A recent Notice of Apparent Liability (“NAL”) issued by the Enforcement Bureau (“Bureau”) of the Federal Communications Commission (“FCC” or “Commission”) proposing to fine AT&T $106,425, highlights the need for service providers in the E-rate program to ensure that they abide by the pricing restrictions of the Commission’s Lowest Corresponding Price (“LCP”) rule, 47 C.F.R. §54.511(b), which requires service providers to charge schools or libraries participating in the E-rate program no higher a price than providers charge to similarly situated non-residential customers, unless the lower rate is not compensatory for the services.

The Commission alleges that AT&T charged two school districts in Florida (Orange County and Dixie County) higher prices for non-Centrex Primary Rate Interface Integrated Services Digital Network (“PRI”) and business flat-rate multiline (MFB) services than other business customers in Florida and higher prices for PRI than rates available in a state-wide contract from which all schools and libraries in Florida were eligible to order. Specifically, the NAL alleges that AT&T violated the LCP requirement by failing to charge the districts the lowest corresponding price for a one-year contract for MBF and PRI. The Bureau found that AT&T had charged the districts a variable month-to month rate, rather than the 12-month rate requested by the districts, and the variable rate was higher than the 12-month rates offered to other non-residential customers. In addition to charging a month-to-month rate, the Bureau found that AT&T also violated the LCP rule by charging the districts a higher price than the rates offered by AT&T for identical services under a state-wide contract, which offered a set monthly rate with no term, volume, revenue commitments or early termination fees.

When investigating AT&T’s actions, the Bureau challenged AT&T to show that the entities receiving lower rates were either not similarly situated to the districts or that the lower prices were not compensatory. The Bureau found that AT&T was unable to make this showing and that its pricing policies, which did not actively identify lowest prices offered to similarly situated entities, did not provide support for abiding by the LCP requirement.

Commissioners Pai and O’Reilly dissented to the NAL, with Commissioner Pai issuing a statement. According to Pai’s statement, the Commission did not have the authority to issue the NAL, since the charges leading to a violation of the LCP rule ended on June 1, 2015 – 421 days prior to issuance of the NAL – and therefore outside of the one-year Statute of Limitations.