Written by attorney Jonathan Soukias Marashlian

Regulation of Prepaid Calling Card Providers

On June 30, 2006, the FCC released a Declaratory Ruling and Report and Order (Order) in which it concluded that all providers of menu-driven prepaid calling cards and prepaid calling cards that use Internet Protocol (IP) transport to deliver “all or a portion of the call" are classified as telecommunications service providers and, therefore, are subject to all applicable requirements of the Communications Act and the FCC’s rules.

In the Order, the FCC also imposed new rules on all prepaid calling card providers.

  • USF Contributions. The FCC confirmed that all prepaid calling card providers, including those that are menu-driven and/or use IP transport to deliver all or a portion of the call, must contribute to the federal USF based on their interstate and international end-user telecommunications revenues.
  • Access Charges. In addition, the FCC determined that all prepaid calling card providers are obligated to pay interstate and intrastate access charges based on the location of the called and calling parties.
  • Reporting Requirements. Noting the difficulty involved in identifying the proper jurisdiction of a prepaid calling card call, the FCC implemented a number of new requirements to facilitate the accurate payment of access charges. These new requirements include a prohibition on using the telephone number associated with a prepaid calling card platform as the Calling Party Number (“CPN") or Charge Number (“CN"), the mandatory quarterly reporting of percentage of interstate usage (“PIU") factors and call volumes, and the annual filing of officer certifications attesting to compliance with the FCC’s rules.
  • Payphone Compensation. The FCC further determined that compensation to payphone service providers is due for calls terminating at the platform if the caller does not attempt to make a call to a third party.

State Regulation of Prepaid Calling Card Providers

Prepaid calling card providers must obtain a license or registration from the utility commissions in California, Florida, Illinois and Texas. Each of these states have both consumer protection laws and specific Utility Commission regulations or precedent that mandate licensing/registration of all prepaid calling card providers selling cards within the state. Furthermore, these are prominent and “active" states, meaning these states are top markets for prepaid services and their attorneys general have been actively pursuing non-compliance in recent years. CA, FL and TX have known, active Attorney General investigations. Prepaid calling card providers may be subject to state regulation in several other states as well.

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