Crime in the Suites: An Analyis of Current Issues in White Collar Defense
Posts Tagged ‘FCC’
May 02
2016

Getting Started with E-Rate

Public schools and libraries in the U.S. can save a lot of money on Internet service by applying for the Schools and Libraries Program, a federal subsidy better known as E-Rate.

E-Rate funding, capped yearly at $3.9 billion, helps eligible institutions cover costs of Internet service. Participants can save anywhere from twenty to ninety percent of their Internet expenses—the precise amount being dictated by the economic standing of both the participating institution and the school district where it is located.

E-Rate and three other programs are part of the Universal Service Fund (USF), a system of subsidies born out of the Telecommunications Act of 1996 as a way to ensure affordable telecom rates across the country. Although the Federal Communications Commission (FCC) oversees the USF, the fund is managed by a nonprofit corporation called the Universal Service Administrative Company (USAC).

Detailed information on how to apply for E-Rate can be found in the Schools and Libraries Program overview. Basically it works as a bidding process. An applicant fills out FCC Form 470, requesting specific services, and submits it to the USAC. The USAC then issues an RFP for telecom providers who want to bid for the requested services. After 28 days, the applicant can study the bids. When it selects one, it requests E-Rate funding by filing FCC Form 471 within a deadline set by the FCC (for FY2016 it is May 26).

The discount rate is generally determined by the size of the population, in the applicant’s school district, that qualifies for the National School Lunch Program. The applicant must also file Form 486, listing services for which funds are requested and ensuring compliance with the Children’s Internet Protection Act.

There are limits to what E-Rate can cover. The applicant is solely responsible for end-user equipment, like hardware and software, and also for any non-discounted portions of Internet services.

While it is a great opportunity to save money, E-Rate isn’t a free-for-all. To discourage abuse and misuse of the program, the FCC requires applicants to comply with a series of rules, notably:

  1. Compliance with state and local law. It’s not enough to follow the FCC standards only.
  2. Applicants cannot seek discounts for services not requested. In other words, services listed on Form 471 must match (or not exceed) services requested on Form 470.
  3. Fair, competitive bidding. Applicants are responsible for ensuring an open, fair, and competitive bidding process to select the most cost-effective provider.
  4. Document retention. Applicants must save all competing bids for services to demonstrate they selected the most cost-effective bid, with price being the primary consideration. Records should be kept for at least ten years after the last date of service delivered.
  5. CIPA compliance. Applicants must confirm compliance with the Children’s Internet Protection Act, which requires schools and libraries that receive federal funding to employ Internet filters that protect children from harmful content.

 

In spite of these rules, the wealth of funds in the E-Rate program can attract abuse. In response, the FCC created the USF Strike Force in 2014 and tasked it with combatting waste, fraud, and abuse of the USF programs. Federal agents have shown that they are serious about investigating alleged abuses. One widely publicized case in Ramapo, NY, recently led to several raids. We will look at that case and others like it in upcoming posts.

Mar 31
2014

Employers Seeking to Curb Employee Mobile Phone Use at Work? Don’t Use Illegal Signal Jammer – FCC is “Listening”

Some employers, particularly those in manufacturing, health care, and other situations where mobile phone use could interfere with employee safety, have come up with novel approaches to curbing employees’ uses of mobile phones.  While a policy restricting personal phone calls and texting may be acceptable, installation of a signal jammer to prevent employees from accessing the network is unlawful and can subject the employer to significant penalties.  R&N (“RNM”) Manufacturing, Ltd.  In Houston, Texas learned this lesson the hard way when the Federal Communications Commission  (“FCC”) showed up at its manufacturing facility.

As background, RNM purchased a signal jammer online in February 2013, to prevent employees from placing wireless calls from the factory, by blocking cell phone communications.  With very limited exceptions, the Communications Act and the FCC’s rules bar the importation, use, marketing, manufacturing, and sale of jammers.  Jammers may be available for sale all over the Internet, but they are prohibited.  The reason behind this prohibition is that jammers can interfere with emergency and other communications services, including GPS. Signal jammers typically transmit high-powered radio signals that interfere with authorized communications.  The interference can, among other dangers, place first responders and the public at risk if critical communications cannot be transmitted.

AT&T determined that a signal originating from RNM’s Houston facilities was interfering with AT&T’s signal, and reported the interference to the FCC’s Enforcement Bureau. FCC field agents in Houston conducted an investigation and found strong signals coming from RNM’s Houston facility.  The agents subsequently visited the facility to determine the source of the interference and to notify a corporate officer.  RNM’s CFO confirmed the jammer and promised to discontinue the jammer’s use. A formal enforcement action followed.

After analyzing the facts and the agency’s forfeiture guidelines, the FCC imposed a forfeiture on RNM of $29,250 for the 10-day operation (and the voluntary relinquishment of the illegal device).  While this is not a huge penalty, the FCC noted that it could have imposed a forfeiture in excess of $337,000 had it imposed a straightforward application of the statutory maximum.

There are a few important points to note here. First, employers seeking to curb employee mobile use should rely on policies and enforcement, rather than “self-help” through installation of their own devices.  While jammers are available for purchase online – they are illegal irrespective of what a website might advertise. 

Second, while companies might not expect an FCC official to show up at their door for an investigation, the agency (like many other agencies) has field agents and they do conduct on-site investigations – including without notice.  All organizations should have a designated officer or senior employee who is trained to interface with investigators.  Outside counsel can also be key here to interact with the agents and help guide the company through the audit.

Third, monetary penalties can be steep.  A mere 10 days’ use of the signal jammer cost RNM a nearly $30,000 penalty plus likely legal fees and employee time. Had RNM been using the cell jammer over a longer time period, it could have faced a six-figure fine.

Fourth, even though RNM was not an “FCC-regulated” entity such as a broadcast station, telecom company, etc., it understood the need to be responsive and to take the matter seriously.  Just because a company is not regularly under an agency’s jurisdiction doesn’t mean it is not subject to the agency’s enforcement powers.  Federal agencies such as the FCC and FTC enforce laws with wide-ranging implications and can subject companies in various industries to their jurisdiction.

The FCC’s Notice of Apparent Liability for Forfeiture is available here.

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About Ifrah Law

Crime in the Suites is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, health care, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen and George Calhoun, counsels Jeff Hamlin and Drew Barnholtz, and associates Rachel Hirsch, Nicole Kardell, Steven Eichorn, David Yellin, and Jessica Feil. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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