The Front Lines - January 20, 2006

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The FRONT LINES Sponsored by The Helein Law Group, P.C.
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Advancing The Cause of Competition in the Telecommunications Industry



Deadline: February 1, 2006

Providers of interstate and international telecommunications services ("Universal Service Fund contributors") are reminded that their FCC Form 499-Q is due no later than Wednesday, February 1, 2006.

The FCC requires all non-de minimis USF contributors to file Form

499-Q to report actual billed revenue and projected revenues. In the Form 499-Q due February 1st, contributors must report actual billed revenue for the 4th Quarter of 2006 and projected billed & collected revenue for the 2nd Quarter of 2006.

The Universal Service Administrative Company mails forms and instructions to contributors who have reported in the past. If you have not reported in the past, but are required to do so, forms and instructions are available on the FCC's website --

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or you may contact our firm and we'll e-mail them to you. Contact: or 703-714-1300.

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.


Deadline: April 1, 2006

Companies providing domestic U.S. interstate services must register to do so with the FCC. Registration is accomplished by filing FCC Form

499-A (Telecommunications Reporting Worksheet). Among other things, the form requires a company to list an agent for service of process in the District of Columbia and calls for a listing of states where the company either provides or anticipates providing intrastate service in the future.

On April 1st of each year, interstate service providers whose Universal Service Fund contribution obligation exceeds the de minimis threshold are required to file FCC Form 499-A and report telecommunications and certain non-telecommunications revenues to the FCC.

Even companies providing predominantly international services must file FCC Form 499-A if they derive revenue from domestic U.S. interstate services.

The FCC Form 499-A is critically important. One reason is that it links a company into the FCC's USF contribution system, identifying a company as a payor under the program. Another reason is that registering companies are added to the FCC's online, searchable database of registered companies. Under the FCC's rules, facilities-based carriers are only allowed to contract with resellers on the FCC registration list. Thus, failing to register will not only subject a company to potential FCC enforcement action, but could prevent it from being able to enter agreements with underlying facilities-based carriers.

If you have any questions or concerns regarding compliance with the FCC Form 499 and related requirements you should contact your existing regulatory attorney. You may also contact our firm for a consultation: (703) 714-1313, e-mail: .

For more information regarding Form 499-A, the following link directs you to a recent article on the subject by Helein Law Group partner, Jonathan S. Marashlian.

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Deadline: March 1, 2006

The FCC Form 477 for the filing due on or before March 1, 2006 is now available electronically on the Commission's website. Filers may obtain the form, and the accompanying detailed reporting instructions, at

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All facilities-based providers of wired or wireless broadband connections to end user locations, all local exchange carriers, and all non-reseller commercial mobile radio service (CMRS) providers offering mobile telephony are required to file Form 477 twice each year. In the filing that is due on or before March 1, 2006, filers will report information about broadband connections and local telephone service as of December 31, 2005.

For the purposes of Form 477, a broadband connection is one that enables the end user to receive information from and/or send information to the Internet at information transfer rates exceeding

200 kilobits per second. The facilities-based provider of a broadband connection is the entity that owns the portion of the wired broadband connection that terminates at the end user location, that provisions/equips over licensed or unlicensed spectrum the broadband wireless channel that terminates at the end user location, or that obtains an unbundled network element, special access line, or other leased facility to the end user location and provisions/equips it as broadband. EDITOR'S NOTE: LEGAL TRENDS IS A NEW FEATURE OF THE FRONT LINES. ARTICLES IN THIS SECTION WILL ADDRESS OTHER AREAS OF THE LAW AFFECTING TELECOMMUNICATIONS AND TECHNOLOGY COMPANIES SUCH AS EMPLOYMENT, TRADE SECRETS, DEFAMATION, NON-COMPETITION AND SIMILAR ISSUES.


A New York biomedical research support company learned that information in unlocked file cabinets and non-password-protected computer files, were not trade secrets under New York Law. (ENV Servs. Inc. v. Alesia, N.Y. Sup. Ct., No. 11777-04, 11/28/05).

"Trade secret protection will not be accorded to customer lists where the names and addresses of the customers are readily ascertainable or where client information is scattered throughout the office in unlocked files. Information from publicly available sources is not entitled to trade secret protection."

ENV's claims failed because its customer list was available on its corporate Web site and could be ascertained from trade publications. Customer contact information, pricing, and servicing information were also available on the company's internal home page.

As a result of this decision, five former employees of ENV were held not liable for violating a non-competition agreement.


Some ISPs are being confronted with a new and increasing legal issue -- Internet libel or "cybersmearing."

For example, Credit Suisse First Boston and Informix recently filed lawsuits against Yahoo and anonymous posters to their message boards on Yahoo because the posters were posting defamatory statements, sharing confidential information and spreading misinformation. In the lawsuits, demand is made that Yahoo disclose the names of the anonymous posters. Last year, Raytheon sued 21 John Does who posted on defamatory statements about it on Yahoo!

A Miami-based company, MasTec Inc., was confronted with false statements about it circulating on Internet investor forums and bulletin boards and sued to obtain a subpoena against a former employee.

A growing number of companies are starting to monitor the cyberhighways for defamatory material and when any are found, filing suit. These companies scour the Internet for defamatory comments because of the damage they can do in a number of important areas. It is estimated that there are now 200 lawsuits on "Internet libel" or "cybersmearing" and the number is increasing.

ISPs that operate investor and other corporate bulletin boards are largely immune from liability because the Communications Decency Act of 1996 designates then as common carriers. But it should be remembered that this Act does not immunize original content produced by ISPs.

While some state courts have generally recognized a right to speak anonymously on the Internet, the U.S. Supreme Court has yet to address the issue except for acknowledging a right to anonymity in cases concerning the distribution of political pamphlets. But lower courts are requiring companies to make a preliminary showing that the anonymous speaker injured them economically (such as a fall in stock price or a deal lost) before forcing the ISPs to identify the speaker.

Companies are advised to consult with an attorney familiar with this area of law and establish a formal set of procedures, to move quickly after an Internet libel attack and to limit the damage to a company's reputation.

To further demonstrate the potential for new legal hurdles, a suit was recently filed against AOL in Ohio claiming that the plaintiff was being humiliated online in an Internet chat room. The suit claims AOL failed to do anything about chat room participants who allegedly caused him emotional distress. Gillespie v. America Online, No. 05CIV1255 (Medina Co., Ohio, Ct. C.P.).


At The Helein Law Group we are frequently asked to provide advice regarding state and federal taxation of telecommunications and enhanced communications services. The firm's Telecommunications & Technology Regulatory Practice includes a separate focus that offers expert advice on federal and state excise taxes on communications products and services, as well as on state sales, use and gross receipt (excise taxes), and other "tax-like" regulatory fees that are or can be applied to a variety of communications and information technology services and products.

As a new service to its clients and readers of The Front Lines, we will begin publishing summaries of tax decisions relevant to the communications industry on a more frequent basis. We are taking these steps to highlight the dizzying array of taxes, changes in tax laws & regulations, and the importance these changes have in the context of the telecommunications & enhanced services industries.

If you seek legal advice on issues pertaining to taxes or "tax-like" fees, please contact our firm at 703-714-1300 or via e-mail: mailto:

New York

Purchase of plastic cards used to provide prepaid calling services declared "resale"; not subject to separate sales tax.

A telephone service provider's purchase of plastic telephone calling cards that provided information on its prepaid calling service were excluded from sales tax as purchases for resale.

The plastic telephone calling cards offered information concerning the provider's prepaid telephone calling service to customers. The cards contained such information as the transfer of the authorization code verifying payment for the telephone service, and instructions and codes for accessing the service.

The company was audited for sales and use tax and subject to additional tax due on its purchase of the plastic prepaid telephone calling cards, including the printing, bundling, storage and packaging of the cards.

The company argued that the plastic telephone cards were tangible personal property and were in fact transferred to their customers. The cards served as an integral part of the sale for the taxable telecommunication service, without which, customers could not access the information to utilize the service. The Tax Division argued that the company was not in the business of selling plastic cards. The provider reminded the tax division that the cards were simply an incidental part of the company's primary business of supplying prepaid telephone service.

The Division of Tax Appeals held that the resolution of the issue in this case revolved around whether the plastic cards were an incidental or ancillary part, as opposed to an essential or critical element of the taxpayer's business of providing a prepaid telephone calling service.

The tax division held that the plastic cards contained the information essential to enable the consumer to access and utilize the prepaid telephone service. It was ultimately decided that the company's purchase of plastic telephone cards were purchases for resale and not subject to tax.

(US Telecom, Inc., New York Division of Tax Appeals, Administrative Law Judge Unit, DTA No. 820160, 12/01/05)


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:

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Jonathan Marashlian
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