As the battle for the future of the Affordable Connectivity Program (ACP) continues on Capitol Hill, and the FCC prepares for the looming shutdown of the program, providers should be aware that the FCC’s Enforcement Bureau (“Enforcement Bureau”) continues to investigate—and issue forfeitures—related to noncompliance with program rules, particularly around subscriber onboarding and usage of the ACP benefit by consumers.

On March 15, 2024, the Enforcement Bureau announced a settlement with Vexus Fiber, LLC, terminating its investigation into whether Vexus violated ACP rules by preventing customers from applying the ACP benefit to any residential broadband service plan selected (a practice otherwise known as “downselling”). Under this settlement, Vexus admitted to violating ACP rules, assented to establishing a compliance plan, and agreed to pay a $100k civil penalty.

In addition, earlier this year the Federal Communications Commission (“FCC”) adopted two major Notices of Apparent Liability for Forfeiture against ACP providers. The FCC proposed a penalty of over $14 million against Tone Communication Services LLC for allegedly enrolling ACP subscribers based on false information and failing to comply with subscriber transfer rules and a penalty of $16.9 million against City Communications, Inc. for similar violations. The FCC also initiated proceedings to remove both providers from ACP.

These actions follow on the heels of an advisory issued by the FCC’s Office of Inspector General (“OIG”) in September 2023, alerting providers and consumers of emerging concerns that some providers are failing to comply with ACP’s usage and related de-enrollment rules. In particular, the OIG discovered that dozens of participating mobile broadband providers de-enrolled few, if any, ACP subscribers for non-usage and claimed reimbursement for all or nearly all of their ACP subscribers. The advisory encouraged providers to urgently examine their usage monitoring practices and fully disclose any noncompliance to the FCC and promptly repay any improperly received funds, as one major provider has done to the tune of $49.4 million.

Given the consistent media focus on the potential misuse of ACP funds by certain providers, and the FCC’s increased scrutiny of subscriber verification processes, we expect the FCC’s Enforcement Bureau to continue pursuing investigations of any suspected noncompliance with ACP rules—even after any potential shutdown of the ACP.

If you have any questions about ACP compliance, or if you have received a letter of inquiry from the FCC regarding your participation in the ACP, please contact a member of Sheppard Mullin’s Telecommunications team.