Telecommunications: FCC Updated Its Enforcement Program, but Improved Transparency Is Needed
Released: 2017-09-14T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: FCC's Enforcement Bureau is primarily responsible for ensuring the telecommunications industry's compliance with federal statutes and the Commission rules and orders designed to protect consumers, ensure public safety, and encourage competition. Some industry stakeholders have raised questions about the transparency and fairness of the Enforcement Bureau. GAO was asked to review FCC's management of its enforcement program.

In this report, GAO addresses: (1) actions FCC has taken in the last 5 years to update its enforcement program, (2) FCC's enforcement performance goals and measures, and (3) selected stakeholders' views on FCC's enforcement program and external communications. GAO reviewed FCC's enforcement policies and procedures; analyzed FCC's performance measures and spoke with officials of similarly sized independent agencies with enforcement missions; and interviewed FCC officials and 22 stakeholders from public and private organizations who were knowledgeable of the Enforcement Bureau and the communications industry.

section_title: What GAO Found
paragraphs: The Federal Communications Commission (FCC) has taken actions in the last 5 years to update its enforcement data collection and processes. In 2012, FCC implemented a new enforcement data system, which combined five previously separate databases and contains pertinent information related to each enforcement case. In 2014, FCC launched a new consumer complaints portal that FCC officials can use to identify trends and determine whether to investigate a particular company or practice. FCC also updated its internal enforcement program guidance, which includes case prioritization policies as well as timeliness goals for case resolution. Lastly, FCC completed its reorganization of the Enforcement Bureau's field office division in January 2017, closing 11 of 24 field offices and decreasing personnel from 108 to 54. FCC officials stated they do not anticipate a decline in enforcement activity because FCC is taking steps to use the anticipated annual cost savings of $9 to $10 million from the reorganization to invest in training, equipment, and technology that will improve efficiency. Given the recent changes, it is too early to determine the impact these actions will have on enforcement efforts.

FCC has not quantified most of its enforcement performance goals and measures. FCC officials told GAO that in 2009 the Chairman's Office decided that narrative examples, rather than quantifiable goals and related measures, were the most appropriate way to report on the enforcement program. For example, FCC's 2016 Annual Performance Report describes details of settlements or fines levied without reporting such goals or measures. Although such metrics can be difficult to develop, GAO found that other enforcement agencies report quantified performance goals and related measures and that FCC has the data it would need to develop such goals and measures. Without meaningful program performance goals and measures, FCC lacks important tools for assessing and reporting on the progress of its enforcement efforts and determining whether it should make changes to its program. FCC also may be missing an opportunity to help promote transparency and support congressional oversight by clearly communicating enforcement priorities.

Most of the selected stakeholders GAO interviewed affirmed the importance of enforcement, but cited concerns about FCC's current enforcement process and communication efforts with stakeholders. Fourteen of 22 selected stakeholders said enforcement is important for deterring violations of federal statutes and FCC rules. However, 17 of 22 also expressed concerns regarding the transparency or fairness of the enforcement process or regarding FCC's emphasis on generating publicity by proposing high dollar fines for potential violators. FCC does not have a formal communications strategy that outlines its enforcement purposes and processes. Instead, FCC tailors the extent of its communications to stakeholders on a case-by-case basis. FCC officials told GAO that information about the enforcement process is sensitive and could undermine their cases. However, leading practices on enforcement highlight the importance of disclosing agency enforcement processes, including how to challenge and appeal conclusions, as a way to foster fair and consistent enforcement. Increased communication from FCC could improve transparency and stakeholder perceptions of FCC enforcement actions.

section_title: What GAO Recommends
paragraphs: FCC should establish and publish: (1) quantifiable performance goals and related measures for its enforcement program; and (2) a communications strategy outlining its enforcement program for external stakeholders. FCC concurred with the recommendations.

section_title: Letter
paragraphs: The Federal Communications Commission (FCC), an independent federal  agency, regulates the telecommunications industry, which includes radio,  television, cable, satellite, wireless, and wireline industries. FCC’s  Enforcement Bureau is primarily responsible for ensuring industry  compliance with the Communications Act of 1934, as amended and  Commission regulations and orders designed to protect consumers,  ensure public safety, and encourage competition. For example, FCC  enforces regulations to resolve wireless communications interference  issues involving commercial carriers and public safety officials. FCC also  takes action against companies or individuals violating regulations or  statutes that directly affect consumers, such as calling people on the Do- Not-Call Registry or broadcasting indecent or profane programming  during certain hours. The Enforcement Bureau undertakes investigations,  and if the investigation reveals a violation occurred, FCC can issue non- monetary and monetary penalties. Monetary penalties can be significant.  For example, in 2017, the Enforcement Bureau issued a $120 million  proposed fine to an individual for allegedly making almost 100 million  spoofed robocalls—telephone calls that caused the display of misleading  or inaccurate caller ID information with the intent to defraud, cause harm,  or wrongfully obtain anything of value—in violation of the Truth in Caller  ID Act.

In 2008, we found FCC’s enforcement program lacked clear performance  goals and data on the outcomes of FCC’s enforcement efforts. FCC  implemented our recommendations by taking steps to establish  performance goals and update its enforcement data. Recently, however,  some stakeholders have raised questions about the openness,  transparency, and fairness of FCC’s enforcement processes. For  example, some have noted an apparent shift away from enforcing  regulations such as those regarding the operation of unlicensed radio  stations, or “pirate radio”, and stated the Enforcement Bureau may not be  setting the appropriate priorities and is less productive than it used to be.  You asked us to review FCC’s management of its enforcement program.  This report examines (1) actions taken by FCC in the last 5 years to  update its enforcement program; (2) performance goals and measures for  FCC’s enforcement program; and (3) selected stakeholders’ views on  FCC’s enforcement program and FCC’s communication with these  stakeholders.

To describe what actions FCC has taken in the last 5 years (calendar  years 2012 through 2016) to update its enforcement program we  reviewed FCC documentation, such as policies and reports related to  internal improvement efforts. In addition, we interviewed FCC  headquarters officials about recent changes to the program including  investments in new technology, management, and process changes. We  also interviewed FCC officials located in two field offices (Columbia, MD,  and Dallas, TX), chosen, in part, because, in the past, they have  conducted greater numbers of investigations than some other field  offices.

To determine what performance goals and measures are in place for the  enforcement program we reviewed FCC’s annual performance and  budget reports and strategic plans from 2008 to present; 2008 was the  last time we reviewed FCC’s enforcement program performance goals  and measures. We evaluated goals and measures—as listed in FCC’s  fiscal year 2015 annual performance and fiscal year 2017 budget reports  against criteria for developing federal agency performance goals and  measures as established in the Government Performance and Results  Act, as enhanced by the GPRA Modernization Act of 2010, and Office of  Management and Budget (OMB) guidance related to implementing  performance measures. In addition, we reviewed the most recent annual  performance reports of three other independent regulatory agencies with  enforcement divisions: the Securities Exchange Commission (SEC),  Commodity Futures Trading Commission (CFTC), and Federal Trade  Commission (FTC). We selected these three agencies, in part, because  they have enforcement missions and are similar in size and budget to  FCC. In addition to interviewing FCC officials on their performance goals  and measures, we also interviewed officials from each of these agencies  to gain their perspective on managing performance and measuring  enforcement efforts.

To determine stakeholder views on FCC’s enforcement program we  interviewed a non-generalizable sample of 22 stakeholders—including  private companies, public interest groups, industry associations, and  telecommunications experts. We determined the stakeholders were  knowledgeable about the communications industry by taking into account  a stakeholder’s prior work and their level of FCC comment activity. We  selected stakeholders based on area of expertise (phone, radio,  television, and wireless) to get a cross section of non-generalizable  viewpoints. To determine how FCC communicates with stakeholders we  reviewed FCC documentation and policies for formal and informal  communication with stakeholders. We compared FCC communication  policies and practices to the Organisation for Economic Co-operation and  Development’s (OECD) Best Practice Principles for Regulatory  Enforcement and federal internal control standards on managing  external communications. We also analyzed publically accessible data  on monetary enforcement actions that are on FCC’s website from  calendar years 2012 through 2016 to determine whether stakeholder  views matched recent FCC enforcement outcomes. We determined that  these data were sufficiently reliable for our purposes by reconciling the  publically accessible data with FCC provided data and interviewing FCC  officials on their data validation efforts.

We conducted this performance audit from June 2016 to September 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. See appendix I for a more  detailed explanation of our scope and methodology.
subsections: section_title: Background
paragraphs: In 1999, FCC established the Enforcement Bureau to investigate potential  violations of applicable statutes and Commission regulations and orders  that are within FCC’s mission of protecting consumers, promoting  competition, ensuring responsible use of the public airwaves, and  addressing risks to public safety. Prior to the establishment of the  Enforcement Bureau, the Compliance and Information Bureau handled  enforcement of matters currently handled by the field offices, and  individual policy bureaus, such as the Media Bureau handled  enforcement within their bureau’s responsibilities. When the Commission  created the Enforcement Bureau, it consolidated most of these  responsibilities to streamline enforcement.

Currently, the Enforcement Bureau has five divisions that conduct  investigations (see fig. 1 below). As of August 2017, there are  approximately 199 employees (full time equivalents) in the Enforcement  Bureau.

Enforcement Bureau officials conduct reviews of potential violations and  open enforcement cases if they determine an investigation is warranted.  According to FCC officials, information about potential violations comes  from a variety of sources including: (1) consumer complaints; (2)  industry and/or public safety complaints on interference, such as weather or cell tower interference; (3) referrals from other FCC bureaus such as  the Media Bureau that administers broadcast licenses; (4) congressional  interest/direction; and (5) trade/news reports on potential company  violations. Figure 2 below shows the general process the Enforcement  Bureau uses once it decides to open a case and pursue an investigation.  In most instances, cases conclude with one of the three following  outcomes: the Enforcement Bureau determines there is no violation, and  the case is closed without action; the Enforcement Bureau and the  company reach a settlement; or FCC issues an enforcement action,  which can include a monetary penalty.

If an investigation for an enforcement case reveals a potential violation,  the Enforcement Bureau may issue a non-monetary or monetary  enforcement action. Non-monetary actions include written warnings such  as a notice of unlicensed operation or a notice of violation. For example,  FCC can notify a party that it is operating a radio station without a license  and warn that continued operation could result in more severe penalties  such as a fine, seizure of equipment, and imprisonment. Below are the  three main enforcement actions that could involve a monetary penalty:

Notice of Apparent Liability (NAL): A notice to inform the party of an  investigation of a violation that FCC believes has occurred and  forfeiture in a specified dollar amount is warranted. The subject of an  NAL may elect to pay the proposed forfeiture, ending the proceeding,  or file a response making legal or factual arguments that the proposed  forfeiture should be modified, reduced, or cancelled.

Consent Decree: An agreement between FCC and the party of an  investigation that sets forth the terms and conditions in exchange for  closing the investigation. This can include a plan for reaching  compliance and an agreed upon civil penalty payable to the U.S.  Treasury.

Forfeiture Order: An order that requires the monetary forfeiture  proposed in an NAL be paid. If a party does not pay the forfeiture, the  case is referred to the U.S. Department of Justice, which may bring an  enforcement action in district court to recover the forfeiture.

From calendar years 2014 through 2016, the Enforcement Bureau  opened 3,075 cases. Of these, 2,591—approximately 84 percent—were  field office cases, which are under the Office of the Field Director. Many  of the cases handled by the field offices relate to wireless spectrum  interference, such as, a radio station operating outside of its licensed  spectrum and interfering with other radio communications. For the  number of cases opened and closed by each division from calendar years  2014 through 2016, see table 1 below.

FCC closes most cases the Enforcement Bureau investigates without  monetary penalty. In calendar years 2014 through 2016, FCC closed  3,732 cases (see table 2). Of these cases, 359 (approximately 10  percent) had a monetary penalty in the form of a NAL, Consent Decree,  or Forfeiture Order. In this same period, FCC closed 1,509 cases  (approximately 40 percent) through non-monetary enforcement actions  such as written or verbal warnings or notice of unlicensed operation.  FCC closed the remaining 1,864 cases (approximately 50 percent)  without an enforcement action.

section_title: FCC Has Taken Actions to Update Its Data Collection and Enforcement Processes
subsections: section_title: FCC Implemented a New Enforcement Data System and Consumer Informal Complaint Portal
paragraphs: FCC recently improved the collection of data for its enforcement program  by implementing a new enforcement data system and consumer informal  complaint portal.

Enforcement Bureau Activity Tracking System (EBATS): EBATS is a  new data system that serves as the system of record for the Enforcement  Bureau. EBATS captures data inputs for investigations (such as key  dates and close out status), and contains pertinent notes and documents  investigators obtain or create related to a case. Prior to the  implementation of EBATS, there were five distinct data systems, one for  each division within the Enforcement Bureau. In 2008, we reported that  FCC’s separate data systems and the limitations with each hampered  FCC’s ability to use data to inform management of the enforcement  program, and we recommended the data systems be improved. EBATS  addresses these previously reported issues by unifying the databases  and capturing key Enforcement Bureau data and information in a manner  that we found, during our current review, to be generally reliable  beginning with calendar year 2014.

Managers across FCC’s divisions use data from EBATS to monitor  ongoing work. FCC officials told us that managers of each division review  reports based on available data on a weekly basis, which includes the  number of cases closed and opened during that week. FCC officials said  Enforcement Bureau managers such as the deputy chief of the  Enforcement Bureau and assistant bureau chiefs, review EBATS data on  a monthly basis. FCC officials noted that the monthly review focuses  mainly on cases with pending Commission reviews and external  deadlines such as referring debt collection of an issued fine to the U.S.  Department of Justice, which is the final step by FCC if a party does not  pay an ordered fine.

FCC officials said EBATS allows for closer management of dates that  resulted in improved case efficiency and provided two examples. First,  officials said FCC has decreased the use of tolling agreements, in which  FCC requests that parties waive the statute of limitations. Data on the  number of tolling agreements from 2014 through 2016 showed FCC used  tolling agreements in approximately 1–2 percent of the cases investigated  each year. Although FCC officials told us this is an improvement over  previous years, they could not provide reliable data on tolling agreements  used before 2014. The second example provided by FCC officials is a  decrease in the number of backlogged cases, which are those cases  considered overdue for resolution. However, when we requested  information on the total number of backlogged cases over the last 5 years  FCC officials informed us that they do not currently track this information  over time. While the database improvements should increase the  availability and reliability of data FCC officials can use to assess the  program, the agency’s current enforcement performance goals are not  quantified, as is discussed later in this report.

Consumer Informal Complaints Portal: FCC implemented a new  consumer complaints portal in December 2014 at a development cost of  $297,514. This portal allows consumers to receive e-mail updates on the  status of their complaints as well as ask questions and receive answers  related to the complaint. The Consumer and Governmental Affairs Bureau  (CGB) manages and houses the consumer informal complaints portal.  FCC officials stated that most complaints are directly addressed by CGB  officials through actions such as providing information to consumers  and/or forwarding the complaint to the service provider. FCC officials told  us that most complaints do not become enforcement cases because most  do not represent a violation of a federal statute or commission regulation.  For example, in calendar year 2016 consumers filed 344,045 complaints  through the portal; these complaints resulted in 402 enforcement cases,  according to FCC officials. Regardless of whether a complaint initiates an  enforcement case, FCC officials have access to the information in the  consumer complaint portal and officials stated that they can use this data  to help identify trends and determine whether to review a particular  company or practice.

section_title: FCC Updated Internal Enforcement Guidelines and Reorganized Field Offices
paragraphs: FCC recently updated its enforcement processes by developing an  enforcement handbook and reorganizing the field office division of the  Enforcement Bureau to enhance efficiencies.

Enforcement Handbook: The enforcement handbook is an internal  guidance document for the Enforcement Bureau. The handbook contains  and organizes previously disparate policy guidelines and added additional  guidelines. According to FCC officials, in 2014, there was an agency wide  process reform effort and an Enforcement Bureau specific reform effort  that resulted in the creation of the enforcement handbook. Officials stated  that this document helped in meeting several goals of the reform effort  including increasing efficiencies and consistency across divisions and  improving effectiveness of allocated resources. The handbook sets  explicit timelines for major case milestones. The handbook also provides  a case priority rating system to improve efficient use of resources. The  case priority rating system is used by most divisions to determine how to  prioritize investigations to improve efficient use of resources with the  exception of the field office division, which conducts the majority of  investigations. The Office of the Field Director has a separate priority  rating system to prioritize public safety interference, such as interference  to emergency communication networks, above all other cases. FCC  officials said they found the case priority rating system helpful for day-to- day management of the enforcement program. To improve consistency  across the divisions, the handbook also has standardized templates for  various forms and official documents. Previously, each division had its  own guidance for preparing these documents.

Field Office Reorganization: FCC contracted for a study to review its  field offices and received the results in March 2015. In July 2015, FCC  issued an order stating it could achieve efficiencies through reorganizing  and closing some field offices. As of January 2017, FCC had closed 11  of 24 field offices (see fig. 3), and FCC officials stated that this reduction  included eliminating 16 of 21 management positions, and reducing the  total number of staff from 108 to 54 employees. FCC officials estimated  the reorganization would cost $2 to $4 million and would save $9 to $10  million per year.

FCC had originally proposed further cuts to the field office division, but  while FCC was considering the field office reorganization in 2015, some  stakeholders—ranging from members of Congress, to industry groups,  and private companies—raised concerns that the decrease in field staff  would hinder FCC’s effectiveness and timeliness of response to  interference. Two stakeholders (one expert and one industry association)  we spoke with for our review remain concerned about this issue. For  example, one expert whom we interviewed stated that with the current  transition in technology there is likely to be an increase in spectrum  interference. According to this expert, wireless broadband is important to  the economy because it is used in so many different ways and without  effective interference enforcement, wireless’ potential could be  undermined. The expert added that if there is an increase in interference  FCC will need more, not fewer, field resources to resolve interference  between spectrum users. Similarly, the industry association  representatives we spoke to, expressed concerns that FCC’s ability to  effectively respond to interference issues has diminished since the field  office reorganization. According to FCC officials, to help mitigate  concerns about responsiveness to interference issues FCC has employed  mobile “tiger teams.” These tiger teams are currently located in the  Columbia and Denver field offices where FCC officials stated they can be  quickly deployed to support high-priority initiatives of the Enforcement  Bureau or other entities from headquarters.

FCC officials also told us that they are taking steps to use the anticipated  cost savings from the field office reorganization to invest in training,  equipment, and technology updates that will improve efficiency. For  example, some efforts already under-taken or planned, according to  officials include the following:

Training: FCC officials said field office staff completed a 3-day  training on Long-Term Evolution (LTE) wireless networks in July 2016  to increase staff knowledge of this technology. FCC officials said that  LTE is increasingly being used for wireless communication and that it  is important for FCC officials in the field to understand what it is and  how interference with it can cause harm. Officials stated that they plan  to conduct more training in the future.

Equipment: FCC is in the process of purchasing a remote radio  location detector system, which officials stated will act as a “force  multiplier” because the detectors can be easily deployed and left in  place to measure interference over time. Previously field personnel  had to collect this type of data in-person. FCC officials stated they  have conducted hands on evaluations of the top four vendors and are  developing purchase recommendations. Also, according to FCC  officials, FCC recently purchased mobile direction finding equipment  for use on rental vehicles and is in the process of purchasing  equipment such as amplifiers, filters, and spectrum analyzers to  improve the technological capability of field office personnel.

Technology: FCC officials are working on a new complaint portal for  businesses and public safety officials to use when they experience  interference. FCC planned to implement this portal in spring 2016 but  has faced delays.

Given the recent changes, it is too early to determine the impact these  actions will have on enforcement efforts.

section_title: Most of FCC’s Enforcement Performance Goals and Measures Have Not Been Quantified
paragraphs: We found that most of FCC’s enforcement program goals as published in  its Annual Performance Reports and Budget Estimates to Congress are  missing key elements that could improve oversight and performance  evaluation. The Government Performance and Results Act (GPRA), as  enhanced by the GPRA Modernization Act of 2010 requires agencies to  develop objective, measurable, and quantifiable performance goals and  related measures and to report progress in performance reports in order  to promote public and congressional oversight as well as improve agency  program performance. OMB guidance on implementation of the GPRA  Modernization Act of 2010 states that performance goals should include a  specific measure with a targeted level of performance to occur over a  defined timeframe. In comparing FCC’s recently published goals to  OMB guidance, FCC has only one enforcement performance goal that  partly meets OMB’s guidance and FCC’s remaining seven performance  goals do not have associated measures with target levels and  timeframes, see table 3 below.

Our review of FCC’s annual performance report found that it includes  descriptions of enforcement actions taken against companies, but does  not include quantified performance measures. FCC officials stated that  narrative examples, rather than quantified goals and related measures,  were the most appropriate way to report on FCC’s efforts to help  consumers and protect the public through its enforcement program. In  2008, FCC reported two additional performance measures related to the  number of cases they investigated and the length of time that it took to  close cases. FCC officials told us the Chairman’s Office made the  decision in 2009 to stop reporting data driven measures and to replace  them with narratives of the types of investigations performed, penalties  issued, and examples of what it considers bad behavior. According to  FCC officials, it is difficult to develop effective performance goals and  measures for its enforcement program because enforcement is usually in  reaction to the activities of companies. As a result, in lieu of performance  goals and measures, FCC’s Fiscal Year 2016 Annual Performance  Report contains descriptions of specific settlements or proposed fines  issued; including one fine in excess of $34 million assessed to a company  that illegally imported jamming devices that overpower, jam, or interfere  with authorized communications. However, the Enforcement Bureau’s  new database—EBATS—described earlier in this report, has the data that  FCC could use to help establish and report on objective, measurable, and  quantifiable performance goals and related measures.

Three other regulatory agencies with inherently reactive enforcement  programs similar to FCC’s have developed objective, measurable, and  quantifiable performance goals. During our review we spoke with officials  from the Securities Exchange Commission (SEC), Commodities Futures  Trading Commission (CFTC), and Federal Trade Commission (FTC),  which all have enforcement programs and have developed objective,  quantifiable, and measureable goals for their programs. Officials from  these agencies agreed that it is difficult to measure enforcement  performance in part due to the reactive nature of enforcement as well as  the difficultly of quantifying deterrence. However, they believe there are  performance measures—timeliness, monetary outcomes, and  enforcement actions taken in relation to consumer complaints, among  others—that can capture essential program information. Examples of  three agencies’ performance goals for their enforcement programs are  shown in table 4 below.

We have previously reported that a key element in an agency’s efforts to  manage for results is its ability to set meaningful performance goals and  to measure progress towards those goals. We have also found that  communicating what an agency intends to achieve and its approach for  doing so are fundamental aims of performance management. Without  developing meaningful, quantifiable goals and related measures for the  enforcement program, FCC (1) lacks important tools for assessing and  reporting on the progress of its enforcement program and determining  whether changes should be made to improve performance, and (2) may  be missing an opportunity to help promote transparency about its  program and support congressional oversight.

section_title: Selected Stakeholders Affirmed the Importance of FCC’s Enforcement but Cited Concerns about the Agency’s Enforcement Process and Communication Efforts Most Stakeholders Stated FCC’s Enforcement Is Important for Deterring Violations
paragraphs: We interviewed stakeholders with a wide range of perspectives however  most agreed that FCC’s enforcement is important for deterring violations  of federal statutes and FCC regulations. Fourteen of the 22  stakeholders explicitly stated that FCC enforcement is important to deter  violations and/or provided examples of appropriate FCC enforcement  against violators.

Ten of the stakeholders highlighted the importance of Enforcement  Bureau actions in helping to protect consumers. For example, two  telecommunications experts said FCC enforcement actions against  prepaid calling card companies for deceptive marketing practices  have protected consumers. In calendar years 2010 through 2015,  FCC investigated and issued separate $5 million dollar fines to six  companies for deceptive marketing of pre-paid calling cards. FCC’s  announcement of the fines said that in each case, companies sold  cards that advertised hundreds or thousands of minutes for  international calls at a low cost but consumers were only given a small  fraction of the advertised time unless they used all of the minutes in a  single call. FCC officials we spoke with also cited these cases as  instances in which they believed there may be a deterrent effect to  other companies that might consider conducting similar practices.

Four stakeholders said Enforcement Bureau actions help address  interference with emergency communications systems or violations of  public safety regulations. For example, representatives of one public  interest group and one industry association said FCC is quick to  respond and resolve interference issues with communications  systems used by first responders, which ensures that risks to public  safety are minimized. One telecommunications company official said  FCC’s fines to companies for insufficiently lighted radio towers appear  to be effective because according to this official, the number of aircraft  accidents involving towers appears to have decreased.
subsections: section_title: Most Stakeholders Expressed Some Concerns about FCC’s Enforcement Processes
paragraphs: Most stakeholders expressed concerns regarding the transparency,  fairness, or emphasis on publicity in the enforcement process. Of the 22  stakeholders we interviewed, 17 mentioned at least one of these  concerns.

Lack of Transparency: When asked about their perception regarding the  transparency of the enforcement process 16 of the 22 stakeholders we  interviewed expressed concern that the enforcement process was not  transparent. As an example, stakeholders noted their unsuccessful  attempts to obtain information during an investigation.

Eight stakeholders said companies are unable to obtain information  from the Enforcement Bureau about the potential violations under  investigation until the final stages of an investigation. Of these 8  stakeholders, 4 said that this situation is different from their  interactions with other regulatory enforcement agencies that inform  companies of the specific violation the agency is investigating earlier  in the process. FCC officials we spoke with said their lack of  transparency during the course of an investigation is, in part, to  protect the reputation and business interests of the target in the event  that no violation is found and ensure that sensitive information that  could undermine a case is not revealed to the party being  investigated.

Perceived Unfair Process: Fourteen stakeholders said the enforcement  process was not always fair. Stakeholders provided the following  examples.

Ten stakeholders said that requests for information from the  Enforcement Bureau can be broad and burdensome and require a lot  of time and resources from the company to comply. FCC officials  told us they often work with parties they are investigating to narrow  the scope of a request like a letter of inquiry, which can reduce the  resource burden on the party and the Enforcement Bureau. FCC  officials added, however, that they are careful to avoid overly  narrowing the scope of a letter of inquiry because doing so could  preclude the Enforcement Bureau from gathering information about all  potential violations by the party.

Nine stakeholders said the Enforcement Bureau issued fines when  there was no clear violation of the regulations. In addition, seven  stakeholders commented that FCC is using enforcement actions to  set precedent and effectively create new policy. Two industry  associations stated that they believe this type of action bypasses the  notice and comment requirements in the Administrative Procedure Act  (APA). For example, one industry association cited a 2015 FCC  enforcement policy statement that adopted a treble damages  approach to calculating fines for companies not making their full  contributions to FCC administered funds such as the Universal  Service Fund. Four industry associations filed a joint petition with  FCC that asked FCC to reconsider the policy statement because they  considered it a substantial change, issued without public notice and  therefore in violation of the APA. FCC officials stated that this petition  for reconsideration is pending at the FCC. When we asked FCC  officials about claims that FCC issued fines where there was no clear  violation of the regulations, officials directed us to a written response  to a question for the record for a 2015 congressional oversight  hearing, where former FCC Chairman Wheeler stated that penalties  may be issued in the absence of an agency regulation governing such  conduct. He stated that this is because the Communications Act of  1934, as amended, demonstrates Congress’s intent that certain  conduct be prohibited and the act as established by Congress does  not require the additional creation of an agency regulation. He further  stated that because the Commission has the choice to decide whether  to carry out their activities through rulemaking or adjudication under  the APA, FCC may use adjudication to interpret and apply statutes  Congress has directed FCC to enforce.

Nine stakeholders said industry participants have lost the incentive to  self-report potential violations because it does not appear that the  Enforcement Bureau will treat them fairly. Of these 9 stakeholders, 4  said they know of companies that acted quickly to correct and report  violations, but the Enforcement Bureau still issued significant  penalties. FCC officials stated that industry’s self-policing is  important to an effective enforcement regime and that pursuant to  FCC regulations, good faith or voluntary disclosure can factor in  decisions of leniency on parties.

Emphasis on Generating Publicity through Large Proposed Fines: Fifteen  of the stakeholders expressed concerns that there has been an emphasis  on generating publicity by proposing high dollar fines through NALs. In  addition, 10 of the 15 stakeholders said fine amounts appeared to be  calculated arbitrarily and without rational basis. To determine whether  there has been an increase in the amount of FCC issued NALs, we  reviewed FCC data on NALs from calendar years 2012 through 2016. As  shown in table 5 below, the average dollar amount of NALs issued by  FCC increased from approximately $180,000 in 2012 to approximately  $6,300,000 in 2016. The median NAL fine amount has also generally  increased over this same period though not to the same extent. From  2012 through 2016 median fines increased from $15,000 to $25,000.  Also, the total number of NALs decreased from 111 in 2012 to 24 in 2016.

Compared to previous years FCC has recently issued a small number of  fines with very high dollar amounts. In 2016, FCC issued two of these  high fines compared to none in 2012 (see table 6). When asked about the  apparent increase in proposed fines, FCC officials acknowledged fines  have increased. However, these officials stated that they have recently  focused resources to investigate difficult cases they believe have the  biggest impact on consumers and that the fine amounts they issue are  appropriate for the violation. FCC officials also stated that publicity and  large fines can be effective deterrents and can alert consumers that  certain activities are unlawful. Seven stakeholders agreed that publicity  and headlines can be effective tools for enforcement.

section_title: FCC Lacks a Clear Communications Strategy for Industry Stakeholders
paragraphs: FCC currently has a variety of ways it communicates with stakeholders  varying in terms of formality and public versus private communications  but does not have a clear communication strategy for its enforcement  activities (see list of all communications in table 7 below). Instead, FCC  tailors the extent of its communications to stakeholders on a case-by- case basis. FCC officials told us they use this approach because they  have concerns that in some cases sharing too much information about  their enforcement processes or case sensitive information could help  parties of investigations undermine FCC’s case. For example, FCC does  not publish an enforcement manual or similar overall policy document on  its website outlining their enforcement policies and processes. In contrast,  other agencies such as FTC and SEC publish enforcement manuals on  their websites to provide information about the enforcement process as  well as brief summaries to explain agency regulations to help ensure the  clarity of both. FCC officials also told us they work under very strict time  deadlines because of the one-year statute of limitations that applies to  many cases that the Enforcement Bureau investigates. FCC officials also  stated that at least some courts have found that this one-year deadline  begins at the time of the violation—not at the time the Enforcement  Bureau learns of the violation—further reducing the time the Bureau has to  negotiate the scope of the investigation. During this one-year period FCC  officials say they must make sure that communications with the parties do  not jeopardize the agency’s ability to act within the one year statutory  deadline. However, as described earlier, FCC can use tolling  agreements, which allows FCC—with agreement from investigated  parties—to waive the statute of limitations in cases where it needs  additional time to conduct or complete the investigation.

Despite the communication efforts outlined in table 7, 16 of 22  stakeholders we spoke with expressed concern that the enforcement  process was not transparent or fair. Additionally, 10 of these 16  stakeholders said there is a perceived lack of communication between  stakeholders and the Enforcement Bureau.

Clear communication strategies are important to promoting transparency  particularly in the case of enforcement activities. In a publication on the  Best Practice Principles for Regulatory Enforcement, the Organisation for  Economic Co-operation and Development (OECD) states that  government should ensure a clear and fair process for enforcement.

The Best Practice Principles include clearly informing parties of what  rights and obligations they have in the process, how to challenge and  appeal the conclusions, where and how to obtain compliance assistance  and/or report any abuses. Federal internal control standards state that  management should design appropriate control activities for programs  including externally communicating the necessary quality information to  achieve the entity’s objectives. In the case of enforcement, agencies  can help promote compliance by establishing strategies that foster open  two-way communications with external parties to help ensure the clarity of  regulations and processes for enforcement.

A communication strategy would serve to relay the purposes, objectives,  and processes the Enforcement Bureau employs to achieve its mission  as well as the rights and expectations of those under investigation.  Furthermore, the creation of a communication strategy to provide  necessary and quality information to external stakeholders could (1)  clarify aspects of the enforcement process that are not transparent or are  confusing to stakeholders, and (2) promote clear, fair, and consistent  enforcement. For example, such a strategy could include clearly  identifying the rights and obligations parties have in the enforcement  process, and where and how to obtain additional information regarding  questions about the enforcement process, or to report any abuses,  without revealing information considered sensitive during the course of an  investigation.

Recently, FCC has taken steps toward improving the transparency of  Commission processes to external stakeholders. Since January 2017, the  new FCC Chairman has implemented six changes including two intended  to improve external transparency. One of the newly implemented changes  is for FCC to publicly release, in advance of monthly Commission  meetings, the text of all agenda items that the Commission will vote on  during the monthly meeting. Previously, FCC’s practice was to release  the full text of agenda items only after the Commission voted. However,  an exception will be made for enforcement actions that are to be voted on  before the Commission; FCC officials explained that the information  contained in enforcement actions is considered law enforcement sensitive  until it has been voted upon by the Commissioners. The other change intended to improve transparency is releasing a one-page fact sheet that  summarizes the text of the meeting’s agenda items. FCC’s statement  released about this change said that the one-page summaries will  improve the public’s accessibility to Commission information. Although  these policies have a limited direct impact on enforcement, increased  focus on external transparency for the enforcement program could  improve stakeholder perceptions of FCC actions and help promote the  perception of a fair process as well as greater industry cooperation and  compliance with FCC regulations.

section_title: Conclusions
paragraphs: In recent years, FCC has taken certain actions to improve the efficiency  of its enforcement program. However, the extent to which FCC’s  Enforcement Bureau is achieving its mission of protecting consumers,  promoting competition, ensuring responsible use of the public airwaves,  and addressing risks to public safety is difficult to determine because  FCC has not developed performance indicators, targets, and timeframes  that would enable a meaningful assessment of its enforcement program.  Furthermore, without quantifiable performance goals and related  measures, Congress does not have information needed to fulfill its  oversight role, and industry and consumers lack information that would  provide transparency regarding FCC’s enforcement priorities. Similarly,  without a communications strategy that publicly outlines the purposes,  objectives, and processes used by the Enforcement Bureau in carrying  out its mission, FCC may be missing an opportunity to improve  transparency for industry and consumers and to further engage with both  to improve their understanding of FCC’s enforcement process.

section_title: Recommendations for Executive Action
paragraphs: The Chairman of the FCC should establish quantifiable goals and  related measures—performance indicators, targets, and timeframes— for its enforcement program and annually publish the results to  demonstrate the performance of this program and improve  transparency regarding FCC’s enforcement priorities.  (Recommendation 1)

The Chairman of the FCC should establish, and make publically  available, a communications strategy outlining the agency’s  enforcement program for external stakeholders, to improve  engagement with the telecommunications community on the  purposes, objectives, and processes the Enforcement Bureau  employs to achieve its mission. (Recommendation 2)

section_title: Agency Comments
paragraphs: We provided a draft of this report to the Federal Communications  Commission for review and comment. FCC provided written comments  that are reprinted in appendix II. In written comments, FCC stated that it  agreed with both of our recommendations and noted steps it plans to take  when making changes to implement quantifiable performance goals and  increase transparency regarding the enforcement process. FCC also  provided technical comments that we incorporated as appropriate.

If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report addresses (1) actions taken by FCC in the last 5 years to  update its enforcement program; (2) performance goals and measures for  FCC’s enforcement program; and (3) selected stakeholders’ views on  FCC’s enforcement program and FCC’s communication with these  stakeholders.

To identify trends in enforcement actions and outcomes, we analyzed  calendar years 2014 through 2016 summary data from FCC’s  Enforcement Bureau Activity Tracking System (EBATS). Although EBATS  was implemented in 2012, a rolling implementation and major system  upgrades limited the available reliable data to 2014 through 2016. We  determined that these data were sufficiently reliable for our purposes by  reviewing documentation related to how the data were collected and  processed, by reconciling the publicly accessible data, and by  interviewing FCC officials on their data validation efforts.

To describe what actions FCC has taken in the last five years (calendar  years 2012 through 2016) to update its enforcement program we  reviewed FCC documentation, such as policies and reports related to  internal improvement efforts. In addition, we interviewed FCC officials  from the Enforcement Bureau, Consumer and Government Affairs  Bureau, as well as the Office of Managing Director. We also interviewed  FCC officials located in two of FCC’s field offices, Columbia, MD, and  Dallas, TX, because these field offices represent 2 of the 3 regions and in  the past have conducted greater numbers of investigations than some  other field offices. In Dallas, we accompanied FCC officials on a field  investigation to observe officials use equipment to locate sources of  interference.

To determine what performance goals and measures are in place for the  enforcement program we reviewed FCC’s annual performance reports,  budget estimates to congress, and strategic plans from 2008 to present  and interviewed FCC officials. We evaluated FCC’s performance goals  and measures as listed in FCC’s Fiscal Year 2015 Annual Performance  Report and the Fiscal Year 2017 Budget Estimates to Congress, against  criteria for developing federal agency performance goals and measures  as established in the GPRA Modernization Act of 2010 and OMB  guidance related to implementing performance measures. We also  reviewed documents including OMB’s Circular A-11, Part 6, Section 200,  and GAO’s Federal Internal Control Standards related to performance  measures. We also reviewed FCC’s fiscal year 2016 Annual  Performance Report and Fiscal Year 2018 Budget Estimates to  Congress; however, FCC did not include enforcement program goals in  these reports.

To obtain information on the performance goals and measures used by  other agencies with enforcement programs, we selected three additional  agencies to review: the Securities Exchange Commission (SEC),  Commodities Futures Trading Commission (CFTC), and the Federal  Trade Commission (FTC). We selected these agencies from a group of  comparison agencies that also had (1) federal independent regulatory  authority and (2) a dedicated enforcement bureau/division. After applying  the first set of criteria, we selected the three agencies based on similarity  to FCC in terms of budget and number of employees allocated in the  congressionally approved budget for fiscal year 2016. For each of the  agencies selected we reviewed its most recent performance plans and  other relevant enforcement related documentation. We also interviewed  officials from each of these agencies to gain their perspectives on  managing performance and measuring enforcement efforts.

To determine stakeholder views on FCC’s enforcement program we  interviewed a non-generalizable sample of 22 stakeholders who were  knowledgeable of the Enforcement Bureau and the communications  industry. We selected these stakeholders in order to get a range of  perspectives using the following criteria: (1) type of industry perspective,  (2) size of a company (where applicable), (3) level of activity in filing  comments with FCC, and (4) area of expertise. After applying these  criteria we assembled a list of stakeholders who viewed the industry from  different perspectives (telecommunications companies, public interest  groups, industry association, telecommunications experts) and different  areas of expertise (phone, radio, television, and internet). By taking into  account stakeholders’ prior work and their level of FCC comment activity,  we also ensured these selected stakeholders were knowledgeable of the  industry. For a full list of the stakeholders whom we interviewed see table  8 below. To determine how FCC communicates with stakeholders, we  reviewed FCC documentation and policies for formal and informal  communication with stakeholders. We compared these policies to the  Organisation for Economic Co-operation and Development’s (OECD)  Best Practice Principles for Regulatory Policy: Enforcement and  Inspections and Federal Internal Control Standards on managing  external communications.

We also analyzed publicly accessible data on monetary enforcement  actions that are on FCC’s website from calendar years 2012 through  2016 to determine whether stakeholder views matched recent FCC  enforcement outcomes. We determined that these data were sufficiently  reliable for our purposes by reconciling the data with FCC provided data  and interviewing FCC officials on their data validation efforts.

We conducted this performance audit from June 2016 to September 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

section_title: Appendix II: Comments from the Federal Communications Commission

section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Derrick Collins, Assistant  Director; Jade Winfree, Analyst-in-Charge; Dennis Antonio, Anne Doré,  Camilo Flores, Josh Ormond, Michelle Weathers, and Elizabeth Wood  made key contributions to this report.


Question-summary annotations: questions: question: How is the FCC working to update its enforcement data?
answer: The Federal Communications Commission (FCC) has taken actions in the last 5 years to update its enforcement data collection and processes.
child_questions: question: How did FCC reorganize their enforcement data system?
answer: In 2012, FCC implemented a new enforcement data system, which combined five previously separate databases and contains pertinent information related to each enforcement case.

question: Why did FCC create a new consumer complaints portal?
answer: In 2014, FCC launched a new consumer complaints portal that FCC officials can use to identify trends and determine whether to investigate a particular company or practice.

question: How did FCC change its internal enforcement program guidance?
answer: FCC also updated its internal enforcement program guidance, which includes case prioritization policies as well as timeliness goals for case resolution.

question: How did FCC change the Enforcement Bureau's field offices?
answer: Lastly, FCC completed its reorganization of the Enforcement Bureau's field office division in January 2017, closing 11 of 24 field offices and decreasing personnel from 108 to 54.

question: Why don't FCC officials anticipate a decline in enforcement activity?
answer: FCC officials stated they do not anticipate a decline in enforcement activity because FCC is taking steps to use the anticipated annual cost savings of $9 to $10 million from the reorganization to invest in training, equipment, and technology that will improve efficiency.

question: What information can be gathered from these recent changes?
answer: Given the recent changes, it is too early to determine the impact these actions will have on enforcement efforts.

questions: question: What is the status of FCC's enforcement performance goals?
answer: FCC has not quantified most of its enforcement performance goals and measures.
child_questions: question: Why are these measure unquantified?
answer: FCC officials told GAO that in 2009 the Chairman's Office decided that narrative examples, rather than quantifiable goals and related measures, were the most appropriate way to report on the enforcement program.
child_questions: question: How did FCC report on performance in 2016?
answer: For example, FCC's 2016 Annual Performance Report describes details of settlements or fines levied without reporting such goals or measures.

question: What is GAO's opinion on this decision by FCC?
answer: Although such metrics can be difficult to develop, GAO found that other enforcement agencies report quantified performance goals and related measures and that FCC has the data it would need to develop such goals and measures.
child_questions: question: Why is it important for FCC to use meaningful and quantifiable measures?
answer: Without meaningful program performance goals and measures, FCC lacks important tools for assessing and reporting on the progress of its enforcement efforts and determining whether it should make changes to its program. FCC also may be missing an opportunity to help promote transparency and support congressional oversight by clearly communicating enforcement priorities.

questions: question: How did stakeholders react to GAO's questions about FCC?
answer: Most of the selected stakeholders GAO interviewed affirmed the importance of enforcement, but cited concerns about FCC's current enforcement process and communication efforts with stakeholders.
child_questions: question: How did stakeholders feel about enforcement?
answer: Fourteen of 22 selected stakeholders said enforcement is important for deterring violations of federal statutes and FCC rules. However, 17 of 22 also expressed concerns regarding the transparency or fairness of the enforcement process or regarding FCC's emphasis on generating publicity by proposing high dollar fines for potential violators.
child_questions: question: Why were some stakeholders concerned about the transparency of FCC enforcement?
answer: FCC does not have a formal communications strategy that outlines its enforcement purposes and processes.
child_questions: question: How does FCC handle its communications?
answer: Instead, FCC tailors the extent of its communications to stakeholders on a case-by-case basis.

question: Why does FCC handle enforcement in this way?
answer: FCC officials told GAO that information about the enforcement process is sensitive and could undermine their cases.

question: How does this practice conflict with leading enforcement practices?
answer: However, leading practices on enforcement highlight the importance of disclosing agency enforcement processes, including how to challenge and appeal conclusions, as a way to foster fair and consistent enforcement.
child_questions: question: How could increased communication benefit FCC?
answer: Increased communication from FCC could improve transparency and stakeholder perceptions of FCC enforcement actions.