Attention Wireless Operators: FCC Issues $5.25 Million Civil Penalty for Unauthorized Transfer of Control and Operations

The FCC’s Enforcement Bureau announced today that the Canadian National Railway, a large diversified rail, trucking, warehousing and distribution services company, has entered into Consent Decree and agreed to pay $5.25 million in civil penalties to resolve an FCC investigation into the company’s wireless radio operations in the United States.

According to the Consent Decree, the Canadian National Railway discovered that on several occasions it had acquired control of a number of wireless radio licenses without securing the FCC’s prior consent to the transactions. Following this discovery, the company initiated a comprehensive internal audit of its FCC authorizations, uncovering multiple unauthorized transactions and system modifications going back to 1995. Additionally, the company found it had deployed several hundred wireless radio stations without first obtaining licenses, with some violations dating back as early as 1990. The Consent Decree indicates that most of the affected radio stations remained in operation in 2013.

In February 2013, the company voluntarily disclosed its findings to the Commission in connection with multiple requests for Special Temporary Authority and remedial filings. What followed was a Bureau investigation into the full extent of the company’s noncompliance. The investigation confirmed that Canadian National Railway completed more than a dozen substantial and pro forma transactions and deployed, modified and/or operated hundreds of wireless facilities without FCC approval.

While the investigation did not uncover any evidence of interference complaints resulting from the unauthorized operations, the company nevertheless acknowledged its extensive noncompliance. The FCC described the scope and duration of these unauthorized operations” as unprecedented in the history of the Commission.” And the Commission’s response was equally as ground-breaking: Canadian’s civil penalty represents the largest in FCC history” for a wireless operator’s unauthorized radio operations and unauthorized transfers of control. In addition to the payment of civil penalties, and an express admission of rule violations, the company also agreed to implement a three-year compliance plan and to maintain the internal compliance plan that was implemented as a result of the internal audit.

While the noncompliance and civil penalty may have been unprecedented, many things included in the consent decree are becoming part of the new normal. As with several other consent decrees we blogged about in recent weeks, the settlement included an admission of liability by Canadian National Railway and referred to monetary payments as civil penalties” rather than voluntary contributions.” This is further evidence of the substantial shift in the Enforcement Bureau’s policy for settlement like negotiating consent decrees. Wireless licensees should pay close attention to these actions and take them into consideration when choosing a course of action in the face of discoveries about possible nonconformance. The Canadian National Railway Consent Decree also serves as a strong reminder that any company or enterprise making an acquisition should always conduct sufficient due diligence to ascertain whether radio operations requiring FCC licenses are involved and, if so, to ensure that the proper authorizations have obtained and maintained and that any FCC procedural requirements connected to the proposed acquisition are identified and followed.