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Thank you
Mr. Chairman and Members of the Subcommittee for giving the United States
Telecom Association (USTA) the opportunity to testify and present its views on
HR 1765 your recently introduced bill to increase penalties for common carrier violations of the
Communications Act of 1934. I am
Lawrence E. Sarjeant and I serve as Vice President Regulatory Affairs and
General Counsel of USTA. I appear at
the hearing today on behalf of the entire Association, which comprises of over
1,100 members, including local exchange carriers ranging from the very smallest
and most rural telephone company to the Bell Operating Companies, as well as
non-ILEC affiliated CLECs.
Of
course, I am not here today to say that we warmly welcome and embrace you and
your co-sponsors’ efforts to increase enforcement penalties. Having said that, we realize that
policymakers such as yourself and your co-sponsors believe that there needs to
be more enforcement and increased penalties for violations of the Act or the
Federal Communications Commission (Commission) rules when the deregulation
contemplated by H.R. 1542 occurs. Under
those circumstances, it seems that the purposeful thing for us to do is to
provide you with the benefit of our thoughts and observations regarding the
enforcement process and to make suggestions to you concerning how it can be
modified to better ensure fairness and equitable outcomes.
First,
let me say that one of the reasons that we believe that this effort to increase
penalties is not warranted is that effective enforcement provisions already
exist in the Act. They have been there
since 1934, but the focus seems always to be on the forfeitures under Section
503, with little attention given to Sections 207, 208 and 209.
Section
207 provides that any person,
meaning CLEC, DLEC, interexchange carrier, ISP, etc., may make a complaint to
the Commission or bring suit against the common carrier in the United States
District Court.
If
an aggrieved person brings the complaint to the Commission, then Section 208
becomes operative. Section 208 provides
that if a common carrier does or has omitted to do some act in violation of the
Communications Act, then the Commission takes up this petition. This is now done through a newly created
Enforcement Bureau established under Chairman Kennard to place more emphasis on
enforcement.
After an investigation of
not more than 5 months and a hearing, the Commission shall under Section 209
award damages if it determines the injured, complaining party is entitled to
damages. There is no statutory limit on damages and the Commission has asserted its
right to award permanent injunctive relief.
Why is this not more effective than any forfeiture under Section 503?
Process
Let
me start my process suggestions with the one that I believe is the most
important. Today, the Commission
process for imposing forfeiture penalties is what I would call an unstructured
one. There are usually no evidentiary
hearings, no testimony taken under oath and no witnesses to be cross-examined. The Commission does have the statutory
discretion to present these matters to an Administrative Law Judge pursuant to
Section 503(b)(3)(A), but it rarely, if ever, exercises this discretion. A hearing before an Administrative Law
Judge should be made mandatory if the alleged violator requests such a hearing,
especially when the action may result in a substantial forfeiture.
H.R.
1765 does not require such a hearing
before an Administrative Law Judge, and we respectfully believe that it
should. It is inappropriate and
inconsistent with accepted principles of fairness for the Commission staff to
serve as investigator, prosecutor and judge with respect to the adjudication of
allegation sufficient to trigger a notice of apparent liability (NAL). Your bill follows the approach in current
law of giving the Commission the discretion to present the issue to an
Administrative Law Judge. Your bill,
H.R. 1765, increase the penalties for some repeated violations to up to
$20,000,000. A penalty in this amount
requires, in our view, greater procedural due process, thus giving the accused
at least a fair hearing before an impartial trier of facts and a fair
opportunity to present its case, including the right to confront its accusers.
H.R.
1765 also will increase other penalties to up to $10,000,000. We believe that for these forfeitures, as
well, there should be a right to a hearing before an Administrative Law Judge,
at the option of the alleged violator.
Section 554 of the Administrative Procedures Act governs the procedures
for such a hearing. What we are seeking
here is not novel—it is common practice in state regulatory enforcement
proceedings. Penalties of any
significant amount should not be assessed without there having first been a
judicatory hearing.
Second,
another process issue is the burden of proof.
We would suggest that it be clearly established in your bill that the
burden of proof be placed upon the government.
The government should be required to prove its case by clear, cogent and
convincing evidence, the standard applied in matters such as civil fraud where
intention is required to be proven.
Willfully
Section 503(b), which H.R. 1765 amends,
provides that forfeitures will be assessed against common carriers that
willfully and repeatedly fail to comply with the provisions of the Act. We strongly urge you to define
willfully. In a recent enforcement
proceeding, the Commission issued a Notice of Apparent Liability in which it
said the following:
“It has been
long established that the word
`willfully’
as employed in Section 503(b)
of the Act,
does not require a demonstration
that… knew it was acting unlawfully.
Section
503(b) requires only a finding that…
knew it was
doing the acts in question and
that the
acts were not accidental.
We
have examined how the various Federal Courts
have interpreted the term willful in other federal statutes, and they all seem
to have at least one common theme, which is that the alleged violator must have
intended to violate the Act. The Commission says that if you did it, you
therefore did it willfully unless it was an accident. The Commission, therefore, reads the word “willfully” out of the
Act. This notion of intent to violate
the Act must in our view be an essential part of your enforcement reform
bill. Second, we would also urge that
some allowance be made in this definition for ambiguity in the rules of the
Commission which change so often. Since
1996, the Commission’s rules regarding unbundled access to network elements have
changed at least a dozen times not counting merger and Section 271 conditions
imposed by the Commission. At this
time, two Notices of Proposed Rulemaking are pending in the Advanced
Telecommunications and Local Competition dockets, which will be the Sixth
Further Notice of Proposed Rulemaking in that docket alone. The reason that they change so often is that
the Commission most continually modify and reinterpret the law based on
changing market conditions. While we
haven’t always agreed with the changes made by the Commission or its evolution
of market conditions, increasing competition requires that the FCC consider
obligatory action where market condition warrant it.
Dispute Resolution
Section 2 of H.R. 1765
provides for a Dispute Resolution process with respect to those matters that
are subject to interconnection agreements approved by a State pursuant to
Section 252. This provision makes
common sense. We believe that under the
1996 Act that these interconnection agreements are within state Public Service
Commission jurisdiction, and we welcome prompt resolution of disputes.
Section
252(c) requires that every interconnection agreement adopted by negotiation or
arbitration must be submitted to the State Public Service Commission for
approval. The Public Service Commission
has the authority to approve or reject any agreement. In other words, there is no regulatory agency in a better
position to resolve these issues than the State PSC that may have arbitrated the
agreement and had to approve it.
Section 2’s Dispute Resolution process follows the
model for disputes arising during the agreement negotiation process provided
for in Section 252 (b). The State PSC
is given sixty days to resolve a dispute.
This seems to us to be ample time.
H.R. 1765 adopts the same approach Judicial review of a State Commission
actions as is in current law regarding other interconnection agreement
determination, namely the right of any aggrieved party to bring an action in
Federal District Court to determine whether the agreement is in compliance with
Section 251.
Parity and Size of Common Carrier
The
increased forfeiture penalties in H.R. 1765 apply only to common carriers.
Why should penalties be increased only for common carriers? Why not all persons subject to the Act’s
jurisdiction such as cable companies and broadcasters. We must begin to bring greater focus to
comparable treatment for functionally equivalent services and not be driven to
disparate treatment based on the old and irrelevant labels applied to today’s
multi-services communications companies.
What is in the bill now applies to all carriers, but at the end of the
process will it apply only to incumbent local exchange carriers or will it
apply to just Bell Operating Companies.
Singling out only segments of those regulated under the same Act is a
concern to us.
Second,
Section 503(b)(2)(D) of current law will be applicable to the increased and new
penalties to be assessed under H.R. 1765.
This subparagraph (D) requires the Commission to take into account the
violators ability to pay among other considerations. Under this subparagraph; we would urge you to make clear to the
Commission that this means that smaller carriers would have their size, number
of residential subscriber and service area taken into account when prescribing
a penalty. While intended to be a
deterrent, revisions to the caps on penalties should not have unintended result
of compromising the ability of any carrier to operate as on going business
providing quality services to its customers.
Forfeitures should be proportionate and the actual affect on consumers
and competition should be taken into account.
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