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	Federal Communications Commission	DA 19-950


Before the
FEDERAL COMMUNICATIONS COMMISSION
WASHINGTON, DC 20554



In the Matter of

LTD Broadband LLC


Applicant for Phase II Connect America Fund  
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File No.: EB-IHD-19-00029977
FRN No.: 0020926788
NAL/Acct. No.: 202032080009



NOTICE OF APPARENT LIABILITY FOR FORFEITURE


Adopted:  October 11, 2019		Released: October 11, 2019

By the Chief, Enforcement Bureau:

I. INTRODUCTION
1. The Connect America Fund (CAF) Phase II (CAF-II)  The Connect America Fund Phase II is part of the Commissions reform and modernization of its universal service support programs.
 Auction (Auction 903) was conducted to award financial support to service providers who committed to increasing broadband services in areas of great need.  The Federal Communications Commission (FCC or Commission) took steps to protect the integrity and proper functioning of Auction 903 by advising auction participants to diligently prepare to meet all auction requirements and by establishing a penalty for default.  LTD Broadband LLC (LTD Broadband or Company), Any entity that is a Small Business Concern as defined in the Small Business Act (Pub. L. 85-536, as amended) may avail itself of rights set forth in that Act, including rights set forth in 15 U.S.C.  657, Oversight of Regulatory Enforcement, in addition to other rights set forth herein.
 was a winning bidder in Auction 903, but withdrew its application for support before receiving its award.  By defaulting on its winning bids, the Company hindered the disbursement of funds that could have otherwise been productively used to increase broadband access to unserved or underserved areas.  Accordingly, we propose a penalty of $3,563 on the Company for apparently defaulting on its winning bids.
II. BACKGROUND  
2. LTD Broadband, formed as a Nevada Limited Liability Company in 2011, provides broadband service to rural and non-rural areas in the Midwest. See LTD Broadband, About Us, https://ltdbroadband.com/about (last visited Sep. 24, 2019).
  The Company has over 1,500 tower sites in Iowa, Minnesota, Nebraska, and South Dakota. Id.

3. The Commission conducted Auction 903 between July 24, 2018 and August 21, 2018, to allocate CAF-II monetary support to certain eligible areas See Wireline Competition Bureau Releases List and Map of Eligible Census Blocks for the Connect America Fund Phase II Auction (Auction 903), AU Docket No. 17-182, WC Docket No. 10-90, Public Notice, 32 FCC Rcd 10381 (WCB 2017) (Eligible Census Block List Public Notice).  The list of census blocks can be found at https://www.fcc.gov/files/caf2auctionpublishblockcsv.
 across the United States.  Auction 903 was slated to award up to $198 million in annual support, a total of $1.98 billion over ten years, in ongoing high-cost universal service support to service providers that committed to offering voice and broadband services in unserved areas. Connect America Fund Phase II Auction Scheduled for July 24, 2018 Notice and Filing Requirements and Other Procedures for Auction 903, AU Docket No. 17-182, WC Docket No. 10-90, Public Notice, 33 FCC Rcd 1428, para. 1 (2018), (Phase II Auction Procedures Public Notice). 
  Using a multiple-round, reverse auction, Auction 903 was intended to close the digital divide for all Americans, including those in the rural areas of our country. Id. at 1428, paras. 1-2.
  
4. In establishing procedures for Auction 903, the Commission was explicit as to the requirements a bidder must meet and the consequences for falling short of those requirements, including the penalties for default. Connect America Fund et al., Report and Order and Further Notice of Proposed Rulemaking, 31 FCC Rcd 5949, 6000, para. 143 (2016), (Phase II Auction Order and/or FNPRM); Phase II Auction Procedures Public Notice, 33 FCC Rcd at 1471-2, paras. 111-119. 
  In a February 1, 2018 Public Notice (Phase II Auction Procedures Public Notice), the Commission established a bidding process with clear dates and deadlines. Phase II Auction Procedures Public Notice, 33 FCC Rcd at 1432, para. 10.
  Each bidder was first required to file FCC Form 183 (Short-Form Application) no later than March 30, 2018. Id.
  Bidders were required to provide information in the Short-Form Application that demonstrated their baseline financial qualifications and technical capabilities in order to establish eligibility. Id. at 1438-9, para. 21.
  After reviewing the Short-Form Applications, the Commission announced the applicants qualified to participate in Auction 903. See 220 Applicants Qualified to Bid in the Connect America Fund Phase II Auction (Auction 903), Bidding to Begin on July 24, 2018, AU Docket No. 17-182, WC Docket No. 10-90, Public Notice, 33 FCC Rcd 6171, 6176, paras. 27-28 (Rural Broadband Task Force/WTB/WCB 2018) (Qualified Bidders Public Notice).
  
5. Once Auction 903 bidding began, the Commission conducted a multi-round, descending clock auction. Phase II Auction Procedures Public Notice, 33 FCC Rcd at 1493, para 199.
  The minimum geographic areas established by the Commission for bidding in Auction 903 were Census Block Groups (CBGs) that contained one or more eligible census blocks, identified in a list released by the Commissions Wireline Competition Bureau (WCB) in December 2017. See Eligible Census Block List Public Notice, 32 FCC Rcd at 10381.
  The list of CBGs included approximately 214,000 eligible census blocks, located in approximately 30,300 CBGs. Id.
  
6. On August, 28, 2018, the Commission released a Public Notice identifying the 103 winning bidders who had won $1.488 billion in support over a ten-year period. See Connect AmericaFundPhaseIIAuction(Auction903) Closes;WinningBiddersAnnounced; FCC Form 683 Due October 15, 2018, AU Docket No. 17-182, WC Docket No. 10-90, Public Notice, 33 FCC Rcd 8257 (Rural Broadband Task Force/WTB/WCB 2018) (Auction 903 Closing Public Notice).
  Winning bidders were given the opportunity to assign some or all of their winning bids to related entities by September 14, 2018. Id. at 8259-60, paras. 9-13.
  Additionally, winning bidders were required to submit a post-auction application for support, FCC Form 683 (Long-Form Application), no later than October 15, 2018.
7. The Company timely submitted its Short-Form Application to participate in Auction 903 See LTD Broadband LLC, Auction 903 FCC Form 183 Application, File No. 0008152553, (filed Mar. 29, 2018).  The Company was classified as eligible to participate in the auction.  See Qualified Bidders Public Notice, 33 FCC Rcd at 6184-95 (Attach. A: Qualified Bidders sorted by applicant name). 
 and was a successful bidder, winning $1,264,673.30 of support for 108 CBGs in Nevada and Nebraska.  The Company also timely filed its Long-Form Application on October 15, 2018. See LTD Broadband LLC, Auction 903 FCC Form 683 Application, File No. 0008152553, (filed Oct. 15, 2018).
  On February 25, 2019, the Company notified WCB that it would default on $71,254.00 of support for two winning bids, one in Nevada and one in Nebraska. See Connect America Fund Phase II Auction Support for 611 Winning Bids Ready to be Authorized, 2019 WL 2443206, Attach. B (Rural Broadband Task Force/OEA/WCB 2019) (Auction 903 June 2019 Public Notice); Letter from Corey Hauer, CEO, LTD Broadband LLC, to Federal Communications Commission, (Feb. 25, 2019) (LTD Letter).
  The Company explained that it had not obtained ETC certification for the locations in those two CBGs. Id.
  On June 7, 2019, WCB referred LTD Broadband and another defaulting bidder to the Enforcement Bureau for enforcement action. See Auction 903 June 2019 Public Notice, 2019 WL 2443206 at Attach. B.
 
III. DISCUSSION
8. In establishing the procedures for Auction 903, the Commission was unambiguous in the requirements each bidder must meet and the consequences of failing to meet any requirement, stating:
Any Auction 903 winning bidder or long-form applicant will be subject to a forfeiture in the event of a default before it is authorized to begin receiving support.  A winning bidder or long-form applicant will be considered in default and will be subject to forfeiture if it fails to timely file a long-form application, fails to meet the document submission deadlines, is found ineligible or unqualified to receive Phase II support by the Bureaus on delegated authority, and or otherwise defaults on its winning bids or is disqualified for any reason prior to the authorization of support.  Any such determination by the Bureaus shall be final, and a winning bidder or long-form applicant shall have no opportunity to cure through additional submissions, negotiations, or otherwise.  Agreeing to such payment in the event of a default is a condition for participating in the Phase II auction (emphasis added). Phase II Auction Procedures Public Notice, 33 FCC Rcd at 1520, para. 314.

Because the Company apparently defaulted on its Auction 903 winning bidder obligations, we find that the Company apparently willfully violated the Commissions rules and orders governing Auction 903.
9. Under Section 503(b)(1) of the Communications Act of 1934, as amended (the Act), any person who is determined by the Commission to have willfully or repeatedly failed to comply with any provision of the Act or any rule, regulation, or order issued by the Commission shall be liable to the United States for a forfeiture penalty. See 47 U.S.C.  503(b)(1)(B); 47 CFR  1.80(a)(1); see also 47 U.S.C.  503(b)(1)(D) (forfeitures for violation of 18 U.S.C.  1464).  Section 312(f)(1) of the Act defines willful as the conscious and deliberate commission or omission of [any] act, irrespective of any intent to violate the law.  47 U.S.C.  312(f)(1).  The legislative history to section 312(f)(1) of the Act clarifies that this definition of willful applies to both sections 312 and 503(b) of the Act, H.R. Rep. No. 97-765, 97th Cong. 2d Sess. 51 (1982), and the Commission has so interpreted the term in the section 503(b) context.  See, e.g., Southern California Broadcasting Co., Memorandum Opinion and Order, 6 FCC Rcd 4387, 4388 (1991) (Southern California Broadcasting Co.).
  In order to impose such a forfeiture penalty, the Commission must issue a notice of apparent liability, the notice must be received, and the person against whom the notice has been issued must have an opportunity to show, in writing, why no such forfeiture penalty should be imposed. See 47 U.S.C.  503(b); 47 CFR  1.80(f).
  The Commission will then issue a forfeiture if it finds, by a preponderance of the evidence, that the person has willfully or repeatedly violated the Act or a Commission rule. See, e.g., SBC Communications, Inc., Forfeiture Order, 17 FCC Rcd 7589, 7591, para. 4 (2002) (forfeiture paid). 
 
10. By withdrawing its application for support in two CBGs, the Company apparently defaulted on two of its winning bids for Auction 903 in apparent violation of section 1.21004(a) of the Commissions rules and the procedures established specifically for Auction 903. Phase II Auction Procedures Public Notice, 33 FCC Rcd at 1520-22, paras. 314-316.
  Pursuant to section 1.21004(a), a winning bidder of a Commission auction that, for any reason, is not subsequently authorized to receive support has defaulted on its bid and is liable for a default payment. 47 CFR  1.21004(a).
  Section 1.21004(b) authorizes the Commission to calculate the default payment by a method established in a public notice prior to competitive bidding.  In Auction 903, however, the Commission concluded that it would impose a forfeiture in lieu of a default payment. Phase II Auction Order, 31 FCC Rcd at 6000, para. 143; Phase II Auction Procedures Public Notice, 33 FCC Rcd at 1521, para. 315.
  Furthermore, the Company agreed to this default payment as a condition to participating in Auction 903. Id. at 1521, para. 314.
 
11. That the Company defaulted because it could not obtain certain ETC designations in Nevada and Nebraska does not absolve it from forfeiture for its default. See LTD Letter.
  The prohibition against default in section 1.21004 applies regardless of the reason for default and imposes a measured penalty directly correlated to the amount of support awarded with a cap to prevent outsized penalties.  Moreover, we reiterate that the penalties for default were clearly stated in the Phase II Auction Procedures Public Notice before bidding ever began, so the Company can reasonably be expected to have considered the associated penalty both into its decision to bid for support, and the decision to subsequently default on its bids.  
12. The Companys failure to adhere to the established auction procedures was disruptive to the integrity and efficiency of the auctions process.  The Commission adopted the forfeiture policy for Auction 903 to impress upon recipients the importance of being prepared to meet all requirements for the post-selection review process and to emphasize the requirement that participants conduct a due diligence review to ensure that they are qualified to participate in the auction and meet its terms and conditions. Phase II Auction Order, 31 FCC Rcd at 6001, para. 145.
  Therefore, participants were expected to plan diligently to fulfill the obligations undertaken in Auction 903, including planning for any difficulties or other contingencies that arose during the process.  By becoming a successful bidder and later choosing not to proceed with its service plans and the obligations it undertook for Auction 903, the Company hindered the disbursement of funds that could have gone to another provider, and thereby further delayed the advancements in broadband offerings in the CBGs where it defaulted on its winning bids.  Furthermore, defaulting on bids imposes a cost to the CAF-II in administrative time spent on reviewing the bids and awarding the support.  Likewise, default negatively impacts the residents of the corresponding CBGs in lost opportunities and delays in launching affordable services. 
13. The Commissions Forfeiture Policy Statement The Commissions Forfeiture Policy Statement and Amendment of Section 1.80 of the Rules to Incorporate the Forfeiture Guidelines, 12 FCC Rcd 17087, 17113 (1997), recons. denied 15 FCC Rcd 303 (1999) (Forfeiture Policy Statement); 47 CFR  1.80(b).  
 specifies that the Commission shall impose a forfeiture based upon consideration of the factors enumerated in section 503(b)(2)(E) of the Act, 47 U.S.C.  503(b)(2)(E), such as 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 such other matters as justice may require. Forfeiture Policy Statement, 12 FCC Rcd at 17100-101, para. 27.
  Moreover, section 312(f)(1) of the Act defines willful as the conscious and deliberate commission or omission of such act, irrespective of any intent to violate . . . any rule or regulation of the Commission . . . . 47 U.S.C.  312(f)(1) (emphasis added).  The legislative history to Section 312(f)(1) of the Act clarifies that this definition of willful applies to both Sections 312 and 503(b) of the Act, H.R. Rep. No. 97-765, 97th Cong. 2d Sess. 51 (1982), and the Commission has so interpreted the term in the Section 503(b) context.  See, e.g., Southern California Broadcasting Co., 6 FCC Rcd at 4388.
  As discussed herein, the Company agreed, prior to participating in Auction 903, to be subject to a forfeiture in the event of default.  Additionally, the Company was cautioned to carefully craft its plans to meet all auction requirements and to prepare for any complications that could occur. Phase II Auction Procedures Public Notice, 33 FCC Rcd at 1471-2, paras. 111-119.
  In considering these factors as well as the procedures established for Auction 903 and the Forfeiture Policy Statement we believe that a forfeiture is warranted against the Company for its apparent willful violation of section 1.21004 of the Commissions rules and the procedures established for Auction 903.
14. We also find that the Company has apparently committed two violations by defaulting on winning bids in two distinct CBGs.  For Auction 903, the Commission established a base forfeiture of $3,000 per violation in the event of an auction default, meaning there would be a separate violation for each geographic unit subject to a bid. Id.
  The Commission deemed a $3,000 base forfeiture appropriate, explaining that it was equivalent to the base forfeiture usually imposed for failing to file required forms or information with the Commission, as the Commission would be prevented from assessing a winning bidders qualifications.  Acknowledging that not all defaults would relate to the failure to submit the required forms or information, the Commission nonetheless concluded that for administrative simplicity and to provide bidders with certainty as to the base forfeiture that would apply for all pre-authorization defaults, it was reasonable to subject all bidders to the same $3,000 base forfeiture per violation.  Therefore, the Companys default in two distinct geographic units subjects it to a $6,000 base forfeiture. 
15. The $6,000 base forfeiture, however, exceeds the caps established for default penalties in Auction 903.  To prevent the base forfeiture amount from being disproportionate to the amount of a winning bidders bids, the Commission limited the total base forfeiture for Auction 903 to 5% of the bidders total assigned support for the CBG in which it was defaulting. Phase II Auction Order, 31 FCC Rcd at 6000-01, para. 144; Phase II Auction Procedures Public Notice, 33 FCC Rcd at 1521, para. 315.  This would occur in situations where the dollar amount associated with the bid is low.  For example, assume Bidder As winning bid includes 100 CBGs for $100,000 over the 10-year support term.  We may impose a base forfeiture of $5,000 (5% of $100,000) because otherwise the base forfeiture would be $300,000 ($3,000 x 100 CBGs), which is three times the entire bid amount.  In contrast, if Bidder Bs winning bid includes 100 CBGs for $7,000,000 over the support term, we may impose a base forfeiture of $300,000 ($3,000 x 100 CBGs), which is 4.3% of the total bid.
  The Commission regarded 5% of the total bid amount as not unduly punitive, while providing sufficient incentive for auction participants to diligently inform themselves of the obligations associated with participation in the auction. Mobility Fund Phase I Auction Procedures Public Notice, 27 FCC Rcd at 4777, para. 187; Tribal Mobility Fund Phase I Auction Procedures Public Notice, 28 FCC Rcd at 11692, para. 214. 
  The Companys total winning bids amounted to $71,254.00 thereby capping the maximum forfeiture at $3,563.00, which is 5% of the Companys total support won in the areas of default.  Thus, in accordance with the Auction 903 Procedures Public Notice, we will limit the Companys forfeiture to $3,563.00, or 5% of the Companys total winning bids for Nevada and Nebraska.
16. Finally, after considering all the circumstances presented in the instant case, we conclude that a departure from the base forfeiture is not warranted here.  For Auction 903 defaults, the Commission allowed for adjustment of the total base forfeiture, upward or downward, based on the criteria set forth in the Commissions forfeiture guidelines, notwithstanding the 5% limitation on base forfeitures as discussed above. See 47 U.S.C.  503(b)(2)(B); 47 CFR  1.80(b)(8), note to paragraph (b)(8); Phase II Auction Order, 31 FCC Rcd at 6000-01, para. 143; Phase II Auction Procedures Public Notice, 33 FCC Rcd at 1521, para. 315.
  However, on balance, we find that there are no other factors present in the instant case that would justify a departure from the established base forfeiture.  Accordingly, we find that a forfeiture in the amount of $3,563.00 against the Company is appropriate here. 
IV. ORDERING CLAUSES
17. ACCORDINGLY, IT IS ORDERED, pursuant to section 503(b) of the Communications Act 47 U.S.C. 503(b).
 and section 1.80 of the Commissions rules, 47 CFR 1.80.
 that LTD Broadband LLC, is hereby NOTIFIED of its APPARENT LIABILITY FOR FORFEITURE in the amount of three thousand five hundred sixty-three dollars ($3,563) for its willful violation of section 1.21004(a) of the Commissions rules, 47 CFR 1.21004(a).
 and the procedures established specifically for Auction 903 in the Phase II Auction Procedures Public Notice.
18. IT IS FURTHER ORDERED, pursuant to section 1.80 of the Commissions rules, 47 CFR 1.80.
 that within thirty (30) calendar days of the release date of this Notice, LTD Broadband LLC, SHALL PAY the full amount of the proposed forfeiture or SHALL FILE a written statement seeking reduction or cancellation of the proposed forfeiture consistent with paragraph 21 below.
19. LTD Broadband LLC, shall send electronic notification of payment to Jeffrey Gee and to Genevieve Ross, Enforcement Bureau, Federal Communications Commission, at Jeffrey.Gee@fcc.gov and Genevieve.Ross@fcc.gov, on the date said payment is made.  Payment of the forfeiture must be made by wire transfer, credit card, or ACH (Automated Clearing House) debit from a bank account using the Commissions Fee Filer (the Commissions online payment system). Payments made using the Commissions Fee Filer system do not require the submission of an FCC Form 159.
  The Commission no longer accepts forfeiture payments by check or money order.  Below are instructions that payors should follow based on the form of payment selected: For questions regarding payment procedures, please contact the Financial Operations Group Help Desk by phone at 1-877-480-3201 (option #6), or by e-mail at ARINQUIRIES@fcc.gov.
	
 Payment by wire transfer must be made to ABA Number 021030004, receiving bank TREAS/NYC, and Account Number 27000001.  A completed Form 159 must be faxed to the Federal Communications Commission at 202-418-2843 or e-mailed to RROGWireFaxes@fcc.gov on the same business day the wire transfer is initiated.  Failure to provide all required information in Form 159 may result in payment not being recognized as having been received.  When completing FCC Form 159, enter the Account Number in block number 23A (call sign/other ID), enter the letters FORF in block number 24A (payment type code), and enter in block number 11 the FRN(s) captioned above (Payor FRN). Instructions for completing the form may be obtained at http://www.fcc.gov/Forms/Form159/159.pdf. 
  For additional detail and wire transfer instructions, go to https://www.fcc.gov/licensing-databases/fees/wire-transfer.  
 Payment by credit card must be made by using the Commissions Fee Filer website at https://apps.fcc.gov/FeeFiler/login.cfm.  To pay by credit card, log in using the FRN captioned above.  If payment must be split across FRNs, complete this process for each FRN.  Next, select Pay bills on the Fee Filer Menu, and select the bill number associated with the NAL Account  the bill number is the NAL Account number with the first two digits excluded  and then choose the Pay by Credit Card option.  Please note that there is a $24,999.99 limit on credit card transactions.
 Payment by ACH must be made by using the Commissions Fee Filer website at https://apps.fcc.gov/FeeFiler/login.cfm.  To pay by ACH, log in using the FRN captioned above.  If payment must be split across FRNs, complete this process for each FRN.  Next, select Pay bills on the Fee Filer Menu and then select the bill number associated to the NAL Account  the bill number is the NAL Account number with the first two digits excluded  and choose the Pay from Bank Account option.  Please contact the appropriate financial institution to confirm the correct Routing Number and the correct account number from which payment will be made and verify with that financial institution that the designated account has authorization to accept ACH transactions.
20. Any request for making full payment over time under an installment plan should be sent to:  Chief Financial OfficerFinancial Operations, Federal Communications Commission, 445 12th Street, SW, Room 1-A625, Washington, DC 20554. See 47 CFR  1.1914.
  Questions regarding payment procedures should be directed to the Financial Operations Group Help Desk by phone, 1-877-480-3201, or by e-mail, ARINQUIRIES@fcc.gov.
21. The written statement seeking reduction or cancellation of the proposed forfeiture, if any, must include a detailed factual statement supported by appropriate documentation and affidavits pursuant to sections 1.16 and 1.80(f)(3) of the rules. 47 CFR  1.16, 1.80(f)(3).
  The written statement must be mailed to the Office of the Secretary, Federal Communications Commission, 445 12th Street, SW, Washington, DC 20554, ATTN:  Enforcement Bureau, Investigations and Hearings Division, and must include the NAL/Account Number referenced in the caption.  The statement must also be e-mailed to Jeffrey Gee and to Genevieve Ross, Enforcement Bureau, Federal Communications Commission, at Jeffrey.Gee@fcc.gov and Genevieve.Ross@fcc.gov.
22. The Commission will not consider reducing or canceling a forfeiture in response to a claim of inability to pay unless the petitioner submits:  (1) federal tax returns for the most recent three-year period; (2) financial statements prepared according to generally accepted accounting practices; or (3)some other reliable and objective documentation that accurately reflects the petitioners current financial status.  Any claim of inability to pay must specifically identify the basis for the claim by reference to the financial documentation.
23. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability For Forfeiture shall be sent, by Certified Mail Return Receipt Requested, to Corey Hauer, CEO, LTD Broadband LLC, 69 Teahouse Street, Las Vegas, NV 89138.

						FEDERAL COMMUNICATIONS COMMISSION



____________________
Rosemary C. Harold 
Chief 
Enforcement Bureau 


8