FCC Uses Revised Forfeiture Policy to Settle Old USF Contribution NAL

Kajeet, Inc., and its wholly-owned subsidiary Kajeet/Airlink LLC, has agreed to pay $450,000 to settle a 2009 investigation by the Enforcement Bureau of the Federal Communications Commission (Bureau), initiated in 2009, into several company violations. The investigation concerned the company’s apparent failure to make timely contributions to the Universal Service Fund (USF) and various other industry funds (the Telecommunications Relay Service (TRS) Fund, the Local Number Portability (LNP) cost recovery mechanism, etc.) and Kajeet/Airlink’s failure to seek an assignment of an international Section 214 authorization in connection with the acquisition of assets of Airlink Mobile. While the Consent Decree, released on October 7, 2015, has many of the provisions that have become the new normal” for the current Bureau – an admission of liability, civil penalty – it is remarkable for several reasons.

Kajeet’s Consent Decree resolves two Notices of Apparent Liability (NALs) released in December 2011. Initially, the Bureau determined the companies were apparently liable for a combined $962,828 forfeiture for the alleged rule violations. However, since issuing the NAL, the Bureau released a Policy Statement in February 2015 announcing a revised base forfeiture methodology for rule violations associated with payments to certain federal funds, including the funds subject to this investigation. The Consent Decree noted that settlement discussions resumed” after the release of the revised Policy Statement and that the Bureau applied the new forfeiture methodology which reduced the companies’ by approximately one-third. (Unfortunately, the Consent Decree does not provide the detail to identify exactly how the new methodology changed the proposed forfeiture). The Bureau stated that it used its prosecutorial discretion” to determine that the public interest was served by affording Kajeet the benefit of the new methodology” to reduce the forfeiture.

Even after using the revised forfeiture methodology, the Bureau reevaluated the statutory factors – nature, circumstances, extent, and gravity of violation, and the violator’s degree of culpability, history of prior offenses, ability to pay, and other matters as justice may require – to further reduce the forfeiture. This adjustment appears to have resulted in an additional 30% reduction from the revised forfeiture ($450,000 /roughly $645,000).

Further, the parties agreed that Kajeet would pay the civil penalty in quarterly installments over the next 5 years. The 5-year plan is reflected in the 5-year effective period of the compliance plan. This appears to the first case (at least those known to CommLawMonitor attorneys) in which the Bureau has agreed to quarterly installments or to payment plan lasting 5 years. While this case is likely distinguishable, it may be a helpful precedent to keep in mind when discussing settlement terms with this Enforcement Bureau.