FCC Cancels 2016 Notice of Apparent Liability Against AT&T Because of Technicality

In 2016, the Federal Communications Commission issued a Notice of Apparent Liability for Forfeiture (NAL) to BellSouth Telecommunications (d/b/a AT&T Southeast) for apparently failing to charge two Florida school districts the lowest corresponding price for telecommunications services it provided under the E-Rate program. Specifically, the NAL proposed a forfeiture of $106,425 against AT&T for apparent violation of section 254(h)(1)(B) of the Communications Act of 1934, as amended (the Act) and section 54.511(b) of the FCC’s rules. Because the Act requires the FCC to issue a notice of apparent liability within one year of a violation and these apparent violations occurred more than one year prior to the issuance of the NAL, the FCC cancels the NAL and proposed forfeiture.

FCC Commissioner Michael O'Rielly said, "I fully support the decision to cancel this Notice of Apparent Liability and proposed forfeiture. The previous Commission’s attempt to evade the applicable statute of limitations through its continuing violation theory was offensive to the rule of law and must be thoroughly rejected.... According to the facts in the record, the two school districts in question chose to purchase services on a month-to-month basis directly from AT&T, rather than through the statewide consortium’s multi-year contract. Requiring AT&T to charge those school districts the same rates charged to those buying services from the bulk consortium contract would be a misapplication of our “lowest corresponding price” rule, which prohibits service providers from charging E-Rate eligible entities a price above what they charge “similarly situated” non-residential customers for “similar services.”

"I respect my colleagues’ decision today to conclude that this prior effort was procedurally untimely," said FCC Commissioner Jessica Rosenworcel. "However, I supported the underlying NAL and continue to believe that there are merits to our earlier approach. In particular, I believe our initial decision would support greater accountability with respect to universal service funds than the course the agency adopts today."

FCC Commissioner Geoffrey Starks said, "I do not disagree with today’s outcome, but I want to emphasize how much more needs to be done to give the lowest corresponding price rule the teeth it needs. The rule requires E-Rate service providers to offer participating schools and libraries rates at or below what they charge similarly situated customers for the same services—protecting schools, libraries, and the Universal Service Fund from inflated prices.... Going forward, we may need to adjust our rules or enforcement practices to ensure we actually punish and deter violations of the lowest corresponding price rule. Detecting these violations is challenging, and the Universal Service Administrative Company is our first line of defense. Due to the timing of various steps in the E-Rate funding cycle, however, USAC may not learn about the price a service provider has charged an E-Rate beneficiary until weeks or months later. The Commission should consider how we can best promote timely detection of violations to avoid future problems with the statute of limitations. If we don’t, schools and libraries will not get the full benefit of the lowest corresponding price rule."