FCC Proposes Fine for Alleged Violation of E-rate Lowest Corresponding Price Rule

On July 27, the FCC proposed a penalty of $106,425 against AT&T for allegedly violating its “lowest corresponding price” (“LCP”) rule, which requires that E-rate service providers offer their services to participating schools and libraries at or below the rates it charges other “similarly situated” customers for the same services. Specifically, the Notice of Apparent Liability (“NAL”) alleges that AT&T charged two Florida school districts prices for non-Centrex Primary Rate Interface Integrated Services Digital Network (“PRI”) and business flat-rate multiline (“MFB”) services that were many times higher than prices charged to other similarly situated parties, including other school districts that received preferential pricing under the statewide SUNCOM E-rate contract.  The NAL also claims that AT&T charged the school districts on a month-by-month basis even though the schools qualified for a lower 12-month rate.

At the heart of the NAL is the FCC’s contention that AT&T failed to adequately compare the school districts’ rates with “similarly situated” customers, including school districts purchasing under the SUNCOM contract.  Many of the specific details of AT&T’s pricing policy, and much of the FCC’s summary of its defense, are redacted in the publicly-available version of the NAL.   For example, there may have been no similarly situated customers because E-rate customers are often provided customized services due to the particularities of each school district’s needs, layout of school buildings, location and local geography.  Although the FCC rejected this argument, details of this case may set it apart from other LCP investigations.

Regardless, the NAL stands as a warning of increased enforcement interest in the LCP rule and the FCC’s willingness to disregard the validity of pricing policies that are not one-size-fits-all, but are instead tailored to the unique requests and requirements of individual E-rate customers.

AT&T has indicated in comments to trade press that it believes the allegations are meritless and will submit a response to the NAL that lays out the basis for this contention, including arguments that pricing differences had a basis in Florida regulations.