FCC Hits Companies in Latest Wi-Fi Blocking Inquiries, Proposing $718,000 Penalty, Fueling Further Controversy

By Stephen J. Matzura and  Marty Stern

On the heels of a consent decree with a services provider imposing a $750,000 penalty for its Wi-Fi management practices at convention center venues, the FCC slammed another services provider earlier this week for allegedly blocking Wi-Fi access at the Baltimore Convention Center.  In a Commission-level Notice of Apparent Liability (“NAL”), the FCC proposed a $718,000 penalty against M.C. Dean, Inc. for allegedly blocking access to third-party Wi-Fi hotspots during at least 26 days in November and December 2014 at the venue, “apparently” in violation of Section 333 of the Communications Act.

The same day, the FCC Enforcement Bureau also issued a separate NAL against Hilton Worldwide Holdings, Inc. proposing a $25,000 penalty for allegedly obstructing its investigation into whether Wi-Fi blocking occurred at several Hilton hotel properties.  According to the Enforcement Bureau, Hilton failed to provide information in response to letters of inquiry concerning corporate policies and Wi-Fi management practices and questioned its authority to investigate Hilton properties beyond one in California where a consumer alleged Wi-Fi blocking occurred.  Dissatisfied with Hilton’s limited responses, the Enforcement Bureau ordered Hilton to fully respond to its repeated information requests within 30 days of the NAL, and within 15 days for a specified subset of inquiries deemed “critical” by the Bureau that relate to Wi-Fi blocking at Hilton-branded hotels and resorts within the United States.  The NAL warns Hilton that it will be subject to additional enforcement actions if it fails to respond in accordance with the Enforcement Bureau’s expectations.

Both investigations began when third-parties complained to the FCC about Wi-Fi blocking practices.  In October 2014, the FCC received an informal complaint from a Wi-Fi provider for exhibitors that M.C. Dean was blocking Wi-Fi access for its equipment.  In response, FCC agents visited the Baltimore Convention Center three times and, according to the M.C. Dean NAL, discovered that Wi-Fi hotspots were being deauthenticated.  According to the NAL, the FCC sent letters of inquiry to M.C. Dean, and in response, M.C. Dean admitted that it deployed deauthentication equipment, including an auto-block feature, during the time period the FCC was investigating.  The FCC has taken the position that such Wi-Fi blocking, with a specific intent to block access to other networks for financial gain, is “malicious interference” prohibited by Section 333 of the Communications Act.  According to the NAL, M.C. Dean failed to provide evidence that it blocked Wi-Fi devices that threatened its network’s reliability or security.  “The record, rather, points to M.C. Dean using automatic blocking only to benefit itself commercially, to improve its system’s performance, and to limit competition.”  Accordingly, the FCC proposed to fine the company $7,000 for each of the 26 days of violations and, based on the “totality of the circumstances,” imposed a “significant upward adjustment,” including for the company’s prior use of the auto-block feature dating back to October 2012.  This increased the penalty to $718,000.

FCC Commissioner Pai issued a strong dissenting statement to the NAL against M.C. Dean, warning “that the FCC’s enforcement process has gone off the rails” and that “the Commission is yet again focused on issuing headline-grabbing fines.”  He chastised the Commission for not yet beginning the rulemaking process to address Wi-Fi blocking and explained that the FCC’s application of Section 333 is impractical and contrary to law; specifically because the FCC rules allow interference between unlicensed devices in these situations.  Commissioner Pai also stated that “it is clear that Wi-Fi blocking is currently lawful under the Commission’s rules” and, at the same time, “it is certainly not clear that Wi-Fi blocking is currently unlawful under the Commission’s rules.”  However, in issuing the NAL, the FCC rejected similar arguments from M.C. Dean regarding the FCC’s authority and its deprivation of due process for lack of fair notice of the requirements related to Wi-Fi blocking.

FCC Commissioner O’Rielly also issued a dissenting statement along the same lines as Commissioner Pai, calling for a rulemaking and raising additional questions concerning whether unlicensed devices are “stations” covered by Section 333.  He was also critical of the upward penalty adjustment because, in his view, the NAL fails to explain with specificity how the adjustment was calculated and encompasses violations outside of the one-year statute of limitations period in the Communications Act.

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