FCC Orders AT&T to Pay Access Charges and USF Payments on Some Calling Cards

February 23, 2005. The Federal Communications Commission (FCC) released an Order and Notice of Proposed Rulemaking [30 pages in PDF] pertaining to universal service fund (USF) payments, access charges, and prepaid calling cards. It orders AT&T to make USF payments and pay access charges on certain prepaid calling cards. It defers decision on related issues by initiating a rulemaking proceeding. AT&T said that it will seek judicial review. See also, FCC release [PDF].

The FCC denied AT&T's May 15, 2003 request for a declaratory ruling that intrastate access charges do not apply to calls made using its prepaid calling cards when the calling card platform is located outside the state in which either the calling or the called party is located. The FCC did not rule on AT&T's November 22, 2004 petition. The FCC issued a notice of proposed rulemaking (NPRM) to consider the classification and jurisdiction of new forms of prepaid calling cards.

The Order and NPRM describes AT&T's prepaid calling card. "AT&T offers what it calls an ``enhanced创 prepaid calling card service. During call set-up, the customer hears an advertisement from the retailer that sold the card. Only after the advertisement is complete can the customer dial the destination phone number. Other than the communication of the advertising message to the caller, there is no material difference between AT&T抯 ``enhanced创 prepaid calling cards at issue in this Order and other prepaid calling cards." (Footnotes omitted.)

AT&T argued in its 2003 petition that this calling card service is jurisdictionally interstate, and therefore exempt from intrastate access charges. AT&T also argued that this service is an information service, and therefore not subject to universal service subsidy requirements.

The FCC's order states that "We find that the ``enhanced创 calling card service described in AT&T抯 original petition is a telecommunications service as defined by the Act. AT&T offers ``telecommunications创 because it provides ``transmission, between or among points specified by the user of information of the user's choosing, without change in the form or content of the information as sent and received.创 And its offering constitutes a ``telecommunications service创 because it offers ``telecommunications for a fee directly to the public.创" (Footnote omitted.)

FCC Chairman Michael Powell wrote in a separate statement [PDF] that "Companies cannot engage in misdirection or word games to avoid their universal service obligations. And they certainly cannot unilaterally decide when and where they pay their universal service charges. These payments are the law of land -- and they apply to all calling cards that offer telecommunications services. Today we reject any ambiguity created by these companies efforts to duck their universal service responsibilities."

Powell also attacked AT&T for its advertising and Congressional lobbying campaign. He wrote that "AT&T has engaged in a campaign to suggest that consumer rates would rise 20 percent or more if carriers are required to pay their fair share. They have gone so far as to take the extraordinary step of conscripting consumers into a lobbying effort directed at this Commission and members of Congress. Shamelessly, they trumpet the impact of this decision on our soldiers serving in Iraq. What is remarkable about this allegation is that other carriers are offering comparable rates to people serving in the military some have even offered to donate free service -- without taking funds from our rural universal service program or programs designed to help low-income individuals."

FCC Commissioner Michael Copps wrote in a separate statement [PDF] that "By starting a Notice of Proposed Rulemaking, the Commission suggests that going forward the boundary between calling cards subject to universal service and those that are not is whether they feature an automated voice that coos on the line 損ress 1 for more information. There may be a bright line out there between services subject to regulatory authority and those that are not. But I doubt this is it. And by initiating a proceeding based on this distinction, the Commission all but ensures that calling card confusion from the past is perpetuated in the future."

FCC Commissioner Jonathan Adelstein also wrote a separate statement [PDF].

AT&T responded in a release that "We are deeply disappointed in today's decision. In order to reach its desired outcome, the FCC has reversed years of precedent and re-regulated enhanced prepaid calling card services. To justify applying its new requirements retroactively, the FCC would have us believe that it is simply interpreting existing rules. But this is clearly not the case."

AT&T also stated that it "will appeal this decision because it is unfair, legally flawed, and harmful to servicemen and women, rural residents, low-income consumers, senior citizens and others who rely on low-cost prepaid calling cards as one of their primary means of communication."

AT&T added that "despite the Chairman's protestations to the contrary, today's Order does not create a level playing field nor does it result in a legal rule by which all providers of prepaid cards will be required to contribute to universal service and pay access charges. As we pointed out in this proceeding, there are dozens of companies offering prepaid cards that do not appear to be contributing to universal service or paying access charges (given the rates that have been placed in the market) based upon those companies' interpretation of Commission rules. This ruling does nothing to change that. Two years after we sought clarity on the rules to ensure a level playing field in the enhanced prepaid calling card market, the Commission has instead dodged the difficult issues and opened another in its long line of rulemakings. By doing so, this Commission continues its legacy of asking many questions but answering very few."

The U.S. Telecom Association issued a release praising the FCC action.

Sen. Ted Stevens (R-AK), the Chairman of the Senate Commerce Committee, stated in a release that "I am pleased that the FCC voted unanimously to protect the Universal Service Fund."

He praised the FCC "for protecting rural America and the nation抯 schools, libraries, and health clinics. It is my understanding that the FCC will undertake a new rulemaking to consider how calling cards will be treated in the future. As this process goes forward, I urge the Commission to consider what can be done to keep calling cards costs low for those serving in our Armed Forces overseas."

Sen. Daniel Inouye (D-HI), the ranking Democrat on the Committee, stated that "While I agree with today's decision by the FCC requiring AT&T's contribution to the Universal Service Fund, I am concerned by reports that its further notice may unwittingly invite the creation of a 憀oophole that will allow future communications service providers to avoid their Universal Service obligations. The obligation to contribute to Universal Service should not hinge on whether the customer presses or does not press certain buttons to hear an advertisement. In addition, I agree with Senator Stevens that any additional costs should not fall on the men and women serving us overseas in our Armed Forces. I pledge to work with him to ensure that result."

This order and NPRM is FCC 05-41 in WC Docket No. 03-133 and WC Docket No. 05-68.