TELECOM Digest OnLine - Sorted: The Front Lines - Urgent Regulatory Reminders

The Front Lines - Urgent Regulatory Reminders

Jonathan Marashlian (
Wed, 12 Jul 2006 12:08:48 -0400 The FRONT LINES
Sponsored by The Helein Law Group, P.C. <>

Advancing The Cause of Competition in the Telecommunications Industry


Interconnected VoIP Providers Required to Register with FCC, File FCC
Form 499-Q by August 1, 2006 and Make USF Contributions

Providers of interstate and international telecommunications services,
which now include "interconnected VoIP providers" (collectively, USF
contributors) are reminded that their FCC Form 499-Q is due no later
than Tuesday, August 1, 2006.

The FCC requires USF contributors to file Form 499-Q to report actual
billed revenue and projected revenues. In the Form 499-Q due August
1st contributors must report actual billed revenue for the 2nd Quarter
of 2006 and projected billed & collected revenue for the 4th Quarter
of 2006.

De Minimis carriers and service providers (i.e., those with $10,000 or
less in annual USF contributions) are not required to file Form
499-Qs, but are reminded that an annual Form 499-A is required each
year in April.

Important Details for Interconnected VoIP Providers

Pursuant to paragraphs 60 through 62 of the FCC's June 27, 2006 Order,
in which it declared interconnected VoIP providers subject to
Universal Service Fund contributor requirements, the FCC requires all
interconnected VoIP providers to take the following actions prior to
August 1, 2006:

* Secure Registered Agent in the District of Columbia, as required
by 47 U.S.C. 154(i);

* Obtain FCC Registration Number (FRN);

* File Form 499-A (interstate telecommunications provider
registration) with Blocks 1, 2 and 6 completed;

* Obtain USF Filer ID from the Universal Service Administrative
Corporation (USAC);

* File Form 499-Q reporting historical gross-billed interstate and
international revenues collected in the 2nd Quarter of 2006 and projected
gross-billed and projected collected end-user interstate and international
revenues for the 4th Quarter of 2006; Form 499-Q must be filed no later than
August 1, 2006.

The timeline established by the Commission for accomplishing all of
the above actions is extremely tight. Indeed, in order to satisfy the
deadline, action is required immediately. Therefore, we urge clients
and interested parties requiring assistance to contact Jonathan
S. Marashlian at <> or


Carriers are reminded that Section 43.61(a) of the Federal
Communications Commission's rules requires each common carrier that
provided international telecommunications services in year 2005 to
file a report of their international traffic data for the calendar
year by July 31, 2006.

All common carriers that provided international facilities-based and
facilities-resale switched and private line services, or pure switched
resale services, in the calendar year are required to file the report
regardless of the amount of traffic they provided.

Facilities-based services are provided using international
transmission facilities that the carrier owns in whole or in part, or
that the carrier leases from an entity that does not report those
circuits in its own Section 43.61 report. Facilities-resale services
are provided by leasing non-switched international circuits from other
reporting international carriers. These are distinct from pure
switched resale services, which are switched services that are
provided by reselling the international switched services of other
U.S.-authorized carriers. International facilities-based and
facilities-resale switched message telephone and private line services
data must be filed on a country-by-country, region and world total
basis. International switched telegraph, telex and other
miscellaneous services data may be provided on a region and world
total basis only. Carriers that provided international pure switched
resale services for the calendar year may file world totals only.

Clients seeking assistance with the Section 43.61(a) traffic reporting
requirements may contact Jonathan S. Marashlian at
<> or 703-714-1313.


On June 30, 2006, the Federal Communications Commission released a
Report and Order in Docket No. 05-68 declaring all prepaid calling
cards telecommunications services and establishing rules and
procedures to ensure prepaid phone providers are subjected to the full
panoply of traditional telephony regulations, including access charges
and Universal Service Fund (USF) contributions. The Order does exempt
revenue derived from the sale of calling cards to the U.S. military
from USF, if done pursuant to contract.

In the Order, the Commission ruled that Internet Protocol-based, menu
driven prepaid calling cards and cards using IP Technology in the
middle are telecommunications services and therefore subject to all
legal and regulatory requirements applicable to such services,
including USF reporting and contributions, as well as inter and
intra-state access charges. Importantly, the Commission also imposed
reporting and certification requirements on prepaid phone providers to
ensure compliance with the new regulatory regime and deter gaming of
the system.

In addition, the FCC held that, although the classification of menu
driven cards as telecommunications services will be applied
prospectively only, the classification of IP Technology cards will be
applied retroactively. The retroactive application of the
Commission's decision means companies relying on IP Technology as a
basis for exemption in the past will be required to voluntarily make
USF contributions for all past periods or face the prospect of formal
enforcement actions.

The new rules, set forth below, will become effective 90 days after
their publication in the Federal Register, except that the
certification requirements will be effective at the end of the first
quarter following Office of Management and Budget (OMB) approval.

New Prepaid Calling Card Regulations

47 C.F.R. 64.5000 Definitions

(a) Prepaid Calling Card. The term 'prepaid calling card' means acard
or similar device that allows users to pay in advance for a specified
amount of calling, without regard to additional features, functions,
or capabilities available in conjunction with the calling service.

(b) Prepaid Calling Card Provider. The term 'prepaid calling card
provider' means any entity that provides telecommunications service to
consumers through the use of a prepaid calling card.

47 C.F.R. 64.5001 Reporting and Certification Requirements

(a) All prepaid calling card providers must report prepaid calling
card percentage of interstate use (PIU) factors, and call volumes from
which these factors were calculated, based on not less than a one-day
representative sample, to those carriers from which they purchase
transport services. Such reports must be provided no later than the
45th day of each calendar quarter for the previous quarter.

(b) If a prepaid calling card provider fails to provide the
appropriate PIU information to a transport provider in the time
allowed, the transport provider may apply a 50 percent default PIU
factor to the prepaid calling card provider's traffic.

(c) On a quarterly basis, every prepaid calling card provider must
submit to the Commission a certification, signed by an officer of the
company under penalty of perjury, providing the following information
with respect to the prior quarter:

(1) The percentage of intrastate, interstate, and international calling
card minutes for that reporting period;

(2) The percentage of total prepaid calling card service revenue
(excluding revenue from prepaid calling cards sold by, to, or pursuant
to contract with the Department of Defense (DoD) or a DoD entity)
attributable to interstate and international calls for that reporting

(3) A statement that it is making the required Universal Service Fund
contribution based on the reported information;

(4) A statement that it has complied with the reporting requirements
described in section 64.5001(a) above.

Effect on Dial-Around Compensation

In an interesting twist, the Commission's Order also addressed the
issue of Dial-Around Compensation (DAC). In footnotes, the
Commission agreed with payphone aggregator, APCC Services, that
providers of calling cards are obligated to pay DAC to payphone
service providers pursuant to section 276 of the Act when menu based
and IP Technology cards are used in the provision of
telecommunications services. Furthermore, the Commission agreed with
APCC that calls completed to a calling card platform without
attempting to reach a third party are subject to DAC. While the
first conclusion was not unexpected, the Commission's latter
statement appears to change the industry's understanding of what
constitutes a completed call under the FCC's Tollgate Rules.


This new federal regulatory regime for prepaid calling card providers
is certain to cause a great deal of disruption in the calling card
marketplace which, up to now, has been provided ample opportunity to
minimize the financial and administrative burdens of traditional
telecommunications regulations through technology and other means.
The application of traditional telecommunications regulations and the
FCC's reporting and certification requirements will undoubtedly result
in material increases in prepaid providers cost of doing business.

Our firm is continuing to analyze the implications of the Commission's
Order and is standing by to assist clients and interested parties with
their efforts to understand and comply with the new requirements. To
be certain you understand how these regulations will affect your
company and make preparations for compliance with the new regulatory
regime, we urge you to contact your telecommunications counsel. If
you do not have counsel, please contact us at 703-714-1300 or by
e-mail, if you require assistance.

The Front Lines is a free publication of The Helein Law Group, P.C.,
providing clients and interested parties with valuable information,
news, and updates regarding regulatory and legal developments
primarily impacting companies engaged in the competitive
telecommunications industry.

The Front Lines does not purport to offer legal advice nor does it
establish a lawyer-client relationship with the reader. If you have
questions about a particular article, general concerns, or wish to
seek legal counsel regarding a specific regulatory or legal matter
affecting your company, please contact our firm at 703-714-1313 or
visit our website:

The Helein Law Group, P.C.
8180 Greensboro Drive, Suite 775
McLean, Virginia 22102

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