FCC Proposes $21.7M Fine for Telecom Reseller

The FCC said Friday it "plans to" fine Reno, Nevada-based telecom services reseller Network Services Solutions and its top executive $21.7 million for "apparent" egregious violations of the Universal Service Fund Rural Health Care (RHC) program.

The Notice of Apparent Liability was adopted by the Commission Friday (Nov. 4) with Republican commissioners Ajit Pai and Michael O'Rielly dissenting in part.

It would be the first time the FCC has proposed a fine for wire fraud involving the Universal Service Fund, which is a government subsidy for telecommunications services to low-income and hard-to-reach areas.

It is also the first enforcement action involving the RHC program.

The RHC program funds telecom and broadband service for rural healthcare providers where such service is more expensive.

Service providers get USF payments based on the difference between rural rates and the lower rate for urban service in the closest city with 50,000 people or more.

The FCC says the company used forged documents--including forged Comcast urban rate documents--to get at least $3.5 million from the program by rigging bids and jacking up rates, a violation of the federal wire fraud statute. The FCC says it expects to order the company to refund the improper payments.

“Forgery, bribery, bid rigging, and fraud are absolutely unacceptable in any federal program,” said FCC Enforcement Bureau Chief Travis LeBlanc in announcing the planned fine. “Today, the Commission calls on Network Services Solutions and its CEO to account for any misuse of federal funds in this vital program that assists rural communities with access to critical services for health care.”

The alleged violations occurred nationwide but were primarily concentrated in the Southeastern states. It was primarily reselling AT&T services. 

The FCC said "NSS and its representatives used the company’s unique relationship with AT&T AM-1 [an account manager focused on healthcare] to cultivate relationships with HCPs (health care providers) that allowed NSS to charge markedly inflated rural rates and earn the trust of HCP employees to do so."

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.