TESTIMONY OF COMMISSIONER AJIT PAI, FEDERAL COMMUNICATIONS COMMISSION
BEFORE THE SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY OF THE UNITED STATES HOUSE OF REPRESENTATIVES COMMITTEE ON ENERGY AND COMMERCE 
“OVERSIGHT OF THE FEDERAL COMMUNICATIONS COMMISSION”
NOVEMBER 17, 2015


One last concern I raise for the Subcommittee's consideration is the agency's enforcement process.  Chairman Upton, Subcommittee Chairman Walden, and Subcommittee Vice Chairman Latta wrote the Comptroller General last month to request an investigation into the management of the Commission's largest subdivision, the Enforcement Bureau.  They were right to do so. To be blunt, the FCC's enforcement process has gone off the rails.  Instead of dispensing justice by applying the law to the facts, the Commission has focused on issuing headline-grabbing fines, regardless of the legality of its actions. 

Things did not use to be that way.  Under Chairman Genachowski's leadership, I only dissented on one Enforcement Bureau action.  That was a partial dissent based on my belief that the forfeiture proposed by the Commission was too low.  Under Acting Chairwoman Clyburn's leadership, I did not dissent on any Enforcement Bureau actions — not one.  But in the last thirteen months, I have voted against ten such items. To be clear, I haven't changed my approach to enforcement.  It's pretty simple: we establish rules in advance; we analyze all facts relevant to an allegation; we determine liability; we fix a penalty.  But the agency's enforcement approach has changed dramatically.

Consider the $100 million fine the FCC issued against AT&T this summer for allegedly failing to disclose that unlimited-data-plan customers could have their data speeds reduced temporarily as part of the company's approach to managing network congestion.  In that case, AT&T posted disclosures on its website and at the point of sale.  It publicized its program through the national press.  It disclosed the program to every single unlimited-data-plan customer.  And it sent targeted disclosures to every single customer actually affected by the program.  All of this fit the FCC's previous interpretation of its transparency rule to a T.  And AT&T had implemented its program after the FCC had explicitly approved similar programs on at least three separate occasions as innovative ways to manage network congestion. But these facts and precedents did not matter—all because they got in the way of a $100 million headline.

Or consider the $30 million in fines the FCC recently issued to six prepaid calling card providers.  Although the companies' conduct was shameful, the agency's authority to impose forfeitures was fatally compromised by its own inadequate and incomplete investigation — one that failed, among other things, to specifically identify even a single purchase of a prepaid calling card, as required by the Communications Act.

Sadly, these cases are not even the most egregious violations of due process.  A fundamental tenet of the American legal system is that the government cannot sanction you for violating the law unless it has told you what the law is.  In the regulatory context, that means that rules must exist before the FCC can enforce them.

But TerraCom didn't break the FCC's rules. Last year, the FCC proposed to fine that company $10 million for failing to protect personally identifiable information (also known as PII) and failing to notify certain customers of a PII data breach.  The problem?  The Commission had never interpreted the Communications Act to require the protection of PII.  The Commission had never obligated carriers to notify consumers of a data breach of PII.  The Commission had never adopted rules regarding the misappropriation, breach, or unlawful disclosure of PII.  Indeed, the Commission could not point to a single rule that TerraCom had violated. And M.C. Dean didn't violate any FCC rules either.  

Earlier this month, the agency accused the company of using an unlicensed Part 15 device to intentionally disrupt the operation of another. But the Commission had never interpreted the Communications Act to prohibit this.  And our own rules expressly allow that conduct.  They hold that, by definition, a Part 15 device cannot cause harmful interference to another Part 15 device.  The litigation mess to come didn't have to be.  In my view, the FCC should have rules that prohibit Wi-Fi blocking, but we don't.  And it's not for the lack of any opportunity.  Over a year ago, parties asked the Commission to adopt regulations on Wi-Fi blocking, and a broad cross-section of stakeholders urged the FCC to clarify the rules of the road.  But instead, Commission leadership made it clear that no such guidance would be provided and the agency ultimately dismissed the petition. 

One more problem traces through the Commission's recent enforcement actions:  The penalties prescribed regularly appear to be plucked from thin air.  The FCC offered no basis for fining AT&T $100 million, only asserting that applying the statutory maximum would lead to an “astronomical figure.”  In TerraCom's case, the Commission calculated the base penalty to be $9 billion — but decided without further explanation that $10 million was sufficient.  With such an implausibly large range of forfeitures, the agency has arrogated for itself the roles of judge, jury, and executioner.  For what company can risk exposure to virtually limitless liability?

Congress never intended the FCC to assert that a company has violated never-adopted rules, to ignore facts that get in the way of good press, or to calculate potential forfeitures so implausibly large that any rough justice penalty will do. When Congress adopted the Administrative Procedure Act, it laid out clear guideposts for how agencies should carry out their statutory duties.  We are supposed to provide fair notice to parties of what the law requires.  Next, we are supposed to investigate conduct, taking into account all of the evidence. And third, we calculate forfeitures based on discrete and concrete violations of the law.  The FCC faithfully followed that formula for the first 80 years of its existence.  There's no good reason why it's become such a problem of late.

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