Forfeiture Policy Statement and forfeiture guidelines
that we adopt herein no longer provide percentage ranges for the
adjustment factors outlined in Section 503 of the Act. (We are
also eliminating the percentage ranges for the statutory
forfeitures that are not assessed pursuant to Section 503 of the
Act, see 47 U.S.C. '' 202(c), 203(e), 205(b), 214(d), 219(b),
220(d), 223, 364, 386, 506, 554. This means that the Commission
will initially assess these violations at the statutory amount,
but can adjust downward based on the adjustment factors set out
in Section 503 and the facts of the case.)
27. Although we are eliminating the percentage ranges, we
are required by statute to consider various adjustment criteria
before determining a forfeiture amount in each case. The
adjustment criteria listed in Appendix A of the guidelines
reflect the factors outlined in the statute. For example, the
statute requires that we consider the "nature, circumstances,
extent and gravity of the violation". Thus, the adjustment
factors regarding the severity of the violation that may increase
or decrease the forfeiture are: substantial harm, repeated or
continuous violation, or substantial or economic gain derived
from the violation, and the minor nature of the violation. The
statute also requires that "with respect to the violator," we
consider factors such as "the degree of culpability, any history
of prior offenses, ability to pay, and such other matters as
justice may require." Accordingly, the adjustment factors we
evaluate in considering the actions of the violator include
egregious misconduct, ability or inability to pay, intentional
violation, prior violation of same or other requirements, good
faith or voluntary disclosure, and history of overall compliance.
47 U.S.C. ' 503(b)(2)(D). In sum, although the base amount is
the starting point in assessing a forfeiture, the forfeiture may
be decreased below the base amount or increased to the statutory
maximum when the adjustment criteria are considered based on the
facts of the case.
D. Other Issues
28. Discretion to depart from forfeiture guidelines. We
sought comment on whether the Commission should retain discretion
to depart from the guidelines in appropriate circumstances or, in
the alternative, adopt the guidelines as a binding rule. Both
USTA and Brown and Schwaninger indicated that guidelines could
not provide effective notice to licensees or result in
administrative efficiency as stated in the NPRM if the Commission
is free to exercise its discretion and deviate from those
guidelines. USTA Comments, 6; Brown and Schwaninger Comments, 2.
Brown and Schwaninger contended that the guideline system would,
in effect, become a case-by-case system, by prompting violators
to seek exemptions from the guidelines for lesser forfeiture
penalties and would invite litigation in forfeitures assessed by
staff discretion. Brown and Schwaninger Comments, 2.
29. We agree that the predictability in the forfeiture
process32 is an important objective and adherence to the
guidelines is a method to achieve this goal. Because this is
only a guideline and not a binding rule, however, the Commission
retains its discretion to depart from the guidelines where
appropriate. As for the concerns expressed by the Commenters
that the Commission's exercise of discretion will invite
litigation, we note that regardless of which method is used to
assess the forfeiture, parties who are dissatisfied with the
process have always had the right to seek reconsideration of a
forfeiture penalty before the Commission. Moreover, in a case
initiated by a Notice of Apparent Liability, the party ultimately
may be heard in a trial de novo in a district court of
appropriate jurisdiction.
30. Use of warnings for first time violations. Some
commenters suggested that the Commission adopt new enforcement
methods, including an increased use of warnings for first time or
minor violations prior to issuance of forfeitures.33 NAB, in
particular, suggested that the Commission's rule making
proceeding should look into more effective methods to obtain
compliance rather than "better ways to accomplish the goals of
developing guidelines for determining forfeiture amounts." NAB
Comments, 9.
31. As the NPRM noted, it was never our intention that the
guidelines be read to require that a forfeiture be issued in
every case or in any particular case. NPRM, at 2945. We agree
that warnings can be an effective compliance tool in some cases
involving minor or first time violations. The Commission has
broad discretion to issue warnings in lieu of forfeitures. See
47 C.F.R. ' 1.89. Nonetheless, an approach whereby, except in
cases of harm to others or safety of life, we would always issue
a warning to first-time violators would greatly undermine the
credibility and effectiveness of our overall compliance efforts.
Licensees must strive to comply with rules. Such an approach
could invite some licensees to commit first-time violations with
impunity. Thus, we will continue to determine whether to issue a
warning or assess a forfeiture based on the nature and
circumstances of the specific violation.
32. Use of the issuance of an unpaid NAL in subsequent
proceedings. Several commenters stated that the Commission's
proposed forfeiture guidelines did not indicate the purpose for
which the Commission uses pending forfeitures against a violator
in subsequent proceedings. Infinity Broadcasting Inc. (Infinity)
argued that the use of a Notice of Apparent Liability (NAL) or an
unpaid Notice of Forfeiture in a subsequent proceeding appeared
to contravene Section 504(c), which prohibits the use of a non-
final, non-adjudicated forfeiture proceeding in any other
proceeding before the Commission, and also prohibits the use of
the underlying facts of the violations to increase the amount of
subsequent forfeitures. Infinity Comments, 5-7.34 Comments from
NAB and ARRL also raised this issue.
33. Section 504 of the Act provides, inter alia that:
In any case where the Commission issues a notice of
apparent liability looking toward the imposition of a
forfeiture under this Act, that fact shall not be used,
in any other proceeding before the Commission, to the
prejudice of the person to whom such notice was issued,
unless (i) the forfeiture has been paid, or (ii) a
court of competent jurisdiction has ordered payment of
such forfeiture, and such order becomes final.
47 U.S.C. ' 504 (c).
The legislative history of Section 504(c), however, indicates
that the Commission may use the facts underlying a violation in a
subsequent proceeding. Although the Senate Commerce Committee
Report noted that the Commission could not use the pendency of a
forfeiture action prior to final adjudication against a licensee,
the report went on to say:
[S]ubsection (c) . . . is not intended to mean
that the facts upon which a notice of forfeiture
liability against a licensee is based cannot be
considered by the Commission in connection with an
application for renewal of a license, for example,
or with respect to the imposition of other
sanctions authorized by the Communications Act of
1934 . . . . [F]acts going to the fitness of the
licensee could be introduced in evidence against
such licensee notwithstanding that such facts are
the basis of an order of forfeiture.
S. Rep. No. 1857, 86th Cong., 2d Sess. 11 (1960).
34. We believe that we have faithfully implemented
congressional intent in this area. Consistent with Section 504
of the Act, the Commission does not use the mere issuance or
failure to pay an NAL to the prejudice of the subject. We
reiterate here that we will not do so in the future unless the
forfeiture penalty constitutes a final action: in other words,
unless the forfeiture has been paid or finally adjudicated as
stated in Section 504 of the Act. What the Commission has done
in the past, and what we will continue to do where appropriate,
is to use the facts underlying the prior violations that may have
been the subject of an NAL. We are persuaded that using the
underlying facts of a prior violation that shows a pattern of
non-compliant behavior against a licensee in a subsequent
renewal, forfeiture, transfer, or other proceeding does not cause
the prejudice that Congress sought to avoid in Section 504(c).
35. The following example should provide guidance as to our
use of facts underlying the issuance of an NAL. Assume that the
Commission determined that a licensee violated the Commission's
rules regarding permissible power on March 1, 1996, again on June
1, 1996, and again on October 1, 1996. Assume further that we
then issue a $5,000 NAL for the March 1 violation and a second
$5,000 NAL for the June 1 violation. In issuing an NAL for the
October 1 violation, the Commission may well view the October 1
violation as repeated or part of a pattern of violations, in
light of the earlier March 1 and June 1 violations. Thus, we may
issue an NAL for $7,500 for the October 1 violation, citing the
apparent March 1 and June 1 violations as a basis for a higher
forfeiture. The NAL for the October 1 violation is not higher
because of the two prior NALs or because the licensee has not
paid the prior forfeitures, but rather because the underlying
facts of the two prior apparent violations suggest egregious
misbehavior by the licensee. The licensee will not be required
to pay the $7,500 forfeiture without having an opportunity to
present evidence before the Commission or in court that it did
not commit the earlier violations. Obviously, if it were to
convince the Commission or a court that it had not committed
violations on March 1 and June 1, the licensee's forfeiture would
be reduced by the Commission or the court for the October 1
violation (assuming it was proven to be a first time violation)
to reflect the fact that it was not a repeated violation or part
of a pattern of violations. The Commission would have complied
with Section 504(c) because it would have used only the
underlying facts, not the existence of prior NALs, against the
licensee, and the licensee would have had the full opportunity to
present appropriate evidence before having to pay any forfeiture.
36. Under this approach, the licensee is not being hurt in
any way for its failure to pay the NAL. Moreover, the licensee
will always have the opportunity to present evidence that the
underlying facts relied on by the Commission did not constitute a
violation, either by introducing evidence to that effect in a
Commission hearing (e.g., renewal or transfer hearing) or in a
court action to collect a subsequent forfeiture that is for a
higher amount because of the earlier violations. See S. Rep. No.
1857. ("The licensee could not, therefore, complain of the
introduction of such evidence so long as he has the right to
cross-examine the witnesses introducing it and the further right
to offer evidence to rebut it").
37. Specific rule violations. Several commenters raised
concerns about the amounts proposed for specific violations.
MCI, for example, urged that the amount of forfeitures charged
for unauthorized conversions, known as "slamming" violations,
should be reduced from the $75,000 proposed in the NPRM. MCI
suggested that because these violations can easily result from
human error, there should be a separate category of violations
for "Failure to verify order to change long distance carrier."
MCI argued that, although it is critical to deter fraudulent
conversions, "it is important that the Commission not deter
telemarketing invitations altogether." See MCI Comments, 1-2.
NAB urged reductions in the amounts assessed for violations that
involve multiple compliance factors (e.g., broadcast files where
only a few documents may be missing). NAB proposed a provision
that if a licensee violates only a portion of a rule, e.g., omits
one document from the public file, the Commission will assess
only a portion of the base forfeiture amount. NAB also sought
"amnesty" from complying with the operator on duty and lottery
broadcast requirements inasmuch as the Commission has initiated
rule makings or made recommendations to Congress to eliminate
these requirements. NAB also requested amnesty for Emergency
Broadcast System/Emergency Alert System (EBS/EAS) violations
during the transition period until all equipment has been
converted. NAB Comments, 13-15. In addition, NAB urged that
amnesty be offered for violations such as exceeding authorized
antenna height, operation at an unauthorized location, and other
tower related violations that do not pose safety threats. See
NAB Comments, 11-12. Motorola agreed with NAB's amnesty
proposal, and urged that the ultimate or primary burden for tower
rules violations be placed on tower owners. Motorola Reply
Comments, 2-3.
38. We agree with MCI that the forfeiture penalty amount
proposed for unauthorized conversion of a consumer's primary
interexchange carrier should be reduced. A review of the
forfeitures issued for slamming violations since the USTA
decision indicates that the Commission has generally assessed
forfeitures at $40,000 for violations such as those in which
fraud is an issue, or in cases where the carrier's deliberate
failure to ensure that letters of authorization are valid and
properly authorized rise to the level of gross negligence. See
e.g., Excel Telecommunications, Inc., 11 FCC Rcd 19765 (1996),
Long Distance Services, Inc., FCC Rcd (1997) DA 97-956
(released May 8, 1997). Accordingly, we are reducing the base
amount for slamming to $40,000 rather than the $75,000 originally
proposed in the NPRM.
39. Regarding NAB's contention that a violation should be
reduced as minor when it is a partial violation of the rule, we
note that the forfeiture guidelines we adopt today provide
sufficient flexibility to allow for a forfeiture less than the
base amount. In this regard, we disagree with NAB's
characterization that omission of the issue/program list from the
public file is a minor violation; such a violation is serious in
that it diminishes the public's ability to determine and comment
at renewal time on whether the station is serving its
community.35 Nonetheless, even in these circumstances, we would
always look to the facts surrounding any partial violation to
determine if it warranted the base forfeiture amount or less. We
reject NAB's proposal that we decline to issue forfeitures for
violations of our operator on duty and lottery broadcast
requirements. Unless Congress amends the Communications Act to
deregulate the action in question, we will continue to issue
forfeitures for this violation, as warranted in each case.36 We
note that NAB's arguments with respect to antenna tower
violations have been largely rendered moot by the Commission's
adoption of the Report and Order, Streamlining the Antenna
Structure Clearance Procedure and Revision of the Rules
Concerning Construction, Marking and Lighting of Antenna
Structures, 11 FCC Rcd 4272 (1995). Under the new tower
registration procedures adopted by the Commission, it is tower
owners rather than licensees who will be primarily responsible
for registering towers requiring marking and lighting under the
Federal Aviation Administration guidelines. Further, in the
antenna proceeding, the Commission also granted an amnesty
period during which no forfeitures will be issued to licensees
seeking to correct existing tower records.
40. With respect to violations for technical and equipment
deficiencies resulting from changes from the EBS to the EAS, the
request for amnesty is moot for broadcasters.37 The issue of
violation of the operator on duty rule is moot because the rule
was eliminated by order released October 23, 1995. Amendment of
Parts 73 and 74 of the Commission's Rules to Permit Unattended
Operation of Broadcast Stations and to Update Broadcast Station
Transmitter Control and Monitoring Requirements, 10 FCC Rcd 11479
(1995). As to other violations for which NAB seeks amnesty for
licensees (e.g. operation at unauthorized location) we see no
public interest basis for such action.
41. Clarification of certain terms. A few commenters urged
clarification of the term "ability to pay" as an adjustment
factor. Some commenters, echoing small carriers who argued that
they should be guided by a different forfeiture scheme, noted
that the Commission's apparent definition of "ability to pay" is
limited to "gross revenues" and does not adequately consider that
many carriers provide high-cost, high-maintenance, low-profit
services to rural communities as "an adjunct" to other
operations. For this reason, they note, the revenues from more
profitable operations should not be considered when evaluating
the carrier's ability to pay.38
42. These commenters also argued that the large forfeitures
in some cases could be the equivalent of a license revocation.
They argue that "ability to pay" is based on gross revenues and
no consideration is given to operating or maintenance expenses.
A company, they argue, may be considered profitable when in fact
it is operating on the margin. The commenters contend that this
approach to determining "ability to pay" contravenes the
"universal service" mandate of Section 1 of the Act because it
disproportionately injures businesses who provide service to
rural or less profitable areas, and discourages diversity. In
addition, the commenters argue that this approach to "ability to
pay" erodes the protections otherwise given to small businesses
in the Paperwork Reduction Act and the Regulatory Flexibility
Act. They argued that smaller carriers that now provide high-
cost, high-maintenance, low-profit services to rural communities,
e.g., improved mobile telephone services (IMTS) or Basic Exchange
Telecommunications Radio Service (BETRS), will be driven out of
business if they must pay higher forfeitures than other
licensees for similar violations. 39 Because these services are
provided by carriers as "an adjunct" to its other operations,
they argue that the Commission would consider the higher profits
from their other operations and the forfeitures would not be
reduced based on the subsidiary's ability to pay.
43. As the commenters noted, Commission cases point to
gross revenues as the starting point for determining a party's
ability to pay. In PJB Communications of Virginia, Inc., 7 FCC
Rcd 2088 (1992) (PJB Communications), we stated:
[i]n general, a licensee's gross revenues are the best
indicator of its ability to pay a forfeiture. Nevertheless,
we recognize that in some cases, other financial indicators,
such as net losses, may also be relevant. If gross revenues
are sufficiently great, however, the mere fact that a
business is operating at a loss does not itself mean that it
cannot afford to pay a forfeiture.
PJB Communications, At 2089. Thus, PJB Communications indicates
that factors other than gross revenues may also be considered.
Indeed, the Commission does not use a strict "gross revenues"
standard. For example, the Commission has reduced a forfeiture
to an amount adequate to deter future misconduct after
consideration of the violators' unprofitable history, and the
relative lower value of the licensed operation at issue. See
e.g., First Greenville Corporation, 11 FCC Rcd 7399 (1996);
Benito Rish, 10 FCC Rcd 2861 (1995) (profit and loss statement
submitted to reflect inability to pay a forfeiture); see also
Pinnacle Communications, Inc., 11 FCC Rcd 15496 (1996) (analysis
of the balance sheet and the profit and loss statement
accompanied by the licensee's certification focused on net
liabilities in light of default of loan payment). Although
forfeiture amounts will be initially assessed according to the
violation, the Commission's staff reviews all responses to NALs
that claim inability to pay a forfeiture on a case-by-case basis
in accordance with Section 503(b)(2)(D) of the Act. In this
respect, we do not believe that focusing on the payment of
forfeiture will deter service to rural or less profitable areas,
discourage diversity or otherwise operate inconsistently with the
universal service goals of the Communications Act.
44. We are cognizant of the concerns raised by small
entities as to the burden and expense of documenting inability to
pay a forfeiture by means of audited financial statements. In
this regard, we note that the Commission has the flexibility to
consider any documentation, not just audited financial
statements, that it considers probative, objective evidence of
the violator's ability to pay a forfeiture. See 47 C.F.R. ' 1.80
(f)(3)40. The Commission intends to continue its policy of being
sensitive to concerns of small entities who may not have the
ability to pay a particular forfeiture amount or the ability to
submit the same kind of documentation to corroborate the
inability to pay. This is consistent with section 503(b)(2)(D)
of the Communications Act and section 1.80(b)(4) of our rules,
which provides that the Commission will take into account ability
to pay in assessing forfeitures, and with our longstanding case
law.
45. American Mobile Telecommunications Association (AMTA)
sought clarification of various violations listed in the proposed
Forfeiture Policy Statement. AMTA contended that several of the
listed violations overlap or are duplicative such as construction
or operation without a license, using an unauthorized frequency,
and construction or operation at an unauthorized location, and
recommended that the Commission simplify the proposed types of
violations relating to the actual operation of a station. In
addition, AMTA indicated that, because the Commission's overall
regulatory scheme is generally designed to prevent interference
among entities, the Commission has failed to explain why
operating without any license would be considered four times as
egregious as operating at a location not covered by the
authorization. Similarly, AMTA questioned why forfeitures for
using unauthorized frequencies are lower than forfeitures for
operating without a license, but higher than forfeitures for
operating at the wrong location. AMTA noted that it is unclear
which violations would be applicable to a specialized mobile
radio (SMR) licensee authorized to operate in the Washington,
D.C. area that initiated service in Annapolis, MD on different
frequencies prior to the grant of an FCC authorization to do so.
AMTA asserted that the severity of the forfeiture should be based
on likelihood or actuality of causing interference to another
licensee. AMTA believed that the Commission needs to
distinguish clearly between essentially
ministerial/administrative violations and those with the
potential for disturbing or disabling the operations of other
facilities (interference potential). AMTA Comments, 7-8.
46. As AMTA noted, one of the principal reasons for
requiring an FCC license to broadcast is to prevent interference
with broadcast signals so that such signals can be received by
the public. In the absence of a scheme requiring a license
before transmitting can commence, it is not clear how
interference conflicts would be resolved. Such an approach would
be costly, disruptive, inefficient, and directly contrary to the
express will of Congress. See Turner Broadcasting System Inc.
v. FCC, 114 S. Ct. 2445, 2456-57 (1994). Thus, ensuring that
parties operate in accord with the license authorization is
fundamental to successful implementation of our spectrum
management objectives. Failure to receive authorization to
transmit prior to transmission is not a mere ministerial
oversight; it is an intentional disregard of the Commission's
efforts to prevent interference. Thus, in AMTA's example about
the SMR licensee, the party has engaged in unlicensed operation
because, regardless of where it may properly transmit, it is
transmitting from a location on a frequency prior to any
Commission approval for that operation.
47. With respect to operating on an unauthorized frequency
or unauthorized location, we note that frequency and location are
very important to our spectrum management and interference
prevention functions. These types of violations arise when a
party seeks and receives an FCC license, but does not operate in
full compliance with the authorization of license. Both
scenarios involve operation under color of a license that creates
a potential for interference or disruption of communications
between licensed entities. Therefore, we agree with AMTA that
the base forfeiture amount for each of these types of violations
should be the same. We reiterate, however, that although we are
using the same base forfeiture amount for these violations, the
forfeiture amount may be affected by the severity of the
interference and intentional nature of the violation, as well as
all other adjustment factors.
48. Treatment of pending cases. NAB stated that the
Commission should rescind any forfeiture imposed under the 1991
Policy Statement or 1993 Policy Statement that has not been paid.
NAB Comments, 8. Infinity argued that forfeitures for violations
prior to the effective date of any new policy statement should be
based on case law decided under the statutory maximum in effect
prior to changes in the statute in 1989.41 Infinity Comments,
9 n. 8.
49. We reject these suggestions. Pursuant to Section 503
of the Act, the Commission has full authority to apply the
increased statutory maximum in effect since 1989 and to adjust
its policies and decisions in specific cases on an ongoing basis
to take account of increased statutory amounts or changes in
Commission enforcement priorities, regardless of the existence or
non-existence of a forfeiture policy statement. All forfeitures
assessed under the 1991 and 1993 Policy Statements conformed to
the standards set out in Section 503 of the Act and, therefore,
constitute the Commission's findings of liability for those
violations. For these reasons, we will include recent case law
in our analysis of pending cases. With respect to these pending
proceedings, we will evaluate them under the case-by-case
approach in effect when the violation occurred. We will also use
the case-by-case approach for violations arising from facts that
occurred before the effective date of this order but where the
Commission will commence forfeiture action after the effective
date.
E. Other Matters
50. In cases where the Commission designates forfeiture
matters for hearing (e.g., as part of a license application,
license revocation or license renewal proceeding), the
Commission's typically indicates that the forfeiture liability
amount may be assessed up to the relevant statutory maximum. See
Ellwood Beach Broadcasting, Ltd., 8 FCC Rcd 453, 454 n. 5 (1993).
In light of recent amendments to the Equal Access to Justice Act
made as part of the Contract with America Advancement Act of
1996, Pub. L. No. 104-121, 110 Stat. 847 (1996), we will
discontinue this practice. Instead, we will indicate an
appropriate maximum forfeiture amount in light of the specific
facts at issue when initiating such hearing cases effective
immediately.
51. We note that Section 223 of the recently enacted Small
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA),
enacted as part of the Contract with American Advancement Act of
1996, Pub. L. No. 104?121, 110 Stat. 847 (1996), requires
agencies to establish a policy providing for the reduction and,
under appropriate circumstances, the waiver of civil penalties
imposed on small entities. As part of this policy, under
appropriate circumstances, the agency may consider ability to pay
in determining penalty assessments on small entities. Such
circumstances may include, among others, violations discovered
because the small entity participated in a compliance assistance
or audit program, and good faith efforts demonstrated by the
entity to comply with the law. Circumstances that may be
excluded from the policy's applicability cover small entities
that have been subject to multiple enforcement actions, willful
or criminal violations, and violations that pose serious health,
safety or environmental threats.
52. Our existing policies, as reflected in our precedent,
and as retained here, comply with Section 223 of SBREFA.
Warnings, rather than forfeitures, may continue to be appropriate
in particular cases involving small businesses or others. See
par. 31, supra. Under Section 503(b)(2)(D) of the Communications
Act and section 1.80(b)(4) of our rules, we will continue to
consider inability to pay a relevant factor in assessing
forfeitures. See par. 44, supra. See also Appendix A, Section
II, downward adjustment criterion (4). Our other upward and
downward adjustment factors, which are reflective of existing
policy, encompass many of the conditions and exclusions listed
and Section 223 of SBREFA. See Appendix A, Section II. These
factors will continue to be applied in cases of violations
involving small entities (as well as others) to determine whether
a waiver or reduction of a forfeiture is warranted.
IV. CONCLUSION
53. The forfeiture guidelines are intended as a guide for
frequently recurring violations. They are not intended to be a
complete or exhaustive list of violations. Moreover, the
guidelines do not apply to violations for which the forfeiture
amounts are statutorily established. See para. 23, supra. The
mitigating factors of Section 503(b)(2) (D) will, however, be
used to make adjustments in all appropriate cases, as warranted.
In addition, the fact that a particular violation is not listed
on the forfeiture guidelines schedule should also not be taken to
mean that the violation is unimportant or nonexistent. The
Commission retains the discretion to impose forfeitures for other
violations, including new violations of existing laws or
regulations, or violations that arise from the use of new
technologies or services.
V. ADMINISTRATIVE MATTERS
A. Final Regulatory Flexibility Analysis
54. Final Regulatory Flexibility Analysis: As required by
Section 604 of the Regulatory Flexibility Act (RFA), the
Commission prepared an Initial Regulatory Flexibility Analysis
(IRFA) that was incorporated in the Notice of Proposed Rulemaking
(NPRM).42 The Commission sought written public comments on all
the proposals in the NPRM, including the IRFA. Based on the
analysis of the public comments, the Commission has prepared a
final Regulatory Flexibility Analysis of the expected impact on
small entities of the rule changes adopted in this Report and
Order. The Final Regulatory Flexibility Analysis is discussed
fully in Appendix C of this Report and Order.
B. Ex Parte Rules -- Permit-But-Disclose Proceeding
55. This is a permit-but-disclose notice and comment rule
making proceeding. Ex parte presentations are permitted except
during the Sunshine Agenda period, provided, they are disclosed
as outlined in the Commission's rules. See generally 47 C.F.R.
'' 1.1202, 1.1203, and 1.1206(a).
VI. ORDERING CLAUSES
56. ACCORDINGLY, IT IS ORDERED that, pursuant to the
authority contained in Sections 4(i), 303(r) and 503(b) of the
Communications Act of 1934, as amended, 47 U.S.C. '' 151, 154(i),
303(r), 503(b), Part 1, Subpart A, Section 1.80(b), 47 C.F.R. '
1.80(b), is amended to incorporate as a note the Commission's
Forfeiture Policy Statement, and the Guidelines for Assessing
Forfeitures set forth in Appendix A.
57. IT IS FURTHER ORDERED, that this Report and Order
will be effective sixty (60) days after publication of a summary
thereof in the Federal Register.
58. IT IS FURTHER ORDERED, that a copy of the Report and
Order shall be sent to the Chief Counsel for Advocacy of the
Small Business Administration.
FEDERAL COMMUNICATIONS COMMISSION
William F. Caton
Acting Secretary Appendix A
Chapter I of Title 47 of the Code of Federal Regulations is
amended by adding a footnote to Part 1, Subpart A-Practice and
Procedure, as follows:
I. Part 1--PRACTICE AND PROCEDURE
1. The authority citation for Part 1 continues to read as
follows:
Authority: 47 U.S.C. 151, 154, 303, and 309(j) unless
otherwise noted.
2. Section 1.80 is amended by revising subsection (b) to
read as follows:
' 1.80 Forfeiture Proceedings.
(b) * * * * *
(4) * * *
NOTE:
GUIDELINES FOR ASSESSING FORFEITURES
The Commission and its staff may use these guidelines in
particular cases. The Commission and its staff retain the
discretion to issue a higher or lower forfeiture than provided in
the guidelines, to issue no forfeiture at all, or to apply
alternative or additional sanctions as permitted by the statute.
The forfeiture ceiling per violation or per day for a continuing
violation stated in Section 503 of the Communications Act and the
Commission's Rules are $25,000 for broadcasters and cable
operators or applicants, $100,000 for common carriers or
applicants, and $10,000 for all others. These base amounts
listed are for a single violation or single day of a continuing
violation. 47 U.S.C. ' 503(b)(2); 47 C.F.R. ' 1.80. For
continuing violations involving a single act or failure to act,
the statute limits the forfeiture to $250,000 for broadcasters
and cable operators or applicants, $1,000,000 for common carriers
or applicants, and $75,000 for all others. Id. Pursuant to the
Debt Collection Improvement Act of 1996 (DCIA), Pub. L. No. 104-
134, ' 31001, 110 Stat. 1321 (1996), civil monetary penalties
assessed by the federal government, whether set by statutory
maxima or specific dollar amounts as provided by federal law,
must be adjusted for inflation at least every four years based on
the formula outlined in the DCIA. Thus, the statutory maxima
increased to $27,000 for broadcasters and cable operators or
applicants; $110,000 for common carriers or applicants, and
$11,000 for others. For continuing violations, the statutory
maxima increased to $275,000 for broadcasters, cable operators,
or applicants; $1,100,000 for common carriers or applicants; and
$82,500 for others. The increased statutory maxima became
effective March 5, 1997. There is an upward adjustment factor
for repeated or continuous violations, see Section II, infra.
That upward adjustment is not necessarily applied on a per
violation or per day basis. Id. Unless Commission authorization
is required for the behavior involved, a Section 503 forfeiture
proceeding against a non-licensee or non-applicant who is not a
cable operator or common carrier can only be initiated for a
second violation, after issuance of a citation in connection with
a first violation. 47 U.S.C. ' 503(b) (5). A citation is not
required, however, for non-licensee tower owners who have
previously received notice of the obligations imposed by Section
303(q) and Part 17 of the Commission's rules from the Commission.
See Streamlining the Commission's Antenna Structure Clearance
Procedure and Revision of Part 17 of the Commission's Rules
concerning Construction, Marking, and lighting of Antenna
Structures, 61 Fed. Reg. 04359 (Feb. 2, 1995). Forfeitures
issued under other sections of the Act are dealt with separately
in Section III below.
Section I. BASE AMOUNTS FOR SECTION 503 FORFEITURES
VIOLATION AMOUNT
Misrepresentation/lack Statutory Maximum for
each Service
of candor
Construction and/or operation $10,000
without an instrument of
authorization for the service
Failure to comply with $10,000
prescribed lighting and/or marking
Violation of public file rules $10,000
Violation of political rules: $9,000
reasonable access, lowest unit charge,
equal opportunity, and discrimination
Unauthorized substantial $8,000
transfer of control
Violation of children's television $8,000
commercialization or programming requirements
Violations of rules relating to $8,000
distress & safety frequencies
False distress communications $8,000
EAS equipment not installed or operational $8,000
Alien ownership violation $8,000
Failure to permit inspection $7,000
Transmission of indecent/ $7,000
obscene materials
Interference $7,000
Importation or marketing of $7,000
unauthorized equipment
Exceeding of authorized $5,000
antenna height
VIOLATION AMOUNT
Fraud by wire, radio or $5,000
television
Unauthorized discontinuance $5,000
of service
Use of unauthorized equipment $5,000
Exceeding power limits $4,000
Failure to respond to $4,000
Commission communications
Violation of sponsorship ID requirements $4,000
Unauthorized emissions $4,000
Using unauthorized frequency $4,000
Failure to engage in required $4,000
frequency coordination
Construction or operation at $4,000
unauthorized location
Violation of requirements pertaining to $4,000
broadcasting of lotteries or contests
Violation of transmitter control $3,000
and metering requirements
Failure to file required forms $3,000
or information
Failure to make required measurements $2,000
or conduct required monitoring
Failure to provide station ID $1,000
Unauthorized pro forma $1,000
transfer of control
Failure to maintain $1,000
required records Violations Unique to the Service
VIOLATION SERVICES AMOUNT
AFFECTED
Unauthorized conversion of long Common Carrier
$40,000
distance telephone service
Violation of operator Common Carrier
$7,000
services requirements
Violation of pay-per-call Common Carrier
$7,000
requirements
Failure to implement rate reduction Cable
$7,500
or refund order
Violation of cable program Cable
$7,500
access rules
Violation of cable leased Cable
$7,500
access rules
Violation of cable cross-ownership rules Cable
$7,500
Violation of cable broadcast Cable
$7,500
carriage rules
Violation of pole attachment rules Cable
$7,500
Failure to maintain directional Broadcast
$7,000
pattern within prescribed
parameters
Violation of main studio rule Broadcast
$7,000
Violation of broadcast Broadcast
$7,000
hoax rule
AM tower fencing Broadcast
$7,000
Broadcasting telephone Broadcast
$4,000
conversations without
authorization
Violation of enhanced Broadcast
$2,000
underwriting requirements Section II. ADJUSTMENT CRITERIA FOR SECTION 503 FORFEITURES
Upward Adjustment Criteria
(1) Egregious misconduct
(2) Ability to pay/relative disincentive
(3) Intentional violation
(4) Substantial harm
(5) Prior violations of any FCC requirements
(6) Substantial economic gain
(7) Repeated or continuous violation
Downward Adjustment Criteria
(1) Minor violation
(2) Good faith or voluntary disclosure
(3) History of overall compliance
(4) Inability to pay
Section III. NON-SECTION 503 FORFEITURES THAT ARE AFFECTED
BY THE DOWNWARD ADJUSTMENT FACTORS
Unlike Section 503 of the Act, which establishes maximum
forfeiture amounts, other sections of the Act, with one
exception, state prescribed amounts of forfeitures for violations
of the relevant section. These amounts are then subject to
mitigation or remission under Section 504 of the Act. The one
exception is Section 223 of the Act, which provides a maximum of
$50,000 per day. For convenience, the Commission will treat the
$50,000 set forth in Section 223 as if it were a prescribed base
amount, subject to downward adjustments. The amounts listed
below were adjusted for inflation pursuant to the Debt Collection
Improvement Act of 1996 (DCIA) (Pub. L. No. 104-134, ' 31001, 110
Stat 1321 (1996). The new amounts became effective on March 5,
1997. These non-Section 503 forfeitures may be adjusted downward
using the "Downward Adjustment Criteria" shown for Section 503
forfeitures in Section II above.
Violation Statutory Amount
Sec. 202 (c) Common Carrier Discrimination
$6,600 $330/day
Sec. 203 (e) Common Carrier Tariffs
$6,600 $330/day
Sec. 205 (b) Common Carrier Prescriptions
$13,200
Sec. 214 (d) Common Carrier Line Extensions $1,200/day
Sec. 219 (b) Common Carrier Reports $1,200
Sec. 220 (d) Common Carrier Records & Accounts
$6,600/day
Sec. 223 (b) Dial-a-Porn $55,000
maximum/day
Sec. 364(a) Ship Station Inspection $5,00
(owner)
Sec. 364(b) Ship Station Inspection
$1,100 (vessel master)
Sec. 386(a) Forfeitures $5,500/day
(owner)
Sec. 386(b) Forfeitures $1,100 (vessel
master)
Sec. 634 Cable EEO $500/day
APPENDIX B
A. Comments
1. American Mobile Telecommunications Association, Inc.
2. American Radio Relay League
3. Bell Atlantic Telephone Company
4. Brown and Schwaninger
5. Emery Telephone
6. Harrisonville Telephone Company
7. Infinity Broadcasting Corporation
8. MCI Telecommunications Corporation
9. MobileMedia Communications, Inc.
10. Mobile Phone of Texas, Inc.
11. National Association of Broadcasters
12. Paging Network, Inc.
13. Personal Communications Industry Association
14. San Bernardino Coalition of Low Power FM Broadcasting
15. Southwestern Bell Telephone Company
16. United States Telephone Association
17. WJGMariTEL Corporation
B. Informal Comment
1. William Dougan
C. Reply Comments
1. American Mobile Telecommunications Association, Inc.
2. MCI Telecommunications Corporation
3. Motorola, Inc.
4. National Telephone Cooperative Association
5. Personal Communications Industry Association
6. San Bernardino Coalition of Low Power FM Broadcasting
7. Southwestern Bell Telephone Company
8. United States Telephone Association
APPENDIX C
ADMINISTRATIVE MATTERS
Final Regulatory Flexibility Analysis
1. As required by Section 603 of the Regulatory Flexibility
Act (RFA), 5 U.S.C. ' 603, the Commission prepared an Initial
Regulatory Flexibility Analysis (IRFA) that was incorporated in
the Notice of Proposed Rule Making (NPRM).43 The Commission
sought written public comments on all of the proposals in the
NPRM, including the IRFA. Based on the analysis of the public
comments, the Commission has prepared a Final Regulatory
Flexibility Analysis (FRFA) of the expected impact the Report and
Order adopted today will have on small businesses and entities.
The FRFA in this Report and Order conforms to the RFA, as amended
by the Contract with America Advancement Act of 1996, Pub. L. No.
104-121, 110 Stat. 847 (1996).44
a. Need for and Purpose of This Action
2. Section 503 of the Communications Act, as amended, 47
U.S.C. ' 503 (the Act) provides the statutory authority for the
Commission to assess forfeitures for violations of the Act and
the Commission's rules. This Report and Order amends Section 1.80
of the Commission's rules to incorporate by reference the
Commission's forfeiture policy statement (Policy Statement) and
the schedule of forfeitures as a note to the rule. Forfeitures
are one of the tools available to the Commission to enhance and
ensure compliance by serving as a sanction to a violator and a
deterrent to other potential violators that are similarly
situated. By adopting the forfeiture guidelines as a note to
the rule, the Commission will provide guidance and clarity to all
potential violators, including small businesses, as to base
forfeiture amounts that can be expected for a violation of the
Communications Act and the Commission's rules. The guidelines
will also provide an increased level of predictability and
uniformity in the forfeiture process. We believe that the
footnote adopted here today has no substantial impact on small
businesses. The footnote does not create a new substantive
Commission rule with which small businesses must comply. The
forfeiture policy adopted here today merely provides guidance as
to the general forfeiture amount that any violator may expect the
Commission to assess for a violation of the Act and rules. To
ensure, however, that the forfeiture guidelines adopted today
reflect the Commission's understanding of the impact of its
regulations on small businesses as well as our efforts to analyze
what, if any, regulatory relief can be provided to small
businesses in light of this Report and Order, we will explain the
steps taken to minimize any significant economic impact on small
entities.
b. Summary of Significant Issues Raised by the Public
Comments in Response to the Initial Regulatory Flexibility
Analysis
3. In responding to the IRFA in the NPRM, several
commenters, such as improved mobile telephone services (IMTS) or
basic exchange telecommunications radio services (BETRS) contend
that the Commission's determination of an entity's inability to
pay a forfeiture based on its gross revenues erodes the
protections otherwise given to small businesses in the Paperwork
Reduction Act and the Regulatory Flexibility Act. They contend
that these rural services will pay higher forfeitures than other
licensees for similar violations because they are run by common
carriers as an adjunct to the main operations whose gross revenue
would be considered in determining the issue of inability to
pay.45 These arguments were considered and rejected as discussed
below.
4. At the outset, we note that forfeitures are imposed
only against those who fail to comply with our rules. Thus, the
issue of inability to pay a forfeiture or maintaining additional
paperwork is moot as to small businesses that comply with the
rules. As to those that violate the Act and rules, Commission
precedent states that gross revenues is a starting point for
determining a party's ability to pay. Commission cases, however,
also indicate that factors other than gross revenues may be
considered. Under Section 503 of the Act, the Commission must
look at the inability to pay in light of the totality of the
circumstances affecting the particular entity's ability to pay.46
This includes whether the company is a small business as defined
by the Commission and/or the Small Business Administration (SBA)
or whether the business is an adjunct of a larger corporation
from which it can draw resources. Moreover, although the
Commission has accepted audited financial statements as a method
to assess a company's inability to pay a forfeiture, the
Commission has flexibility to consider any documentation (e.g.
balance sheet, profit and loss statement accompanied by
licensee's certification) that it considers probative and
objective evidence of the violator's ability or inability to pay
a forfeiture. This also comports with the requirements of
SBREFA.47
5. In the general comments to the NPRM, a number of
commenters raised issues that might affect small entities. Many
commenters oppose the system proposed in the NPRM that would
impose differing base amounts based on the service rather than
the violation involved. In particular, the commenters,
including small commercial mobile radio services (CMRS), noted
that the system proposed in the NPRM imposed larger forfeitures
on common carriers without any regard for the common carrier's
business size. Comments from CMRS entities also contend that, if
the proposed fines are adopted, they should be treated in the
"other" category as they were in the previous guidelines rather
than the "common carrier" category which has higher base amounts
and a higher statutory maximum.48 As adopted, this Policy
Statement would impose forfeitures based on the violation and not
the service as originally proposed. Thus, CMRS providers who are
small businesses will not be treated to higher forfeiture amounts
simply because of their "common carrier" status. Moreover, the
base forfeiture amount, i.e., the amount at which the Commission
may initially assess a forfeiture, is calculated in light of the
lowest statutory maximum imposed under Section 503 of the Act,
rather than the higher statutory maxima for broadcasters and
common carriers. Thus, small broadcast and common carrier
businesses are not subject to base amounts higher than those
imposed on small businesses in the remaining category, i.e., the
"other " category. As to those small businesses in the "other"
category, the Commission generally gives warnings to first time
violators, who are licensed by rule rather than on an individual
basis, based on the facts of each case unless the violation is
egregious or a serious safety of life issue.49 The adopted
forfeiture policy statement also eliminated the proposed
adjustment factor ranges, thus allowing the Commission to reduce
a forfeiture to a minimum amount against a violator such as a
small business if warranted by the facts of the case in light of
the factors outlined in Section 503 of the Act.50 Lastly, we
note that, in light of recent changes to the Equal Access to
Justice Act made as part of the Contract with America Advancement
Act of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996), we will
indicate an appropriate maximum forfeiture amount in cases where
the Commission designates forfeiture matters for hearing.
Because this maximum forfeiture amount will be based on the
specific facts at issue rather than the statutory maximum for
that service, small businesses in the "broadcast", "common
carrier", and "other" services will not be subject to the
statutory maxima in a hearing unless warranted by the facts in
that case. 51
c. Description and Estimate of Number of Small Businesses
to Which Rules Will Apply:
6. The RFA generally defines "small entity" as having the
same meaning as the terms "small business", "small organization",
and "small governmental jurisdiction" and "the same meaning as
the term