AT&T Lightly Chastised for Airwave Piracy

Late last week the Federal Communications Commission released a Notice of Apparent Liability against AT&T for running microwave radio links without the proper licenses. These links are often used as point-to-point backhauls to move data long distances, and sometimes they are used to connect cell nodes in remote locations to the larger network.
The shenanigans first came to light in 2011, when the FCC found an AT&T microwave link in Puerto Rico that was operating on the wrong frequency. The company subsequently conducted a review and found that hundreds of its microwave links were operating outside of licensed parameters and, in some cases, were not licensed at all. AT&T claims these links were part of acquisitions it made from 2009-2012, and in simple terms neglected to file the right paperwork to adequately license them. But the scale of the problem isn’t minor: at least 240 point-to-point microwave licenses in all require either major modifications or minor modifications to be brought into compliance. All have been operating outside license parameters (or without licenses at all) for three to four years.
What’s worse, when the FCC first inquired to AT&T about these problems, the company acknowledged them, but has done little to actually file the requisite license applications and modification-forms in the intervening years. Thus the Commission considers AT&T to have willfully and repeatedly violated its rules, which all but guarantees some level of punishment.
For running roughshod over its licensing rules, the Commission proposes to fine AT&T $640,000. “But Anderson, you said AT&T was lightly chastised! $640k is a lot of money!” To us, perhaps…but to a company with a market cap of $174 billion, that generated $34 billion revenue in the last quarter alone, it’s not even a rounding error. The Commission had the option of assessing AT&T up to $1.5 million per violation, but instead based its proposed fine on the bare minimums ($4,000 for each instance of unlicensed operation, and $3,000 for each instance of out-of-variane operation). It also assessed penalties on just a fraction of the microwave links caught up in this snafu, making the FCC’s proposed base forfeiture just $128,000—with another half-million tacked on for AT&T’s “untimely review” of its microwave-link acquisitions. Still, the FCC expects this will serve as an “effective deterrent” to similar behavior in the future.
AT&T has 30 days from the NAL’s publication to appeal, which they probably will. Once that wrangling is finished, it’ll be interesting to see if the FCC sticks to its popguns. The Republican Commissioners are all but endorsing a skirmish. Ajit Pai accuses the agency of not being transparent enough in its investigation and rationale for how it figured the forfeiture amount. “[I]t’s difficult to assess how egregious [AT&T’s conduct] was because critical information about the company’s conduct remains unknown,” Pai lamented. Of course, Pai’s barb is answered in the NAL document itself (p. 2, footnote 13), in which AT&T requested confidentiality in this case, and the NAL itself “relies on publicly available information.” Fellow Republican Mike O’Reilly dissented in part from the NAL, similarly lambasting the FCC’s rationale for determining the size of the proposed fine. He is most worried about how the agency increased the penalty—a practice he describes as tantamount “to a traffic cop issuing a speeding ticket and then trying to increase the size of the fine because the motorist admitted to speeding last week when no cops were around.”
The proposed forfeiture constitutes just .000005% of AT&T’s annual revenue, so it’s a bit curious that Pai and O’Reilly are so heavily invested in this case’s outcome. Tnen again, it’s another example of the double-standard the FCC has when it comes to piracy on the airwaves. If you’re an unlicensed broadcaster on the AM, FM, or shortwave dials, you face a base penalty of $10,000 per violaton, and the feds have the option of pursuing criminal charges. But corporate piracy is considered not that big a deal.
AT&T’s case sounds quite similar to that of Sirius and XM satellite radio, who committed piracy on a remarkable scale. During their merger-dance, it was revealed that the vast majority of their networks of terrestrial repeater stations (to which the vast majority of satellite radio listeners actually receive their signals) were either wholly unlicensed or operating far outside their licensed parameters. Hundreds of stations were involved, and the companies ponied up a combined $19.7 million to the FCC in 2008 as part of the agency’s approval of their combination—a pittance relative to the $13 billion value of the merger itself.
A slew of companies along the California/Mexico border were simiarly caught using unlicensed point-to-point wireless links, for which the FCC fined them between $4,000 and $10,000 apiece. A company that operated an unlicensed two-way radio network on the grounds of New York’s JFK Airport was penalized a paltry $5,000.
In the broadcast realm, corporate pirates get special breaks, too. If you’ve been contacted by the FCC for operating a pirate station, you’re barred from even applying for an LPFM license. But if you’re a commercial broadcaster who openly flaunts the license rules for multiple stations, the FCC may take some away but will let you keep some, too. Pirate broadcasting at sporting events seems semi-permissible: a company contracted to run mini-FM stations for the 2003 Super Bowl went rogue, and suffered just $12k in fines, while a Texas racetrack owner caught running pirate stations in 1999 placed a call to his Congressman and got Clinton-appointed FCC Chairman William Kennard to specially bless his operations.
Then there’s plain old well-connectedness, such as Nevada microbroadcaster Radio Goldfield’s contacts with Senator Harry Reid after a visit from the FCC in 2007. He secured the station a temporary LPFM license, which has since been parlayed into a full-power station license. So I’m much less worried than Pai and O’Reilly about the agency’s transparency than I am about its inconsistency, and that’s a bipartisan problem.