FCC Says AT&T Avoids Millions of Dollars in Payments

In a case involving prepaid calling cards, federal regulators on Wednesday said AT&T Corp. unlawfully avoided paying millions of dollars in connection fees and universal service contributions that subsidize telecommunications services across the country.

FCC Chairman Michael Powell said the $160 million AT&T avoided in universal service contributions on enhanced prepaid calling cards since 1999 would subsidize telephone service for over 6 million low-income consumers for an entire quarter.

One carriers failure to comply with its universal service obligations means that other carriers and their customers pay more for service, and the burden is shifted from one group to another unfairly, Powell said.

AT&T said it would appeal the ruling.

The FCC rejected AT&Ts argument that its calling card service was an unregulated information service exempt from universal service contributions just because the company inserted advertisements. Federal regulators said AT&T is responsible for making retroactive payments on the universal service contributions and directed the company to file revised forms reporting its prepaid calling card revenue.

The FCC also initiated a notice of proposed rulemaking to analyze the appropriate regulatory treatment for all calling cards.

In its order, the commission rejected AT&Ts claim that the calling cards are not subject to intrastate access charges, the fees carriers pay one another to originate and terminate calls within a state. AT&T had said that subjecting the calling card service to the intrastate connection fees could cause the company to raise its prices for the cards, which could be harmful to military personnel, low-income consumers and other people using them.

AT&T 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, the company said in a statement.

Powell said the argument was disingenuous.

Shamelessly, they trumpet the impact of this decision on our soldiers serving in Iraq, he said. 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.

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