Legal Alerts and Articles
FCC Assesses Monetary Penalty Against ADMA Telecom, Inc.
On March 10, 2011, the Federal Communications Commission (“FCC” or “Commission”) released a Forfeiture Order (“Order”) assessing a monetary forfeiture in the amount of $662,541 against ADMA Telecom, Inc. (“ADMA” or “Company”), a Florida-based prepaid calling card company. ADMA was financially penalized for: 1) not registering (via FCC Form 499-A) with the Commission; 2) failing to file the required Telecommunications Reporting Worksheets (“Worksheet”); 3) failing to fully and timely contribute to the Universal Service Fund (“USF”), the Telecommunications Relay Service (“TRS”) Fund, and the cost recovery mechanisms for the North American Numbering Plan (“NANP”) administration; and 4) not obtaining an International Section 214 Authorization.
The Company attempted to advance numerous arguments, through a Washington, D.C. based law firm, in an effort to mitigate the forfeiture penalties which the FCC sought to impose. However, essentially all of these arguments were rejected by the Commission. Out of the $672,541 originally proposed in penalties, the amount was only reduced by $10,000 by the Commission after a determination that ADMA was not technically subject to NANP contributions in 2005.
Failure to Register
The FCC found that ADMA failed to register with the Commission when the Company began providing services in 2001. Although the Company eventually registered in August 2006 when it filed its first annual FCC Form 499-A, the FCC assessed a monetary penalty of $100,000 for this violation of its rules.
Failure to Submit Form 499 Worksheets
Further, the Commission concluded that the Company did not file the required annual FCC Form 499-A due April 1, 2006 until August 1, 2006 and the Company failed to file the quarterly FCC Forms 499-Q due on February 1, 2006 and May 1, 2006. In response to these failures to timely file the required Worksheets, the FCC imposed a $50,000 forfeiture for each violation for a total of $150,000 in fines.
Failure to Contribute to USF, TRS, and NANPA
In addition to imposing a forfeiture for failing to file the required Worksheets, ADMA was also fined for its failure to make the required USF contributions from January 2006 to October 2006. The Company’s total delinquency for its 2005 revenues totaled $10,870.53. The FCC assesses penalties for non-payment of USF contributions based on the following method: a base forfeiture amount of $10,000 for each month in which the provider fails to fully pay USF contributions; $20,000 for each month in which the provider fails to make any USF contribution; plus an upward adjustment based on one-half of the company’s approximate unpaid contributions. Thus, the FCC charged ADMA a $211,835 monetary penalty for the Company’s failure to make required USF contributions.
The FCC further found that ADMA failed to fully contribute to the TRS fund in 2005 and 2006. Based on precedent, the Commission imposed a base forfeiture of $20,000 for the Company’s failure to pay its contribution in addition to an upward adjustment of $60,706 (which represents half of ADMA’s unpaid TRS contributions). Thus, the Company’s total monetary forfeiture for this infraction was $80,706.
Moreover, the Commission alleged that the Company failed to make timely contributions to the NANP administration in 2005, 2006, and 2007. The FCC found the Company liable for a base forfeiture of $30,000, applying the established forfeiture amount of $10,000 for each instance where the Company did not make its required contributions. This amount was reduced by $10,000 as the Commission found that the Company was not subject to NANP administration contributions in 2005. Accordingly, the monetary penalty for this violation was assessed at $20,000 for the years 2006 and 2007 (with no forfeiture for 2005).
Failure to Obtain Section 214 Authorization
The Commission also found ADMA liable for its willful failure to obtain an International Section 214 Authorization prior to providing international telecommunications service. The Commission imposed a $100,000 forfeiture for this violation, consistent with FCC precedent.
This forfeiture appears to be the largest monetary penalty issued against a prepaid calling card company (by the FCC) in over a decade, if not ever, emphasizing the importance of staying in compliance with the FCC’s rules and regulations. If a company has not been in compliance in the past, it is especially crucial that the provider take the risks seriously and work swiftly towards fulfilling its regulatory obligations.
If your company requires assistance in navigating the process of becoming compliant or with maintaining ongoing compliance, please do not hesitate to contact us.
April 2011