After six NALs and an Enforcement Advisory, the FCC is not finished with prepaid calling card marketing practices. On February 7th, the Enforcement Bureau issued a Notice of Apparent Liability against a prepaid card provider for failing to respond to the Bureau's investigation. This action serves both as a reminder to carriers of the importance of responding fully to FCC investigations and as a warning to prepaid card carriers that, despite the previous actions, the FCC's investigations are likely to continue. Any provider that receives or has received an inquiry from the FCC Enforcement Bureau should carefully consider its response.Continue Reading...
Back in 2007, in response to the pretexting controversy, the FCC strengthened its CPNI rules to require telecommunications carriers to authenticate a subscriber’s identity before providing call detail information. The FCC rules required carriers to authenticate customers with a password or some other information that does not rely upon "readily available biographical information" before providing telephonic, online or in-store access to CPNI, including call detail information.
These rules presented a particular difficulty for prepaid calling card providers, who typically do not have the same type of information available to them about the identity of their customers. In response to a prepaid card provider's petition seeking relief from the authentication rules, the FCC's Wireline Competition Bureau has issued a waiver to all prepaid calling card providers to allow them to authenticate users solely by virtue of the PIN assigned to the card if the prepaid card provider does not have other identifying information on the end user. Under the waiver, the prepaid card provider may provide call detail information to a caller if the caller provides the PIN as authentication.
However, it is important to note that this waiver does not apply if the prepaid card provider has telephone numbers or addresses of record for the customer. Moreover, the FCC ruling concludes, for the first time, that an email constitutes an address of record for this purpose (see fn. 8). Thus, for “no pin” customers, the prepaid card provider should authenticate the customer via the telephone number(s) registered with the account. For cards purchased online, which are then delivered to an email address, the prepaid card provider should authenticate the customer using the email address provided. It is only for prepaid cards sold through traditional retail store distribution channels that a provider will lack any identifying information other than a PIN.
In 2011, the FCC was extremely active in the prepaid calling card area, proposing $25 million in fines and investigating several other prepaid card providers. While the FCC has exclusive jurisdiction over prepaid cards when provided by common carriers, the Federal Trade Commission also has jurisdiction over non-carrier marketers of prepaid calling cards. This case is a reminder of the shared jurisdiction between the agencies.Continue Reading...
Yesterday, the FCC proposed another $5 million fine for insufficient disclosures on prepaid calling cards. This action is best understood as an echo to the FCC's action in September, when it proposed four similar $5 million fines against other prepaid calling card providers. In fact, I believe that this NAL has been circulating at the FCC since shortly before the other four NALs were released.
2011 has been highlighted by an active FCC using Section 201(b) of the Act to engage in consumer-focused enforcement. Although the FCC's authority to use 201(b) in this way is in doubt, the lesson for carriers is clear, especially in the prepaid market. Carriers should clearly and conspicuously disclose all material terms and conditions of their services. Failure to do so risks claims of deceptive marketing or cramming.Continue Reading...
Late yesterday, the FCC released its latest NPRM on high cost USF and ICC reform (see our 2/8 post). The 289 page item, available here, sets forth staggered comment dates triggered by federal register publication. The first -- 30 days after Federal Register publication -- is for comments on intercarrier compensation for VoIP traffic, rules to address phantom traffic and rules to reduce access stimulation. Reply comments are due 15 days after that. Comments on the rest of it will be due on the same day (45 days after Federal Register publication). State members of the Federal-State Joint Board on Universal Service get two extra weeks to file comments. All reply comments on the remaining sections are due 80 days after federal register publication.
As expected, late yesterday, the FCC announced that it would again attempt to tackle its "holy grail" of regulatory action: reforming carrier-to-carrier compensation mechanisms and the high-cost program of the Universal Service Fund. The FCC has placed a Notice of Proposed Rulemaking addressing both intercarrier compensation and USF reform on its agenda for February 8. The combined NPRM furthers the National Broadband Plan's promise to refocus FCC policy to supporting broadband networks.
These two topics are at the core of what we cover in this blog. The complicated mix of carrier-to-carrier compensation mechanisms, which make how a call is classified critical to determining its cost, has engendered significant litigation involving such issues as VoIP, prepaid calling cards, access charges, reciprocal compensation and many others. Meanwhile, the funding and administration of the $7 billion per year Universal Service Fund is a constant source of audit issues, enforcement actions and rulemaking proposals.Continue Reading...
Long time readers of the blog will know that we've been following AT&T's attempts to collect access charges for local calls delivered via intermediaries to prepaid card providers. The background is available here: previous Telecom Law Monitor entry. The AT&T litigation is proceeding, albeit slowly.
In June, the U.S. District Court overseeing the first of AT&T's lawsuits allowed the IDT case to proceed forward. IDT counterclaimed against AT&T, and AT&T answered the counterclaims. The pre-trial discovery period is ongoing, but trial is not scheduled to begin until March of 2012.
In addition, AT&T has sued two other small prepaid card providers in the same U.S. District Court in Texas. The defendants are Next-G Communications and Touch-Tel Communications. Next-G has answered the complaint, and it appears it will follow the IDT case's timing.
Meanwhile, the FCC still has not acted on the Arizona Dialtone petition for reconsideration of the Prepaid Card Order that underlies AT&T's case. Arizona Dialtone's 2006 request to reconsider an "ambiguous aspect of the Order [that] sends mixed messages to carriers" remains pending.
In a recent USF appeal, the FCC agreed with a prepaid card "platform provider" that each of its customers, not the platform provider, is the "carrier" for Universal Service purposes. The FCC ruled, however, that the platform provider may owe USF on transport services it provided, unless it properly qualified the customers as resellers under the USF rules. The case, Network Enhanced Telecom LLP, is discussed after the jump.
Prepaid card providers should take note. This decision carries implications for all "carrier" responsibilities, including 214 authorizations, tariffing, CPNI obligations and responsibility for marketing claims, not just for USF contributions.
Wholesale carriers and resellers also should take note. This represents the first time since Global Crossing that the FCC has addressed the obligations of wholesale carriers to qualify their resellers -- a persistent point of contention in USF auditing and reporting.Continue Reading...
Following on the heels of AT&T and Verizon's announcements, prepaid card provider Allcom Telink Corporation informed the FCC that it, too, would no longer report for universal service purposes the face value of the prepaid cards that it sells. In a June 11 letter to the FCC, Allcom stated that it "likewise intends to cease contributing on the basis of its non-contributing resellers' revenues (or our best estimate of those revenues) for this year and future years." In other words, Allcom will only report the revenue that it receives when selling the cards for distribution, not their ultimate face value. Given that prepaid cards often are sold to distributors at 35-40% below the face value, these actions could significantly reduce the amount of USF paid for prepaid calling card sales.
Allcom cited to the AT&T and Verizon letters and to USAC's August 2009 request for clarification from the FCC. Allcom then explained:
It is Allcom's preference that the Commission issue an order or guidance resolving this matter. Given the reality of the prepaid calling card market, however, Allcom now has little choice. To avoid an untenable competitive disadvantage in 2010 and future years, absent intervening Commission action, like AT&T and Verizon, we also intend to contribute only on the prepaid calling card revenue Allcom actually receives, not the ultimate retail sale price of those prepaid calling cards that Allcom sells to non-contributing resellers.
For good measure, Allcom also expressed support of a numbers-based USF contribution methodology.
Undoubtedly, Allcom is not the only prepaid card provider that has followed AT&T and Verizon's lead in reporting prepaid card revenues. We expect most other providers to report revenues in this way pending FCC action on the USAC request.
If you were planning to disregard a Form 499-A instruction, would you report yourself to the FCC? That is exactly what AT&T and Verizon have now done with regard to their reporting of prepaid card revenues. Both AT&T and Verizon have told the FCC that retroactive to January 1, 2010, they will report the revenues actually received from selling prepaid cards to distributors or other carriers, rather than the face value of the cards. Since prepaid cards often are sold into the distribution chain at a 30-40% discount off the face value, this move will significantly reduce AT&T and Verizon's USF obligations from the sale of prepaid calling cards.
Click the link for more background on the change.Continue Reading...
Late last week, the FCC sent inquiry letters to a number of prepaid calling card providers concerning their marketing practices. This action represents the first significant entry by the FCC into prepaid calling card marketing practices. Prior to this action, prepaid card enforcement activities have been conducted in private litigation brought by a large prepaid carrier, before a handful of state attorneys general and, in the case of non-carrier distributors, before the Federal Trade Commission. However, the FTC is barred from taking action against common carriers. The FCC's action suggests that the Commission is attempting to close the gap in compliance within the prepaid industry by acting directly against carriers that offer prepaid cards.
Details about the FCC requests are available after the jump.Continue Reading...
A few months ago, AT&T sued IDT Corp. for failing to pay access charges allegedly due on local-dialed prepaid calling cards. As we expected, IDT has moved the court to stay, or in the alternative, dismiss, AT&T's action. IDT contends that the FCC, not the court, should decide whether access charges apply to this type of call. In a strategic move, IDT seeks a stay of the case, rather than referral of AT&T's complaint to the FCC for resolution.
The case bears watching because AT&T appears to be using the IDT litigation as a test case before proceeding with actions it has threatened against other providers. If IDT is successful, AT&T likely will have to present its case directly to the FCC, perhaps by filing a petition for declaratory ruling, or maybe by bringing a formal complaint before the Enforcement Bureau. Alternatively, AT&T may switch approaches and seek to recover access charges from the CLECs to whom it hands off the calls.
In the meantime, AT&T has continued to send monthly demands to prepaid card providers, allegedly calculating the amount of access charges due from the carrier. We are not aware of any other cases AT&T has filed against prepaid card providers. Yet.
Follow the jump for a discussion of the pleadings on IDT's motion.
The House Energy and Commerce Committee, Subcommittee on Commerce, Trade and Consumer Protection, will hold a hearing today on the "Calling Card Consumer Protection Act of 2009" (HR 3993). The bill would require prepaid calling card providers and their distributors to disclose all applicable rates and other terms and conditions to consumers. The FTC would be empowered to enforce the requirements, including against common carrier prepaid card providers.
Rep. Engel (D-NY) introduced the bill on November 3, 2009. This is the first hearing on the bill.
Scheduled witnesses today will be:
- Lois Greisman, Director, Division of Marketing Practices, Federal Trade Commission
- Sally Greenberg, Executive Director, National Consumers League
- Patricia Acampora, Commissioner, New York State Public Service Commission, National Association of Regulatory Utility Commissioners
- Alie Kabba, Executive Director, United African Organization
- Scott Ramminger, President, American Wholesale Marketers Association