Response to Bureau Inquiries
The target of the enforcement
action is one of the nation’s largest providers of prepaid calling cards with thousands of retail locations, agents
and distributors nationwide. In March, 2004, the Bureau sent a routine letter to the prepaid provider requesting information
regarding the Company’s compliance with FCC Form 499A registration requirements and USF obligations. The Company
only partially responded with contact information and a general statement that it is not a carrier.
As a result of this inadequate
response, in December, 2004, the Bureau sent a more formal letter of inquiry (“LOI”) to the Company requesting
a sworn written response to a series of questions relating to the Company’s failure to register with the FCC, file FCC
Forms 499A and 499Q and make required USF and other federal regulatory payments. In response to the Bureau’s LOI,
the Company provided a statement that it does not provide telecommunications services, and is not required to file FCC 499
forms or pay USF or other regulatory payments. The prepaid provider took the position that it is solely a distributor
of prepaid phone cards, a position that many prepaid providers take. The Company’s response was also not accompanied
by a sworn statement as requested by the Bureau. The Bureau then sent a second LOI to the Company in June, 2005 in an
attempt to collect additional information to investigate the prepaid provider’s position that it is not a carrier, but
the Company did not respond at all. The Bureau attempted to contact the Company by phone, but its calls were not returned.
Penalties
The Bureau’s NAL found
the prepaid provider to be apparently liable for a penalty in the amount of $20,000 based solely on the failure to adequately
respond to FCC Enforcement Bureau inquiries. The Company had failed to provide requested information, ignored
several Bureau inquiries by mail and phone and failed to include a sworn statement with its response to the first LOI. The
proposed penalty does not cover potential non-compliance with the FCC’s Form 499 filing requirements or USF obligations—those
issues will be addressed in the future.
Notwithstanding the NAL, the
prepaid provider remains under obligation to adequately respond to all of the previous Bureau inquiries within 30 days.
Potential USF liability could be extensive and include substantial back payments. By way of example,
AT&T was recently required to make back payments for USF based on its failed legal claim that its “enhanced”
prepaid calling cards were unregulated information services. According to the NAL, further penalties against
the Company could include additional monetary assessments, revocation of operating authority and the disqualification of corporate
principals from offering carrier services, depending on the Company’s response.
FCC Determines Status
from Website
Because the Company failed to
adequately respond with the information requested, the Bureau reviewed the Company’s website in order to assess whether
the Company is operating as a carrier. Based on that review, the Bureau found that the Company offers interstate
and international telecommunications service as a carrier. For example, such service is offered through
Company-labeled calling cards. In this case, the prepaid provider’s website supplied information
critical to a Bureau finding that was adverse to the Company.
Conclusion
The Bureau’s NAL highlights
the importance of corporate website descriptions as well as properly responding to FCC Enforcement Bureau inquiries.
Prepaid providers receiving any inquiry from the FCC should work with communications counsel to respond fully and in
a timely manner. In addition, prepaid providers should not overlook the legal and regulatory implications
of website descriptions as such material is readily accessible to federal and state regulators.
