FCC Proposes $100K Fine For Prohibited Communications in Auction 904

On May 3, 2022, the Enforcement Bureau (“Bureau”) released a Notice of Apparent Liability for Forfeiture (“NAL”) proposing a $100,000 forfeiture against LTD Broadband LLC (“LTD”) for repeatedly engaging in prohibited communications of its bidding strategies during the Rural Digital Opportunity Fund (“RDOF”) Phase I Auction (“Auction 904”) in violation of section 1.21002(b) of the FCC’s rules, and its failure to timely report such prohibited communications.  During the period where the prohibition regarding certain communications was in effect (the “Quiet Period”), LTD, an Auction 904 applicant, sought investments through its agent, RJM, which resulted in shared information regarding its bids, bidding strategies, and bidding outcomes with Cox, another Auction 904 applicant, during the Quiet Period.  This NAL underscores the importance of complying with the FCC’s anti-collusion/prohibited communications rules.

Though LTD informally conveyed to RJM that they should be careful when speaking with other Auction 904 applicants, LTD took none of the “appropriate steps” that the Commission advised Auction 904 applicants take to prevent third parties from becoming a “conduit for prohibited communications to other applicants, which would violate the rule.”  For instance, LTD could have executed an auction-specific non-disclosure agreement with RJM, before authorizing RJM to solicit funding for LTD’s broadband expansion, which could have prevented prohibited communications between Cox and RJM during the Auction 904 Quiet Period.  Note that while these types of “firewalls” are helpful, the Bureau warned that even if LTD took such a step to assist in preventing prohibited communications, that in itself is not an absolute defense when violations do occur.  Ultimately, it is the Auction 904 applicant’s responsibility to ensure its agents do not become a “conduit” for prohibited communications during the Quiet Period.

The Bureau concluded that LTD, through RJM, violated Section 1.21002(b) and (e) by sharing information regarding its bids, bidding strategies, and bidding outcomes with Cox, during the quiet period.  The Bureau also found that LTD took none of the recommended or appropriate steps to prevent third parties from becoming a conduit for prohibited communications, such as implementing a firewall or auction-specific non-disclosure agreement with said third party.   LTD further violated the rules when it failed to report the prohibited communications within five business days of their occurrence.  As a result of these violations, the Bureau proposed a $100,000 forfeiture, as has been customarily applied in such cases.

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