The Front Lines - Urgent Regulatory Reminders

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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 period;

(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:

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