Before the

[Federal Communications Commission]{.smallcaps}

# Washington, D.C. 20554

In the Matter of ) ) File No. EB-01-IH-0642

SBC Communications, Inc. )

) NAL/Acct. No. 200232080001

Apparent Liability for Forfeiture )

###### NOTICE OF APPARENT LIABILITY FOR FORFEITURE

# Adopted: November 1, 2001 Released: November 2, 2001 

By the Chief, Enforcement Bureau:

# I. INTRODUCTION

1.  In this Notice of Apparent Liability for Forfeiture ("NAL"), we find
    that SBC Communications, Inc. ("SBC") has apparently violated an
    Enforcement Bureau order that SBC submit a sworn written response,
    not later than October 22, 2001, to a Bureau inquiry conducted
    pursuant to its authority provided by the Communications Act of
    1934, as amended.[^1] Based upon our review of the facts and
    circumstances surrounding this matter, we find that SBC is
    apparently liable for a forfeiture in the amount of one hundred
    thousand dollars (\$100,000).

##### II. BACKGROUND

2\. On September 29, 2000, the Enforcement Bureau sent SBC a letter of
inquiry ("LOI") ordering SBC to provide digital subscriber line ("DSL")
provisioning and maintenance data for its affiliated Internet service
provider ("ISP") and for unaffiliated ISPs.[^2] The Bureau sent this LOI
pursuant to its investigation into whether SBC was discriminating in its
provisioning and maintenance of DSL. SBC indicated in its response to
that LOI,[^3] and in affidavits provided on December 5, 2000,[^4] that
it was unable to supply the information. The major impediment identified
by SBC was that it "has no method to identify or separate ISPs from any
other \[DSL\] customer\[s\],"[^5] and that "\[t\]herefore, a comparison
of SBC's ISPs to all other ISPs is not possible."[^6]

3.  On April 30, 2001, SBC filed comments with the Commission in an
    unrelated rulemaking proceeding, in which it stated that "SBC has
    generated data that shows that SBC's affiliated Internet ISPs and
    unaffiliated Internet ISPs received comparable treatment with
    respect to \[DSL\] provisioning and maintenance."[^7] SBC attached
    the referenced data to its comments.[^8]

4.  On October 1, 2001, the Bureau issued a supplemental LOI to SBC
    ordering the company to describe, among other things, the facts and
    circumstances surrounding the discrepancy between SBC's statements
    in October and December 2000 that it could not provide the requested
    DSL data, and SBC's statement in its April 2001 filing that it had
    such data available.[^9] The Bureau, in two separate paragraphs of
    its supplemental LOI, directed SBC to submit a "sworn written
    response" to the LOI.[^10]

5.  On October 22, 2001, SBC submitted its response to the Bureau,[^11]
    which failed to include a sworn statement, as ordered by the Bureau
    in its October 1, 2001 LOI.[^12]

6\. On October 29, 2001, Enforcement Bureau staff contacted SBC
regarding the company's omission of a sworn statement in its October 22,
2001 response. SBC orally stated to the staff that the company's failure
to submit a sworn statement was not an oversight; rather, it was
intentional.

III. **DISCUSSION**

```{=html}
<!-- -->
```
A.  

7\. Under section 503(b) of the Act, any person who is determined by the
Commission to have willfully or repeatedly failed to comply with any of
the provisions of the Act, or any rule or order issued by the Commission
under the Act, shall be liable for a forfeiture penalty.[^13] In order
to impose such a forfeiture penalty, the Commission must issue a notice
of apparent liability, the notice must be received, and the person
against whom the notice has been issued must have an opportunity to
show, in writing, why no such forfeiture penalty should be imposed.[^14]
The Commission will then issue a forfeiture if it finds by a
preponderance of the evidence that the person has violated the Act or a
Commission rule.[^15] Based on the facts set forth above, we find that
SBC is apparently liable for a forfeiture for willful violation of the
Bureau's order that SBC submit a sworn written response to the Bureau's
October 1, 2001 LOI. The term "willful" means that the violator knew it
was taking the action in question, irrespective of any intent to violate
the Commission's rules.[^16]

8\. Section 503(b)(2)(B) of the Act authorizes the Commission to assess
a forfeiture of up to \$120,000 for each violation, or each day of a
continuing violation, up to a statutory maximum of \$1,200,000 for a
single act or failure to act.[^17] In determining the appropriate
forfeiture amount, we consider the factors enumerated in section
503(b)(2)(D) of the Act, including "the nature, circumstances, extent
and gravity of the violation, and, with respect to the violator, the
degree of culpability, any history of prior offenses, ability to pay,
and such other matters as justice may require."[^18]

9.  Section 1.80 of the Commission's rules and the Commission's
    *Forfeiture Policy Statement* establish a base forfeiture amount of
    \$3,000 for failure to file required forms or information.[^19] The
    circumstances of this case, however, appear to justify a substantial
    increase to this base amount pursuant to upward adjustment criteria
    contained in the rules and the *Forfeiture Policy Statement*.
    Specifically, three factors warrant the adjustment. First, the
    misconduct appears egregious. Second, the violation was apparently
    intentional. Third, the forfeiture amount must be high enough to
    serve a deterrent effect in view of SBC's ability to pay.[^20]

10. We consider SBC's conduct in this case to be egregious because its
    failure to submit a sworn written response to the Bureau hinders the
    Bureau's investigation into SBC's possible discrimination in
    provisioning and maintenance of DSL -- a technology vital to
    competition in the ISP marketplace. Moreover, SBC's decision not to
    provide the requisite sworn statement here obstructs the Bureau's
    investigation into discrepancies in SBC's various representations to
    the Commission. SBC's conduct strikes at the core of the Bureau's
    ability to perform its function, and rises above the level of a mere
    omission or failure to file. Therefore, substantial upward
    adjustment of the proposed forfeiture amount is warranted. The fact
    that SBC apparently intentionally violated the order provides an
    additional basis for a substantial upward adjustment.

11. Finally, SBC's ability to pay warrants an upward-adjusted forfeiture
    amount to serve as a deterrent to future misconduct. In the
    *Forfeiture Policy Statement*, the Commission made it clear that
    companies with higher revenues, such as SBC,[^21] could expect
    higher forfeitures than those reflected in the base amounts:

> \[O\]n the other end of the spectrum of potential violations, we
> recognize that for large or highly profitable communication entities,
> the base forfeiture amounts . . . are generally low. In this regard,
> we are mindful that, as Congress has stated, for a forfeiture to be an
> effective deterrent against these entities, the forfeiture must be
> issued at a high level . . . For this reason, we caution all entities
> and individuals that, independent from the uniform base forfeiture
> amounts . . ., we intend to take into account the subsequent
> violator\'s ability to pay in determining the amount of a forfeiture
> to guarantee that forfeitures issued against large or highly
> profitable entities are not considered merely an affordable cost of
> doing business. Such large or highly profitable entities should expect
> in this regard that the forfeiture amount set out in a Notice of
> Apparent Liability against them may in many cases be above, or even
> well above, the relevant base amount.[^22]

12\. Based on these factors and the particular circumstances of this
case, we find that SBC is apparently liable for a forfeiture in the
amount of \$100,000. The egregiousness and intentional nature of SBC's
misconduct, as well as SBC's ability to pay, considered in conjunction
with the deterrent effect of the forfeiture, dictate that SBC be held
apparently liable for an amount significantly higher than the base
forfeiture amount set for the relevant misconduct.

> **IV. ORDERING CLAUSES**

IV. 13\. ACCORDINGLY, IT IS ORDERED THAT, pursuant to section 503(b) of
    the Act,[^23] and section 1.80 of the Commission's Rules,[^24] SBC
    Communications is HEREBY NOTIFIED of its APPARENT LIABILITY FOR
    FORFEITURE in the amount of one hundred thousand dollars (\$100,000)
    for willfully violating an Enforcement Bureau directive to submit
    timely a sworn written response to a Bureau letter of inquiry.[^25]

```{=html}
<!-- -->
```
14. IT IS FURTHER ORDERED THAT, pursuant to section 1.80 of the
    Commission's Rules, within thirty (30) days of the release date of
    this NOTICE OF APPARENT LIABILITY, SBC Communications SHALL PAY to
    the United States the full amount of the proposed forfeiture OR
    SHALL FILE a written statement showing why the proposed forfeiture
    should not be imposed or should be reduced.

15\. IT IS AGAIN ORDERED THAT SBC SHALL SUBMIT, not later than November
7, 2001, a sworn written response to the Bureau's LOI dated October 1,
2001, in accordance with the delivery instructions set forth therein.

16\. Payment of the forfeiture amount may be made by mailing a check or
similar instrument, payable to the order of the Federal Communications
Commission, to the Forfeiture Collection Section, Finance Branch,
Federal Communications Commission, P.O. Box 73482, Chicago, Illinois
60673-7482. The payment should note the "NAL/Acct. No." referenced
above.

17\. The response, if any, must be mailed to Charles W. Kelley, Chief,
Investigations and Hearings Division, Enforcement Bureau, Federal
Communications Commission, 445 12^th^ Street S.W., Room 3-B443,
Washington, D.C., 20554, and must include the "NAL/Acct. No." referenced
above.

18\. IT IS FURTHER ORDERED that a copy of this Notice of Apparent
Liability shall be sent by Certified Mail/Return Receipt Requested to
SBC Communications, c/o Caryn D. Moir, Vice-President \-- Federal
Regulatory, 1401 I Street, N.W., Suite 1100, Washington, D.C. 20005.

FEDERAL COMMUNICATIONS COMMISSION

David H. Solomon

Chief, Enforcement Bureau

[^1]: 47 U.S.C. §§ 4(i), 4(j), 218, 403.

[^2]: *See* Sept. 29, 2000 Letter from Charles W. Kelley, Chief,
    Investigations and Hearings Division, Enforcement Bureau, Federal
    Communications Commission to Christine Jines, Executive Director --
    Federal Regulatory, SBC Telecommunications, Inc.

[^3]: *See* Oct. 19, 2000 Letter from Christine Jines, Executive
    Director -- Federal Regulatory, SBC Telecommunications, Inc. to
    Charles W. Kelley, Chief, Investigations and Hearings Division,
    Enforcement Bureau, Federal Communications Commission.

[^4]: *See* Dec. 5, 2000 Letter from Priscilla Hill-Ardoin, Senior Vice
    President, SBC Telecommunications, Inc. to Brad Berry, Deputy Chief,
    Enforcement Bureau, Federal Communications Commission ("SBC's Dec.
    5, 2000 Affidavits").

[^5]: *See* SBC's Dec. 5, 2000 Affidavits, Hill-Ardoin Affidavit at
    para. 9.

[^6]: *Id.* at para. 10; *see also* SBC's Dec. 5, 2000 Affidavits,
    Taylor Affidavit at para. 4 ("SBC is unable to identify the universe
    of ISP customers").

[^7]: *See Computer III Further Remand Proceedings, Bell Operating
    Company Provision of Enhanced Services*, CC Dkt No. 95-20; *1998
    Biennial Regulatory Review -- Review of Computer III ONA Safeguards
    and Requirements*, CC Dkt No. 98-10, Further Reply Comments of SBC
    Communications Inc., Apr. 30, 2001 at 15 ("SBC's Further Reply
    Comments").

[^8]: *See* SBC's Further Reply Comments at Attachments A and B.

[^9]: *See* Oct. 1, 2001 Letter from Charles W. Kelley, Chief,
    Investigations and Hearings Division, Enforcement Bureau, Federal
    Communications Commission to Sandra L. Wagner, Vice-President --
    Federal Regulatory, SBC Telecommunications, Inc. ("Oct. 1, 2001
    LOI").

[^10]: *Id.* at pp. 2, 4.

[^11]: *See* October 22, 2001 Letter from William A. Brown, Senior
    Counsel, SBC Telecommunications, Inc. to Elizabeth H. Valinoti,
    Attorney, Investigations and Hearings Division, Enforcement Bureau,
    Federal Communications Commission.

[^12]: *See* Oct. 1, 2001 LOI.

[^13]: 47 U.S.C. § 503(b); 47 C.F.R. § 1.80(a).

[^14]: 47 U.S.C. § 503(b)(4); 47 C.F.R. § 1.80(f).

[^15]: *See, e.g.*, *Tuscola Broadcasting Co*., Memorandum Opinion and
    Order, 76 FCC 2d 367, 371 (1980) (applying preponderance of the
    evidence standard in reviewing Bureau level forfeiture order). *Cf.*
    47 U.S.C. § 312(d) (assigning burden of proof in hearings to
    Commission).

[^16]: *See Application for Review of Southern California Broadcasting
    Co*., Memorandum Opinion and Order, 6 FCC Rcd 4387, 4388 (1991).

[^17]: 47 U.S.C. § 503(b)(2)(B); *see also* 47 C.F.R § 1.80(b)(2); *see
    also* *Amendment of Section 1.80(b) of the Commission's Rules,
    Adjustment of Forfeiture Maxima to Reflect Inflation*, Order, 15 FCC
    Rcd 18221 (2000).

[^18]: 47 U.S.C. § 503(b)(2)(D); *see also* *The Commission's Forfeiture
    Policy Statement and Amendment of Section 1.80 of the Rules to
    Incorporate the Forfeiture Guidelines*, 12 FCC Rcd 17087, 17100
    (1997) ("*Forfeiture Policy Statement*"); *recon. denied* 15 FCC Rcd
    303 (1999); 47 C.F.R. § 1.80(b)(4).

[^19]: 47 C.F.R. § 1.80; *Forfeiture Policy Statement*, 12 FCC Rcd at
    17114, Appendix A, Section I.

[^20]: 47 C.F.R. § 1.80; *Forfeiture Policy Statement*, 12 FCC Rcd at
    17100.

[^21]: In 2000, SBC had operating revenues of \$51.4 billion and
    operating income of \$10.7 billion*. See* SBC Telecomm., Inc., 2000
    Annual Report at 4 (2001).

[^22]: *Forfeiture Policy Statement*, 12 FCC Rcd at 17099, 17100.

[^23]: 47 U.S.C. § 503(b).

[^24]: 47 C.F.R. § 1.80.

[^25]: We note that as of October 31, 2001, SBC still had not submitted
    the required attestation. SBC's intentional violation of the
    Bureau's directive thus has continued from at least October 22, 2001
    through October 31, 2001.