STATEMENT

of

DAVID H. SOLOMON

Chief, Enforcement Bureau

Federal Communications Commission

Before the

Subcommittee on Telecommunications and the Internet

of the House Committee on Energy and Commerce

on

H. R. 1765

Thursday, May 17, 2001

10:00 a.m.

2123 Rayburn House Office Building

SUMMARY OF STATEMENT OF

DAVID H. SOLOMON, CHIEF, ENFORCEMENT BUREAU

**BEFORE THE**

**SUBCOMMITTE ON TELECOMMUNICATIONS AND THE INTERNET**

**OF THE HOUSE COMMITTEE ON ENERGY AND COMMERCE**

**MAY 17, 2001**

Strong and effective enforcement is critical to implementation of the
Telecommunications Act of 1996. Chairman Powell has emphasized on
numerous occasions his strong commitment to enforcement as a central
part of his vision for a more effective FCC dedicated to implementing
the competitive and deregulatory vision of Congress in the 1996 Act.
Within the scope of responsibilities Congress has delegated to the
Commission, he has charged the Enforcement Bureau to move quickly to
respond to complaints or requests for investigations that we receive.
Only in partnership with the states can we facilitate compliance with
the local competition provisions of the 1996 Act and we will continue to
work with the states to do so.

As Chairman Powell recently indicated in a letter to the leaders of the
House and Senate Commerce and Appropriations Committees, attached to my
testimony, the effectiveness of the Commission's enforcement efforts
could be increased with the help of Congress. We are pleased that H.R.
1765 incorporates certain proposals made by Chairman Powell and, not
surprisingly, we strongly support these measures.

*Statutory Forfeiture Caps.* Given the vast resources of the nation's
large common carriers, including incumbent local exchange carriers and
long distance carriers, the existing caps on common carrier forfeitures
of \$120,000 per violation or per day of a continuing violation, up to
\$1.2 million overall for a continuing violation, are an insufficient
sanction or deterrent in many instances.

The proposed 10-fold statutory increases -- to \$1 million and \$10
million -- would significantly strengthen our enforcement authority
against incumbent local exchange carriers and other common carriers.
Through deterrence as well as the impact of sanctions that are imposed,
we believe this should increase compliance with the Act and the
Commission's rules, to the overall benefit of consumers.

*Statute of Limitations.* As Chairman Powell has noted, the one-year
statute of limitations for common carriers has often proved an
impediment to the Commission's enforcement actions. While it is
certainly important that the Commission commence forfeiture proceedings
before the evidence relating to the alleged violation becomes stale, it
is imperative that the Commission have enough time to conduct a
meaningful investigation into the matter before issuing a publicly
available notice charging the carrier with apparent misconduct. The
proposed extension of the statute of limitations to two years would give
the Commission the needed flexibility to proceed with its investigations
without running up against an artificially short deadline.

Good morning Mr. Chairman and members of the Subcommittee. I am pleased
to appear today on behalf of FCC Chairman Michael K. Powell regarding
H.R. 1765. We appreciate the interest of Chairman Upton and others on
the Subcommittee and the full Committee in enhancing our enforcement
tools.

Strong and effective enforcement is critical to implementation of the
Telecommunications Act of 1996. Chairman Powell has emphasized on
numerous occasions his strong commitment to enforcement as a central
part of his vision for a more effective FCC dedicated to implementing
the competitive and deregulatory vision of Congress in the 1996 Act.
Within the scope of responsibilities Congress has delegated to the
Commission, he has charged the Enforcement Bureau to move quickly to
respond to complaints or requests for investigations that we receive.
Only in partnership with the states can we facilitate compliance with
the local competition provisions of the 1996 Act and we will continue to
work with the states to do so.

Our common carrier enforcement efforts generally take place in one of
three contexts. First, through the formal complaint process set out in
section 208 of the Communications Act, the Commission decides formal
complaints between private parties. These are generally the equivalent
of private law suits filed in court. Second, as an adjunct to the formal
complaint process, Enforcement Bureau staff provides mediation
assistance to litigants or potential litigants in an effort to help them
reach a private settlement of their disputes where feasible. Third, the
FCC conducts informal investigations pursuant to sections 218, 403 and
503(b) of the Communications Act. These investigations may lead to
monetary forfeitures or consent decrees. While outside entities
sometimes informally bring information to our attention in connection
with such investigations, they are not parties to the investigation or
any subsequent forfeiture proceeding. The only party to this type of FCC
investigation is the subject of the investigation.

As Chairman Powell recently indicated in a letter to the leaders of the
House and Senate Commerce and Appropriations Committees, which I have
attached to my testimony, the effectiveness of the Commission's
enforcement efforts could be increased with the help of Congress. We are
pleased that H.R. 1765 incorporates certain proposals made by Chairman
Powell and, not surprisingly, we strongly support these measures.

Specifically, I'd like to focus my remarks on two provisions of H.R.
1765 that would amend section 503(b) of the Communications Act: (1) the
increase in the caps on the Commission's forfeiture authority for common
carriers; and (2) the lengthening of the statute of limitations period
for such forfeitures. Both of these provisions relate to the informal
investigation process I mentioned before.

# **Statutory Forfeiture Caps**

Right now, under section 503(b) of the Communications Act and the
inflationary adjustments provided for under the Debt Collection
Improvement Act of 1996, the Commission can fine common carriers only
\$120,000 per violation or per day of a continuing violation. In the
case of a continuing violation, the total fine cannot exceed \$1.2
million. Given the vast resources of the nation's large common carriers,
including incumbent local exchange carriers and long distance carriers,
this amount is an insufficient sanction or deterrent in many instances.

H.R. 1765 would increase the statutory caps 10-fold to \$1 million per
violation or per day of a continuing violation and \$10 million for
continuing violations. We think these statutory increases would
significantly strengthen our enforcement authority against incumbent
local exchange carriers and other common carriers. Through deterrence as
well as the impact of sanctions that we impose, we believe compliance
with the Act and the Commission's rules should be increased, to the
overall benefit of consumers. We thus strongly support this provision.
For similar reasons, we also support the proposal to increase the caps
to \$2 million and \$20 million in situations where a carrier has
violated a cease and desist order or where there has been a repeated
violation that has caused harm to competition.

I.  ***Statute of Limitations***

In addition to setting out forfeiture caps, Section 503(b) of the
Communications Act spells out the procedure for the imposition of
forfeitures and the timetable for the initiation of such actions. Under
the statute, the Commission may impose a forfeiture through a hearing
that begins with a Notice of Opportunity for Hearing or through a paper
process that begins with a Notice of Apparent Liability. Under either
process, the Commission may not impose a forfeiture penalty unless the
carrier is notified of the charges and provided an opportunity to
respond. For common carriers, the requisite notice must be issued within
one year of the violation or violations at issue.

As Chairman Powell has noted, this one-year limitations period has often
proved an impediment to the Commission's enforcement actions. While it
is certainly important that the Commission commence forfeiture
proceedings before the evidence relating to the alleged violations
becomes stale, it is imperative that the Commission have enough time to
conduct a meaningful investigation into the matter before issuing a
publicly available notice charging the carrier with apparent misconduct.

Let me explain some of the practical constraints that the one-year
limitation creates. In some situations, the Commission first hears about
a violation from information informally provided by a competitor that
has been harmed by the alleged violation. This can take several months
as the harmed competitor determines whether there is a serious violation
or pattern of violations at issue. In other instances, we are first
notified of potential violations through incumbent carriers' required
filings with the Commission, which often cover time periods dating back
many months. Thus, when the Commission receives these reports, we are
often already fairly deep into the limitations period. Moreover, once we
start an investigation, much of the evidence relating to the alleged
violation resides with the carrier whose conduct is under investigation.
Accordingly, in both types of situations, to determine whether there is
sufficient evidence of a violation to proceed, the Bureau is often
required to send a letter to the carrier requiring the submission of
relevant information and documents, and then await the carrier's
response. Moreover, because some carriers employ mechanisms to slow the
progress of our investigations, the Bureau is often required to send
follow-up letters to the carrier before obtaining the information
sought. This cuts still further into the limitations period.

Because of the one-year statute of limitations for forfeiture
proceedings, there have been instances in which the Commission has been
constrained from commencing forfeiture proceedings. In other instances,
we have been put in the unfortunate position of requesting that the
subject carrier enter into an agreement to toll the running of the
limitations period. While carriers often agree to such arrangements when
they believe it is in their interest to do so, they do sometimes refuse.
When they refuse, the Commission is left racing against the clock to
make a decision on whether or not to initiate a forfeiture proceeding
before the limitations period expires.

These problems would be largely solved if the Congress were to extend
the statute of limitations in Section 503(b)(6)(B) of the Communications
Act to two years. Thus, we thus strongly support this provision in H.R.
1765 as well.

Thank you again for this opportunity to testify. I would be happy to
answer any questions you may have.