Federal Communications Commission DA 09-84 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Suddenlink Communications, Inc. ) ) ) ) ) File No. EB-08-SE-1077 NAL/Acct. No. 200932100014 FRN 0018147504 NOTICE OF APPARENT LIABILITY FOR FORFEITURE AND ORDER Adopted: January 19, 2009 Released: January 19, 2009 By the Chief, Enforcement Bureau: I. INTRODUCTION 1. In this Notice of Apparent Liability for Forfeiture and Order (“NAL”), we find that Suddenlink Communications, Inc. (“Suddenlink”) apparently willfully violated a Commission Order and Section 76.939 of the Commission’s Rules (“Rules”) in failing to respond fully to an Enforcement Bureau Letter of Inquiry.1 We conclude, pursuant to Section 503(b) of the Communications Act of 1934, as amended (“Act”),2 that Suddenlink is apparently liable for a forfeiture in the amount of twenty-five thousand dollars ($25,000). We also order Suddenlink to respond fully to the LOI within ten (10) days of release of this NAL. If Suddenlink again fails to submit a complete response, it will be subject to further enforcement action. II. BACKGROUND 2. In response to consumer complaints against Suddenlink, on October 30, 2008, the Enforcement Bureau (“Bureau”) issued a Letter of Inquiry (“LOI”) regarding the company’s migration of analog programming to digital tiers.3 The LOI sought information concerning instances in which Suddenlink had migrated analog channels to a digital tier, including the channels affected, whether and how the company notified customers of the change, whether, in light of the change in service, the company permitted customers to change their service tier without charge, and the rates charged customers before and after the channel migration. The LOI also asked about Suddenlink’s charges for digital set-top boxes as well as information regarding Suddenlink’s subscriber rates and the rates it pays to video programmers. 3. In its response to the LOI, Suddenlink fails to answer most of the inquiries set forth in the LOI except in the most general terms.4 For example, Suddenlink provides a table containing information responsive to our inquiry in Question 1 regarding the dates and nature of its analog-to-digital channel 1 47 C.F.R. § 76.939. 2 47 U.S.C. § 503(b). 3 Letter from Kathryn S. Berthot, Chief, Spectrum Enforcement Division, Enforcement Bureau, Federal Communications Commission to Michael J. Zarrilli, Vice President, Government Relations and Senior Counsel, Suddenlink Communications, Inc. (Oct. 30, 2008) (“LOI”). 4 Letter from Michael J. Zarrilli, Vice President, Government Relations and Senior Counsel, Suddenlink Communications, Inc. to Deborah Broderson, Esq., Spectrum Enforcement Division, Enforcement Bureau, Federal Communications Commission (Nov. 13, 2008) (“LOI Response”). Federal Communications Commission DA 09-84 2 changes; however, it claims that it lacked the ability to respond directly to questions regarding related changes in rates to consumers, because it evaluates service rate changes on an annual basis.5 Similarly, Suddenlink represents that it has a policy to provide thirty (30) days written notice to subscribers before a channel is removed from a service tier, and that this policy was followed for each of the re-tierings at issue, but did not respond to the related inquiry in Question 1 regarding the ability of subscribers to change their service at no charge. In response to Question 2, Suddenlink acknowledges that subscribers might require additional equipment as a result of channel changes, but does not respond to the remainder of the inquiries included in this question, including the model numbers of equipment that subscribers could use to continue to access newly-digitized channels, and whether equipment of a different manufacture could also be used by subscribers. In addition, Suddenlink fails to provide copies of any notices or other documents that were sent to subscribers to inform them of analog-to-digital changes (Questions 3 and 5) or copies of any explanation that Suddenlink sent to Local Franchising Authorities (Question 4) regarding such changes.6 Suddenlink also declines to provide any information in response to Question 8, which seeks information regarding fees for each affected channel collected from subscribers, and the per-subscriber fee related to each affected channel paid by Suddenlink to the video programming distributor responsible for that channel. 4. Suddenlink admits that it did not respond fully to the LOI. Although Suddenlink states that it “has no desire to violate Commission regulations,” it claims that the two week time period allowed in which to respond to these questions was inadequate.7 Suddenlink also contends that the LOI is unenforceable because it does not comply with the Paperwork Reduction Act (“PRA”).8 Suddenlink asks the Commission to “reconsider the current LOI procedure and … engage in a cooperative dialog with the cable industry regarding the conversion practices now at issue.”9 Finally, Suddenlink requests copies of any complaints that have been submitted to the Commission, “to understand the basis for the LOI, facilitate our response, and enable us to more meaningfully address potential Bureau concerns.”10 III. DISCUSSION A. Failure to Respond Fully to the LOI 5. We find that Suddenlink’s failure to fully respond to the Bureau’s inquiry constitutes an apparent willful11 violation of a Commission Order and Section 76.939 of the Rules. The Bureau directed Suddenlink to provide certain information related to the movement of analog channels to digital tiers. This information was necessary to enable the Commission to perform its enforcement function and 5 Id. at 3. 6 Suddenlink does affirmatively state that “[n]one of the service tiers involved in Suddenlink’s analog to digital conversions are rate regulated,” and “relatively few of Suddenlink’s cable systems are subject to active rate regulation by local franchising authorities.” Id. 7 Id. at 2. 8 Id. 9 Id., citing to Letter from Kyle McSlarrow, National Cable & Telecommunications Assn., to Chairman Kevin J. Martin and Commissioners Michael J. Copps, Jonathan S. Adelstein, Deborah Taylor Tate and Robert M. McDowell (Nov. 12, 2008) (“NCTA Letter”). 10 Id. 11 Section 312(f)(1) of the Act defines willful as “the conscious and deliberate commission or omission of [any] act, irrespective of any intent to violate” the law. 47 U.S.C. § 312(f)(1). The legislative history of Section 312(f)(1) of the Act indicates that this definition of willful applies to both Sections 312 and 503(b) of the Act, H.R. Rep. No. 97- 765, 97th Cong. 2d Sess. 51 (1982), and the Commission has so interpreted the term in the Section 503(b) context. See, e.g., Southern California Broadcasting Co., Memorandum Opinion and Order, 6 FCC Rcd 4387, 4387-88 ¶ 5 (1991) (“Southern California Broadcasting”). Federal Communications Commission DA 09-84 3 evaluate whether Suddenlink violated Commission rules. Suddenlink received the LOI but has failed to provide a full and complete response. 6. The Commission has broad investigatory authority under Sections 4(i), 4(j), and 403 of the Act, its Rules, and relevant precedent. Section 4(i) authorizes the Commission to “issue such orders, not inconsistent with this Act, as may be necessary in the execution of its functions.”12 Section 4(j) states that “the Commission may conduct its proceedings in such manner as will best conduce to the proper dispatch of business and to the ends of justice.”13 Section 403 grants the Commission “full authority and power to institute an inquiry, on its own motion ... relating to the enforcement of any of the provisions of this Act.”14 Pursuant to Section 76.939 of the Rules, a cable operator must comply with FCC requests for information, orders, and decisions.15 In carrying out this obligation, a cable operator also must provide truthful and accurate statements to the Commission or its staff in any investigatory or adjudicatory matter within the Commission’s jurisdiction.16 Lastly, numerous FCC decisions have reaffirmed the Commission’s authority to investigate potential misconduct and punish those that disregard FCC inquiries. 17 The Commission delegated this authority to the Enforcement Bureau in Section 0.111(a)(16) of the Rules.18 7. We reject Suddenlink’s contentions that it was not obligated to respond fully and completely to the Bureau’s inquiry because it believes the LOI violates the PRA and is therefore unenforceable.19 According to Suddenlink and a letter submitted by NCTA, the Commission has violated the PRA by sending similar inquiries to 10 or more persons without first seeking notice and comment and approval by the Office of Management and Budget.20 We disagree. The LOI complies with the PRA 12 47 U.S.C. § 154(i). 13 47 U.S.C. § 154(j). 14 47 U.S.C. § 403. 15 47 C.F.R. § 76.939 (“Cable operators shall comply with … the Commission’s requests for information, orders, and decisions.”). 16 See 47 C.F.R. § 1.17. 17 See, e.g., SBC Communications, Inc., Forfeiture Order, 17 FCC Rcd 7589, 7599-7600 ¶¶ 23-28 (ordering $100,000 forfeiture for egregious and intentional failure to certify the response to a Bureau inquiry) (“SBC Forfeiture Order”); Digital Antenna, Inc., Notice of Apparent Liability for Forfeiture and Order, 23 FCC Rcd 7600, 7602 (Spectr. Enf. Div., Enf. Bur. 2008) (proposing $11,000 forfeiture for failure to respond to provide a complete response to an LOI); BigZoo.Com Corporation, Forfeiture Order, 20 FCC Rcd 3954 (Enf. Bur. 2005) (ordering $20,000 forfeiture for failure to respond to an LOI). 18 47 C.F.R. §0.111(a)(16) (granting the Enforcement Bureau authority to “[i]dentify and analyze complaint information, conduct investigations, conduct external audits and collect information, including pursuant to sections 218, 220, 308(b), 403 and 409(e) through (k) of the Communications Act, in connection with complaints, on its own initiative or upon request of another Bureau or Office.”). See also 47 C.F.R. §§0.111(a)(13) (Enforcement Bureau has authority to “[r]esolve complaints regarding multichannel video and cable television service under part 76 of the Commission’s rules”); 0.311 (general delegated authority for Enforcement Bureau). 19 LOI Response at 2. Prior to the due date for Suddenlink’s LOI Response, the Commission’s General Counsel advised the company that the LOI complied with the Paperwork Reduction Act, warned of enforcement action if the company failed to comply with the LOI, and offered Suddenlink the opportunity to submit any highly confidential information pursuant to a protective order. See Letter from Matthew Berry, General Counsel, Federal Communications Commission, to Michael J. Zarrilli, Vice President, Government Relations and Senior Counsel, Suddenlink Communications, Inc. (Nov. 12, 2008) (“Berry Letter”). 20 Id.; NCTA Letter at 5-7. Federal Communications Commission DA 09-84 4 because it is part of a targeted investigation of “specific individuals or entities,” namely those companies that have been the subject of consumer complaints filed with the Commission.21 8. Suddenlink alleges that it could not have responded fully to the LOI because the amount of time allowed for the preparation of the company’s LOI response was too brief.22 Certain complaints received by the Commission regarding the migration of analog programming to a digital tier, however, alleged that cable operators were falsely linking the programming changes with the digital television transition. Because of the strong public interest in avoiding confusion about the transition and the rapidly approaching transition date, the Bureau determined that two weeks was an appropriate deadline and we conclude that two weeks was a reasonable deadline. Suddenlink does not dispute that this decision was within our discretion. Thus, Suddenlink was obligated to provide the requested information by our deadline. Moreover, we note that since it submitted its LOI response and while this matter remains under investigation by the Bureau, Suddenlink has neither contacted the Bureau about its response nor provided any supplemental information. We find therefore that Suddenlink’s failure to fully respond to the Bureau’s inquiry constitutes an apparent willful23 violation of a Commission Order and Section 76.939 of the Rules. B. Proposed Forfeiture 9. We conclude under applicable standards set forth in the Act, that Suddenlink is apparently liable for forfeiture for its apparent willful violation of a Commission Order and Section 76.939 of the Rules. Under Section 503(b)(1)(B) of the Act, any person who is determined by the Commission to have willfully or repeatedly failed to comply with any provision of the Act or any rule, regulation, or order issued by the Commission shall be liable to the United States for a forfeiture penalty.24 To impose such a forfeiture penalty, the Commission must issue a notice of apparent liability and the person against whom such notice has been issued must have an opportunity to show, in writing, why no such forfeiture penalty should be imposed.25 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.26 We conclude under this standard that Suddenlink is apparently liable for forfeiture for its apparent willful violation of a Commission Order and Section 76.939 of the Rules. 21 See 44 U.S.C. §3518(c)(1)(B)(ii); 5 C.F.R. §1320(a)(2) (cited in Berry Letter at 1). We do not intend to suggest that the Commission may only commence an investigation in response to consumer complaints. As Section 403 of the Act makes clear, the Commission also may institute an investigation on its own motion. See 47 U.S.C. § 403 (“The Commission shall have full authority and power at any time to institute an inquiry, on its own motion, in any case and as to any matter or thing concerning which complaint is authorized to be made…”). 22 LOI Response at 2. 23 Section 312(f)(1) of the Act defines willful as “the conscious and deliberate commission or omission of [any] act, irrespective of any intent to violate” the law. 47 U.S.C. § 312(f)(1). The legislative history of Section 312(f)(1) of the Act indicates that this definition of willful applies to both Sections 312 and 503(b) of the Act, H.R. Rep. No. 97- 765, 97th Cong. 2d Sess. 51 (1982), and the Commission has so interpreted the term in the Section 503(b) context. See, e.g., Southern California Broadcasting Co., Memorandum Opinion and Order, 6 FCC Rcd 4387, 4387-88 ¶ 5 (1991) (“Southern California Broadcasting”). 24 47 U.S.C. § 503(b)(1)(B); 47 C.F.R. § 1.80(a)(1). 25 47 U.S.C. § 503(b); 47 C.F.R. § 1.80(f). 26 See, e.g., SBC Forfeiture Order, 17 FCC Rcd at 7591. Federal Communications Commission DA 09-84 5 10. Under Section 503(b)(2)(A) of the Act,27 we may assess a cable operator a forfeiture of up to $37,500 for each violation, or for each day of a continuing violation up to a maximum of $375,000 for a single act or failure to act. In exercising such authority, we are required to take into account “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.”28 11. Section 1.80 of the Rules and the Commission’s Forfeiture Policy Statement establish a base forfeiture amount of $4,000 for failure to respond to Commission communications.29 We find that Suddenlink’s failure to respond fully to the LOI in the circumstances presented here warrants a significant increase to this base amount. Misconduct of this type exhibits contempt for the Commission’s authority and threatens to compromise the Commission’s ability to adequately investigate violations of its rules. Prompt and full responses to Bureau inquiry letters are essential to the Commission’s enforcement function. In this case, Suddenlink’s apparent violations have delayed our investigation and inhibited our ability to examine allegations raised in consumer complaints and also potentially touching on an area of critical importance -- the DTV transition. We note that Suddenlink failed to provide a full and complete LOI response even after receiving a specific warning from the Commission’s General Counsel that such actions could be subject to enforcement penalties.30 12. Based on these facts, we therefore propose a twenty-five thousand dollar ($25,000) forfeiture against Suddenlink for failing to respond fully to Commission communications. This forfeiture amount is consistent with precedent in similar cases, where companies failed to provide responses to Bureau inquiries concerning compliance with the Commission’s Rules despite evidence that the LOIs had been received.31 13. We also direct Suddenlink to respond fully to the October 30, 2008 LOI within ten (10) days of the release of this Notice of Apparent Liability for Forfeiture and Order. Failure to do so may constitute an additional violation subjecting Suddenlink to further penalties, including potentially higher monetary forfeitures.32 27 47 U.S.C. § 503(b)(2)(A). The Commission has amended Section 1.80(b)(3) of the Rules, 47 C.F.R. § 1.80(b)(3), three times to increase the maximum forfeiture amounts, in accordance with the inflation adjustment requirements contained in the Debt Collection Improvement Act of 1996, 28 U.S.C. § 2461. See Amendment of Section 1.80 of the Commission’s Rules and Adjustment of Forfeiture Maxima to Reflect Inflation, 23 FCC Rcd 9845 (2008) (adjusting the maximum statutory amounts for broadcasters and cable operators from $32,500/$325,000 to $37,500/$375,000); Amendment of Section 1.80 of the Commission’s Rules and Adjustment of Forfeiture Maxima to Reflect Inflation, Order, 19 FCC Rcd 10945 (2004) (adjusting the maximum statutory amounts for broadcasters and cable operators from $27,500/$300,000 to $32,500/$325,000); Amendment of Section 1.80 of the Commission’s Rules and Adjustment of Forfeiture Maxima to Reflect Inflation, Order, 15 FCC Rcd 18221 (2000) (adjusting the maximum statutory amounts for broadcasters and cable operators from $25,000/$250,000 to $27,500/$300,000). The most recent inflation adjustment took effect September 2, 2008 and applies to violations that occur after that date. See 73 Fed. Reg. 44663-5. Suddenlink’s apparent violations occurred after September 2, 2008 and are therefore subject to the higher forfeiture limits. 28 47 U.S.C. § 503(b)(2)(E). See also 47 C.F.R. § 1.80(b)(4), Note to paragraph (b)(4): Section II. Adjustment Criteria for Section 503 Forfeitures. 29 See 47 C.F.R. § 1.80(b)(4); The Commission’s Forfeiture Policy Statement and Amendment of Section 1.80 of the Rules to Incorporate the Forfeiture Guidelines, Report and Order, 12 FCC Rcd. 17087 (1997), recon. denied, 15 FCC Rcd. 303 (1999). 30 Berry Letter at 2. 31 See supra note 17. 32 We do not decide in this NAL whether the failure to respond to an LOI constitutes a continuing violation. Federal Communications Commission DA 09-84 6 IV. ORDERING CLAUSES 14. Accordingly, IT IS ORDERED that, pursuant to Section 503(b) of the Act, and Section 1.80 of the Rules, and the authority delegated by Sections 0.111 and 0.311 of the Commissions Rules, Suddenlink Communications, Inc. is NOTIFIED of its APPARENT LIABILITY FOR A FORFEITURE in the amount of twenty-five thousand dollars ($25,000) for its willful violation of a Commission Order and Section 76.939 of the Rules. 15. IT IS FURTHER ORDERED that, pursuant to Section 1.80 of the Rules, within thirty (30) days of the release date of this Notice of Apparent Liability for Forfeiture and Order, Suddenlink SHALL PAY the full amount of the proposed forfeiture or SHALL FILE a written statement seeking reduction or cancellation of the proposed forfeiture. 16. IT IS FURTHER ORDERED that, pursuant to sections 1, 4(i), 4(j), 403 of the Communications Act of 1934, as amended, 47 U.S.C. §151, 154(i), 154(j), 403, Suddenlink shall fully respond to the October 30, 2008 Letter of Inquiry sent by the Enforcement Bureau in the manner described by that Letter of Inquiry within ten (10) days of the release of this Notice of Apparent Liability and Order. 17. Payment of the forfeiture must be made by check or similar instrument, payable to the order of the Federal Communications Commission. The payment must include the NAL/Account Number and FRN Number referenced above. Payment by check or money order may be mailed to Federal Communications Commission, P.O. Box 979088, St. Louis, MO 63197-9000. Payment by overnight mail may be sent to U.S. Bank – Government Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO 63101. Payment by wire transfer may be made to ABA Number 021030004, receiving bank TREAS/NYC, and account number 27000001. For payment by credit card, an FCC Form 159 (Remittance Advice) must be submitted. When completing the FCC Form 159, enter the NAL/Account number in block number 23A (call sign/other ID), and enter the letters “FORF” in block number 24A (payment type code). Requests for full payment under an installment plan should be sent to: Chief Financial Officer -- Financial Operations, 445 12th Street, S.W., Room 1-A625, Washington, D.C. 20554. Please contact the Financial Operations Group Help Desk at 1-877-480-3201 or Email: ARINQUIRIES@fcc.gov with any questions regarding payment procedures. Suddenlink will also send electronic notification on the date said payment is made to JoAnn Lucanik at JoAnn.Lucanik@fcc.gov and to Deborah Broderson at Deborah.Broderson@fcc.gov. 18. The response, if any, must be mailed to the Office of the Secretary, Federal Communications Commission, 445 12th Street, S.W., Washington, D.C. 20554, ATTN: Enforcement Bureau – Spectrum Enforcement Division, and must include the NAL/Acct. No. referenced in the caption. The response should also be e-mailed to JoAnn Lucanik, Deputy Chief, Spectrum Enforcement Division, Enforcement Bureau, FCC, at JoAnn.Lucanik@fcc.gov and to Deborah Broderson, Esq., Spectrum Enforcement Division, FCC, at Deborah.Broderson@fcc.gov. 19. The Commission will not consider reducing or canceling a forfeiture in response to a claim of inability to pay unless the petitioner submits: (1) federal tax returns for the most recent three- year period; (2) financial statements prepared according to generally accepted accounting practices; or (3) some other reliable and objective documentation that accurately reflects the petitioner’s current financial status. Any claim of inability to pay must specifically identify the basis for the claim by reference to the financial documentation submitted. Federal Communications Commission DA 09-84 7 20. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability for Forfeiture and Order shall be sent by first class mail and certified mail return receipt requested to Michael J. Zarrilli, Vice President, Government Relations and Senior Counsel, Suddenlink Communications, Inc., 12444 Powerscourt Drive, Suite 140, St. Louis, MO 63131. FEDERAL COMMUNICATIONS COMMISSION Kris Anne Monteith Chief, Enforcement Bureau