**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+----+------------------------------+
| In the Matter of                 | *  | WC Docket No. 03-133         |
|                                  | *) |                              |
| AT&T Corp. Petition for          | ** | WC Docket No. 05-68          |
| Declaratory Ruling               |    |                              |
|                                  | *  |                              |
| Regarding Enhanced Prepaid       | *) |                              |
| Calling Card Services            | ** |                              |
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| Regulation of Prepaid Calling    | *  |                              |
| Card Services                    | *) |                              |
|                                  | ** |                              |
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|                                  | *) |                              |
|                                  | ** |                              |
|                                  |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
|                                  |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
|                                  |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
+----------------------------------+----+------------------------------+

**ORDER AND NOTICE OF PROPOSED RULEMAKING**

**Adopted: February 16, 2005 Released: February 23, 2005**

**Comment Date:** 30 days after publication in the Federal Register

**Reply Comment Date:** 60 days after publication in the Federal
Register

By the Commission: Chairman Powell and Commissioner Adelstein issuing
separate statements; Commissioner Copps concurring and issuing a
separate statement.

# introduction

1.  On May 15, 2003, AT&T filed a petition requesting a declaratory
    ruling that intrastate access charges do not apply to calls made
    using its so-called "enhanced" prepaid calling cards when the
    calling card platform is located outside the state in which either
    the calling or the called party is located.[^1] For the reasons set
    forth below, we deny the petition. We limit our decision in this
    Order to the calling card service described in AT&T's original
    petition.

2.  On November 22, 2004, AT&T requested a similar ruling with regard to
    two new variants to its "enhanced" calling card offering.[^2] These
    changes to AT&T's calling card services may be significant for
    purposes of regulatory classification and jurisdiction. Rather than
    try to address each possible type of calling card offering through a
    declaratory ruling, we are instead initiating a rulemaking to
    consider the classification and jurisdiction of new forms of prepaid
    calling cards.

# BACKGROUND

3.  Prepaid calling cards provide consumers with the ability to place
    long-distance calls without presubscribing to an interexchange
    carrier (IXC) or using a credit card. A calling card customer
    typically dials a number to reach the service provider's centralized
    switching platform and the platform requests the unique personal
    identification number associated with the card for purposes of
    verification and billing. When prompted by the platform, the
    customer dials the destination number and the platform routes the
    call to the intended recipient.

4.  To date, calling card services have been regulated by the Commission
    as telecommunications services because they provide transmission of
    information, without a change in form or content, for a fee directly
    to the public.[^3] Consistent with this classification, the
    Commission requires carriers to report revenues from prepaid calling
    cards on the forms submitted to the Universal Service Administrative
    Company (USAC) for purposes of universal service contributions.[^4]

5.  Calling cards have been considered "jurisdictionally mixed"
    telecommunications services because they enable the caller to make
    interstate and intrastate calls.[^5] For purposes of determining the
    jurisdiction of calling card calls, the Commission has applied an
    "end-to-end" analysis, classifying long-distance calls as
    jurisdictionally interstate or intrastate based on the endpoints,
    not the actual path, of each complete communication.[^6] Under the
    Commission's end-to-end analysis, intrastate access charges apply
    when customers use prepaid calling cards to make interexchange calls
    that originate and terminate within the same state, even if the
    centralized switching platform is located in a different state.

6.  AT&T offers what it calls an "enhanced" prepaid calling card
    service. During call set-up, the customer hears an advertisement
    from the retailer that sold the card.[^7] Only after the
    advertisement is complete can the customer dial the destination
    phone number.[^8] Other than the communication of the advertising
    message to the caller, there is no material difference between
    AT&T's "enhanced" prepaid calling cards at issue in this Order and
    other prepaid calling cards.

7.  On May 15, 2003, AT&T filed a petition asking the Commission for a
    declaratory ruling that any call using AT&T's "enhanced" prepaid
    calling card platform is jurisdictionally interstate, and therefore
    exempt from intrastate access charges, when the platform is located
    outside the state in which the calling or called parties are
    located.[^9] Specifically, AT&T argues in its petition that when an
    "enhanced" prepaid calling card customer places a call to someone in
    the same state, the call should be considered jurisdictionally
    interstate because it consists of two calls (one between the caller
    and the platform and one between the platform and the called party),
    at least one of which is interstate.[^10] Alternatively, AT&T
    argues, even if the call is deemed to be a single call, it is
    jurisdictionally interstate.[^11]

8.  Both of AT&T's arguments are based on the assumption that the
    "enhanced" prepaid card services platform engages in its own
    communication with the cardholder, separate from the communication
    between the calling party and the called party.[^12] This
    communication occurs even if the called party does not answer, or if
    the calling party hangs up before reaching the called party.[^13]
    AT&T argues that this first stage of the call creates an endpoint
    for purposes of the Commission's jurisdictional analysis.

9.  AT&T also argues that its "enhanced" prepaid calling card service
    should be classified as an "information service" within the meaning
    of the Act and the Commission's rules, and that any underlying
    telecommunications are jurisdictionally interstate.[^14] As with its
    jurisdictional arguments, AT&T's classification argument is based on
    the assertion that each time an "enhanced" prepaid calling card is
    used, the centralized switching platform engages in its own
    communications with the cardholder by sending the advertising
    message.[^15] AT&T argues that this service falls within the
    Commission's definition of an information service because it
    provides "additional, different or restructured information"
    unrelated to routing or billing and it "involve\[s\] subscriber
    interaction with stored information."[^16]

10. Finally, AT&T notes that prepaid calling cards generally provide an
    important form of "universal service" to many low-income and
    minority households.[^17] AT&T argues that the application of
    intrastate access charges to its "enhanced" prepaid calling cards
    might cause it to raise the price of the cards, which would make the
    availability of this telecommunications service prohibitively
    expensive to the significant numbers of underprivileged groups that
    rely on it.[^18] Similarly, AT&T argues that military personnel
    often use prepaid calling cards and that they would be adversely
    affected by a decision denying the petition.[^19]

11. On November 22, 2004, AT&T filed an *ex parte* letter amending its
    petition to request an additional ruling on two new "variants" of
    its "enhanced" prepaid calling card service. In the first variant,
    rather than immediately sending the advertising message, the
    platform provides the caller with a series of options other than
    making a call (e.g., "press 1 to learn more about specials at ABC
    stores; press 2 to add minutes to your card").[^20] AT&T recently
    added this type of capability to cards it offers through a
    partnership with Wal-Mart Stores, Inc., including an option for
    customers to donate minutes to troops serving overseas.[^21] When
    the chosen option is completed, or if no option is chosen, the
    caller is directed to dial the destination number and at that point
    the platform transmits the advertising message in the same manner as
    the original version of the service.

12. In the second variant of the service, the service provided to the
    customer is the same as the service described in the original
    petition, but some of the transport is provided over AT&T's Internet
    backbone using Internet Protocol technology.[^22] AT&T states that
    these calls are not dialed on a 1+ basis and therefore are not
    covered by the Commission's prior determination that
    "IP-in-the-middle" calls are telecommunications services, not
    information services.[^23]

# ORDER

13. In this portion of the item we address the classification and
    jurisdiction of the "enhanced" prepaid calling service identified in
    AT&T's petition as filed. In the Notice of Proposed Rulemaking
    (NPRM) portion of the item we consider issues related to the
    variants of the service identified in AT&T's November 22 amendment
    to the petition and other possible types of calling card offerings.

## Classification of AT&T's Service

14. We find that the "enhanced" calling card service described in AT&T's
    original petition is a telecommunications service as defined by the
    Act. AT&T offers "telecommunications" because it provides
    "transmission, between or among points specified by the user of
    information of the user's choosing, without change in the form or
    content of the information as sent and received."[^24] And its
    offering constitutes a "telecommunications service" because it
    offers "telecommunications for a fee directly to the public."[^25]

15. We are not persuaded by AT&T's claim that inserting advertisements
    in a calling card service transforms that service into an
    information service under the Act and our rules.[^26] As an initial
    matter, we find that AT&T's service does not meet the statutory
    definition of an information service because AT&T is not "offering"
    any "capability" with respect to the advertising message. As noted
    by Sprint, the packaging materials for AT&T's "enhanced" prepaid
    calling cards do not even mention their possible use as a device for
    listening to advertisements.[^27] Because the advertising message is
    provided automatically, without the advance knowledge or consent of
    the customer, there is no "offer" to the customer of anything other
    than telephone service, nor is the customer provided with the
    "capability" to do anything other than make a telephone call.

16. Furthermore, we find that in this case the provision of the
    advertising message is an adjunct-to-basic service, and therefore
    not an "enhanced service" under the Commission's rules.
    Adjunct-to-basic services are services that are "incidental" to an
    underlying telecommunications service and do not "alter\[\] their
    fundamental character" even if they may meet the literal definition
    of an information service or enhanced service.[^28] The Commission
    has found that Congress preserved the Commission's pre-1996 Act
    treatment of "adjunct-to-basic" services as telecommunications
    services, rather than information services.[^29] We find that the
    advertising message provided to the calling party in this case is
    incidental to the underlying service offered to the cardholder and
    does not in any way alter the fundamental character of that
    telecommunications service.[^30] From the customer's perspective,
    the advertising message is merely a necessary precondition to
    placing a telephone call and therefore the service should be
    classified as a telecommunications service.[^31]

17. The cases AT&T cites in support of its argument that the "enhanced"
    calling card service is an information service all are
    distinguishable. For example, we reject AT&T's argument that we are
    compelled to follow the Commission's decision in the *Talking Yellow
    Pages* case that stored advertisements played from a centralized
    switching platform create an information service.[^32] In *Talking
    Yellow Pages*, the information service at issue played
    advertisements in response to subscribers' individual selections for
    various categories of information (*e.g.*, restaurants, stores,
    services). The Commission found this service to be an information
    service because it involves "subscriber interaction with stored
    information."[^33] In contrast, there is no meaningful subscriber
    interaction with the information provided by AT&T's service;
    customers must let the recorded advertising message play -- whether
    or not they listen to it -- because that is the only way they can
    actually place a call.[^34] This automatic imposition of an
    advertising message does not rise to the level of a subscriber
    interaction, and therefore it does not meet the definition of an
    enhanced service.

18. AT&T's reliance on the *AT&T CEI Order* also is misplaced.[^35] In
    that order, the Commission approved an amendment to AT&T's
    comparably efficient interconnection (CEI) plan to provide outbound
    calling capabilities with AT&T's interactive voice and data
    services.[^36] AT&T asserts that this order demonstrates that any
    service that includes both telecommunications and information
    service components is regulated as an information service. AT&T's
    assertion is wrong. In that case, AT&T started with a stand-alone
    enhanced service and added the capability to make calls. As noted in
    a subsequent order, the Commission approved the CEI plan precisely
    because the underlying telecommunications service used in the
    amended offering was made available to other carriers under tariff
    and regulated as a telecommunications service.[^37] In contrast,
    there is no stand-alone information service in this case. The ruling
    AT&T seeks here would enable AT&T to exempt the entire service at
    issue from Title II regulation merely by including an advertising
    message.

19. The *NATA Reconsideration Order* cited by AT&T also does not support
    its position.[^38] In that case, the Commission classified as an
    information service a Bell Operating Company offering that provided
    additional billing information to customers if they dialed extra
    digits before making a call (*e.g*., so calls could be tracked by
    client).[^39] As with the *AT&T CEI Order*, nothing in the *NATA
    Order* removes the underlying telecommunications service from Title
    II regulation. The information service at issue in the *NATA Order*
    was offered separately from the telecommunications service and there
    is no suggestion in that order that every call made by subscribers
    using the information service somehow would be deemed
    jurisdictionally interstate or outside of Title II regulation
    altogether.

20. We also disagree with AT&T's argument that our *Cable Modem Ruling*
    stands for the proposition that a service that makes information
    available cannot be classified as a telecommunications service, even
    if the information capability is not used.[^40] In that case, the
    Commission stated that not all cable modem subscribers use e-mail or
    web-hosting that is provided with the service, but that nearly every
    subscriber uses the domain name system that is provided.[^41] Given
    the availability and use of these functions, the Commission found
    that cable modem service is offered to customers as a single,
    integrated information service, and that the underlying
    telecommunications cannot be separated from the data processing
    capabilities.[^42] In marked contrast, AT&T offers its "enhanced"
    calling card service to consumers solely as a telecommunications
    service. [^43] The advertising information it provides is not in any
    sense an integral or essential part of the service AT&T offers to
    consumers. Rather, it is completely incidental to that service and
    therefore not sufficient to warrant reclassification of the service
    as an information service. As commenters note, subscribers buy
    AT&T's calling cards to make telephone calls, not to listen to
    advertisements.

21. In sum, we find that the mere insertion of the advertising message
    in calls made with AT&T's prepaid calling cards does not alter the
    fundamental character of the calling card service. Accordingly,
    consistent with the foregoing precedent, we find that AT&T's service
    is properly classified as a telecommunications service.

## Jurisdiction of Calls Made with AT&T's Service

22. As noted above, the Commission previously has found that prepaid
    calling cards are jurisdictionally mixed, and that calls made with
    such cards that originate and terminate in the same state are
    jurisdictionally intrastate under the Commission's traditional
    end-to-end analysis.[^44] We use this same analysis to determine the
    jurisdiction of calls made using AT&T's "enhanced" calling card
    service as described in its original petition.

23. We reject AT&T's argument that the communication of the advertising
    message creates a call endpoint at the switching platform, thereby
    dividing a calling card communication into two calls. As Verizon and
    GCI argue, it cannot be the case that communication of the
    advertising message creates an endpoint because *all* calling card
    platforms engage in some form of communication with the calling
    party, and the Commission never has found this communication to be
    relevant for jurisdictional purposes. Under an end-to-end analysis,
    communication of the incidental advertising message embedded in the
    AT&T card here is no more relevant than the typical phrase, "Thank
    you for using AT&T."[^45]

24. We also disagree with AT&T's comparison of its service to three-way
    calling services. With three-way calling, the caller makes one call
    over a single circuit that terminates with one end user, then makes
    a second call over a second circuit to a second end user, and then
    the two calls are joined together.[^46] AT&T states that the
    Commission has recognized that three-way calling involves two
    separate calls and it urges us to make a similar finding with
    respect to "enhanced" calling card services.[^47] We agree with SBC
    and GCI that this comparison is inapt because AT&T's "enhanced"
    prepaid calling card calls terminate with just one end user at a
    time.[^48] Moreover, as noted by Verizon, subscribers that use
    three-way calling services choose to converse with two different
    people at the same time, and each call is characterized as
    jurisdictionally interstate or intrastate depending on the endpoints
    of the call, without regard to the physical location of the
    three-way calling platform.[^49] Consequently, these decisions do
    not support AT&T's argument that the switching platform should be
    considered an endpoint for jurisdictional purposes.

25. AT&T's application of the Commission's rulings on ISP-bound traffic
    to its "enhanced" calling card services also is flawed. In decisions
    regarding ISP-bound traffic, the Commission has found that calls to
    ISPs may consist of multiple communications, and because these
    communications often are interstate or international in nature, the
    whole call is considered jurisdictionally interstate.[^50] AT&T
    argues that a similar approach is appropriate in this case because
    at least one "communication" within each calling card "call" usually
    will be interstate (because cardholders and the centralized
    switching platforms are usually in different states), and therefore
    the whole call should be considered jurisdictionally
    interstate.[^51]

26. We agree with BellSouth that AT&T\'s service is not analogous to
    ISP-bound traffic.[^52] Although a call to an ISP may include
    multiple communications, the only relevant communication in the case
    presented by AT&T is from the calling card caller to the called
    party. Moreover, even if there are multiple communications, the
    Commission has found that neither the path of the communication nor
    the location of any intermediate switching point is relevant to the
    jurisdictional analysis.[^53]

27. We reject AT&T's argument that its service is jurisdictionally
    interstate because "the underlying telecommunications services . . .
    retain their basic jurisdictional character even if they are used as
    'building blocks' in a larger information service that falls within
    a different jurisdiction."[^54] According to AT&T, if it were to
    purchase the underlying telecommunications services from
    non-affiliated carriers (*e.g.*, a wholesale 800 link from WorldCom
    and Sprint), those services would retain their interstate
    classification "even if AT&T uses that building block as part of a
    larger information service that might ultimately be deemed
    intrastate."[^55] AT&T argues that we should reach the same result
    even if it purchases underlying basic services from itself (*e.g.,*
    an affiliated carrier).[^56] Along the same lines, AT&T argues that
    any requirement that it pay intrastate access charges on calls that
    are jurisdictionally intrastate would discriminate against
    facilities-based providers in favor of resellers that provide
    service using interstate services purchased from other
    carriers.[^57]

28. The flaw in AT&T's argument is that it is not offering customers an
    information service that *uses* telecommunications; the service it
    offers *is* a telecommunications service. Consequently, we determine
    the jurisdiction of calls made with that service based on an
    end-to-end analysis, without regard to the routing of the call or
    the geographic characteristics of the underlying telecommunications.
    This same analysis applies to facilities-based carriers and to
    resellers. In either case, the service provided to the calling card
    customer is a telecommunications service that is subject to
    intrastate access charges when calls originate and terminate in
    different local calling areas within the same state.[^58]

29. Finally, we reject AT&T's argument that a ruling denying its
    petition and subjecting its "enhanced" calling card service to
    intrastate access charges is presumptively inconsistent with the
    First Amendment because it penalizes AT&T relative to other
    information service providers based on the content of the
    information it provides.[^59] As an initial matter, we conclude
    above that AT&T is providing a telecommunications service, not an
    information service. Therefore, the relevant comparison is with
    other calling card service providers, not with information service
    providers. As noted throughout this order, our treatment of AT&T's
    "enhanced" calling card service is identical to our treatment of
    similar telecommunications services. We have applied the same legal
    analysis for purposes of determining the jurisdiction of calls and,
    with respect to jurisdictionally interstate traffic, the same Title
    II regulatory requirements apply.[^60] Consequently, our decision
    here raises no First Amendment concerns.

## Universal Service Contributions

30. As noted above, by unilaterally deciding to treat "enhanced" prepaid
    calling cards as information services, AT&T claims that it has
    "saved" \$160 million in universal service contributions since the
    beginning of 1999.[^61] Given these representations by AT&T in its
    SEC statements, it is apparent that the universal service
    contribution forms that it has submitted to USAC do not accurately
    reflect the treatment of "enhanced" prepaid calling cards as
    telecommunications services.

31. We direct AT&T to file with USAC revised Forms 499-A that properly
    report prepaid calling card revenue consistent with the findings in
    this Order so that USAC may calculate and assess the appropriate
    additional universal service contributions for the entire period
    that AT&T provided such calling card services.[^62] AT&T must make
    such revised filings within 30 days of the effective date of this
    Order. We direct AT&T to pay any past due universal service amounts,
    including any applicable late fees, as invoiced by USAC and by the
    due date listed on USAC\'s invoice. Further, we expect all other
    companies providing calling card services similar to those described
    herein to file new or revised Forms 499-A within 30 days of the
    effective date of this Order as needed to properly report revenues
    from these services consistent with this Order. We direct USAC to
    issue revised invoices for all new or revised Forms 499-A described
    herein, those filed by AT&T and by similarly situated companies,
    within 60 days of the effective date of this Order and requiring
    payment as specified on the invoices. To the extent that AT&T or
    other similarly situated companies do not file new or revised Forms
    499-A and begin paying revised universal service contribution
    amounts in accordance with the deadlines provided above, we direct
    the Enforcement Bureau to take or recommend appropriate enforcement
    action under section 503(b) of the Act.

32. AT&T argues that it should not be subject to retroactive liability
    because its treatment of "enhanced" prepaid calling cards as
    information services was consistent with the Commission's
    precedent.[^63] In addition, AT&T claims that it informed the
    Commission -- through the filing of a 1994 revision to its cost
    allocation manual (CAM) -- that it planned to treat this type of
    calling card service as an enhanced service and this treatment was
    "deemed accepted" on February 28, 1995.[^64] We reject AT&T's
    arguments and find that retroactive liability for universal service
    contributions is warranted in this case. The Commission's prior
    decisions had always treated prepaid calling cards as
    telecommunications services,[^65] and the universal service
    contribution forms submitted to USAC plainly require revenues from
    prepaid calling cards to be reported.[^66] In this context, we find
    that AT&T had no reasonable basis to expect to avoid these
    obligations merely by adding an unsolicited advertising message to
    its prepaid calling card service.[^67]

33. Similarly, the fact that the Common Carrier Bureau allowed AT&T's
    1994 CAM revision to take effect does not constitute a Commission
    decision or finding regarding the classification of the service that
    shields AT&T from liability for past contributions. As an initial
    matter, we agree with BellSouth that a CAM filing does not establish
    the proper legal classification of a service for any purpose other
    than the allocation of costs between regulated and non-regulated
    services.[^68] Furthermore, because the Commission substantially
    deregulated AT&T in October 1995,[^69] its treatment of "enhanced"
    prepaid calling cards for cost allocation purposes was in effect for
    only a few months and was irrelevant by the time the Commission
    started requiring explicit contributions to the Universal Service
    Fund pursuant to the Telecommunications Act of 1996. Moreover,
    nothing in the Commission's decisions regarding the contribution
    mechanisms ever suggested that some types of prepaid cards should be
    exempt from the contribution requirement. We therefore find that
    AT&T's 1994 CAM revision does not provide a basis for shielding it
    from the obligation to contribute for past periods.

## Other Considerations

34. AT&T argues that a decision denying its petition would compromise
    the availability of inexpensive calling card calls to consumers,
    particularly low-income consumers and consumers in rural communities
    and inner-city neighborhoods.[^70] Several commenters echo these
    concerns.[^71] AT&T also states that military personnel make
    extensive use of "enhanced" prepaid calling cards and that they may
    be adversely affected if AT&T is forced to raise the rates
    associated with these cards.[^72] The Department of Defense
    acknowledges that AT&T provides prepaid calling cards to military
    personnel around the world, including personnel serving in Operation
    Iraqi Freedom, and asks that we consider the impact of our decision
    on military families.[^73] A number of commenters representing
    members of the armed services raise similar concerns.[^74]

35. We appreciate that prepaid calling cards can provide a low-cost
    calling option for all types of consumers, including members of the
    military and their families. Prepaid calling cards are a lifeline
    for troops serving overseas, and we applaud the generous donations
    made by many carriers, including AT&T, as well as many other
    organizations. Appendix B to this Order highlights some of these
    contributions and provides information about ongoing programs
    through which the public can donate calling cards to members of the
    armed services.

36. Nothing in this decision is intended to jeopardize the benefits
    provided by prepaid calling cards. As an initial matter, given
    AT&T's representation that the majority of calls made with these
    calling cards do not originate and terminate in the same state,[^75]
    we are not convinced that subjecting intrastate calls to intrastate
    access charges, as existing law requires, will have a material
    impact on AT&T's rates. In particular, it is not apparent why an
    increase in the cost of intrastate calls should have any material
    effect on the cost of calls made to or from members of the armed
    services that are serving overseas.[^76] AT&T is correct that cards
    sold to members of the armed forces can be used for purely
    intrastate calls, and can be priced accordingly,[^77] but AT&T
    provides no information on calling patterns of service men and women
    to support its position that payment of intrastate access charges on
    intrastate calls would result in a material increase in the cost of
    providing service under its contract with the military. Although
    this Commission has no direct involvement in AT&T's contractual
    dealings with the military, we urge AT&T to heed the concerns
    expressed by the Department of Defense and the numerous
    organizations representing the interests of the armed forces and
    consider all possible alternatives before raising rates to members
    of the armed forces.[^78]

37. As to the suggestion that requiring universal service contributions
    will result in increased rates for prepaid calling cards, the same
    argument can be made for all telecommunications services. The regime
    established by Congress under section 254 of the Act relies on
    contributions from all telecommunications carriers, including
    carriers that offer prepaid calling cards like those offered by
    AT&T. We note that numerous carriers have asserted that they comply
    with the requirements to contribute to universal service mechanisms
    and pay intrastate access charges on these calls today while
    continuing to offer calling card rates that are competitive with the
    rates offered by AT&T.[^79]

# notice of proposed rulemaking

## Discussion

38. As explained above, AT&T's November 2004 amendment to its petition
    identified two variants to the "enhanced" prepaid calling card
    service described in its original petition. In the first variant,
    the customer is given the option to listen to additional information
    or perform additional functions before listening to the advertising
    message.[^80] In the second variant, AT&T would provide transport
    associated with enhanced calling card calls over its Internet
    backbone network using IP technology.[^81] These two variations
    could be offered separately from one another or in combination
    (e.g., a card that gives callers the option to access additional
    information and uses IP transport for a portion of the call.)[^82]
    Rather than continuing to address the appropriate regulatory regime
    for variations of prepaid calling cards in a piecemeal manner, we
    conclude that the public interest would best be served by
    considering this issue in a more comprehensive manner, enabling us
    to gather information about all types of current and planned calling
    card services.

39. In the Order portion of this item, we find that the prepaid calling
    card service described in AT&T's original petition is a
    telecommunications service. We find that this service does not meet
    the statutory definition of an information service because: (1) AT&T
    does not offer any capability to the customer with respect to the
    advertising message; and (2) the advertising message is incidental
    to the underlying telecommunications service. We seek comment on how
    to apply this analysis to the first variant on AT&T's "enhanced"
    calling card service described above. Does offering the caller a
    menu of options to access information satisfy the definition of an
    information service, or must the information made available be more
    integral to the underlying telecommunications service? How should we
    distinguish between incidental information and information that is
    essential to the service? Is there any evidence that any of these
    cards are being marketed as providing a service other than making
    telephone calls? Is there any evidence that customers purchase these
    cards for any reason other than making telephone calls? Is the
    customer's purpose in buying the card relevant to this inquiry? How
    relevant is the frequency with which customers use any such
    additional features? We seek comment on the manner in which these
    cards are marketed, the types of features they offer, and the
    frequency with which customers use those features.

40. We also seek comment on the extent to which the use of IP technology
    to deliver calls placed using prepaid calling cards is a relevant
    factor in determining its classification under the Act. In the *AT&T
    IP Telephony Order*, we concluded that an AT&T voice service
    utilizing 1+ dialing from a regular telephone that is converted into
    IP format for transport over AT&T's network and converted back into
    analog format for delivery through local exchange carrier lines is a
    telecommunications service.[^83] We stated that this conclusion
    applies to all services that (1) use ordinary customer premises
    equipment with no enhanced functionality, (2) originate and
    terminate on the public switched telephone network, and (3) undergo
    no net protocol conversion and provide no enhanced functionality to
    end users due to the provider's use of IP technology.[^84] Are
    prepaid calling card services that use "IP-in-the-middle" and meet
    these same criteria also telecommunications services? Does it
    matter, as AT&T argues, whether 1+ dialing or 8YY dialing is used to
    originate the call?[^85] AT&T has asserted that other prepaid
    calling card providers are using IP to transport prepaid calling
    card services and are treating such calls as information
    services.[^86] If other providers are offering such services, are
    they treating them as information services? If so, how are those
    services similar or dissimilar to the "IP-in-the-middle" service we
    classified as a telecommunications service in the *AT&T IP Telephony
    Order*?

41. In addition to services similar to the variants described above, we
    seek comment on how we might distinguish between telecommunications
    and information services for other existing or potential prepaid
    calling card services that incorporate features not specifically
    addressed in this item. Are there other existing prepaid calling
    cards that offer capabilities in addition to the ability to place a
    phone call? What capabilities do these other cards offer, and how
    are they different from the prepaid calling cards offered or
    proposed by AT&T? In what other ways is IP technology being used to
    provide prepaid calling services? What other features are relevant
    to the classification of any existing or potential prepaid calling
    cards?

42. To the extent the variant services described by AT&T or other
    existing or potential prepaid calling card services are classified
    as information services, they presumably would be subject solely to
    federal jurisdiction.[^87] If any such services are classified as
    telecommunications services, we seek comment on the circumstances,
    if any, under which we should assert exclusive federal jurisdiction,
    even if the calls originate and terminate in the same state. What
    factors would be relevant in deciding whether the Commission should
    assert exclusive jurisdiction? Does the Commission\'s recent *Vonage
    Order* have any relevance in this circumstance?[^88]

43. The record developed in response to AT&T\'s petition makes clear
    that prepaid calling cards are a vital communications tool for
    members of the armed services and their families.[^89] As
    demonstrated in Appendix B, numerous programs exist through which
    the public can support the troops by donating calling cards, and the
    Commission fully supports these efforts. We seek comment on whether
    there are steps this Commission can take to ensure that prepaid
    calling cards continue to be available to soldiers and their
    families at reasonable rates. Specifically, are there any
    circumstances in which soldiers and their families would be
    negatively impacted if prepaid calling cards were subject to
    universal service and access charges?[^90] If there would be any
    such negative impact, are there steps the Commission can take,
    consistent with the requirements of the Act, to ameliorate it? In
    this respect, would it be within our authority to exempt calling
    cards sold at military exchanges or other military retails outlets
    from universal service or access charges, or within our authority to
    forbear from applying such charges? Even if it is within our
    authority, is it technically feasible for vendors to differentiate
    such cards?

## Procedural Matters

### Comment Filing Procedures

44. Pursuant to sections 1.415 and 1.419 of the Commission\'s
    rules,[^91] interested parties may file comments on or before 30
    days and reply comments on or before 60 days after publication of
    this NPRM in the Federal Register. **All pleadings responsive to
    this NPRM must reference WC Docket 05-68. Pleadings intended to
    respond only to the issues raised in this NPRM should not reference
    WC Docket No. 03-133.** Comments may be filed using the
    Commission\'s Electronic Comment Filing System (ECFS) or by filing
    paper copies.[^92] Comments filed through the ECFS can be sent as an
    electronic file via the Internet to <http://www.fcc.gov/cgb/ecfs/>.
    Only one copy of an electronic submission must be filed in a single
    docket. In completing each transmittal screen, commenters should
    include their full name, U.S. Postal Service mailing address, and
    the applicable docket or rulemaking number, in this case, WC Docket
    No. 05-68. Parties may also submit an electronic comment by Internet
    e-mail. To get filing instructions for e-mail comments, commenters
    should send an e-mail to <ecfs@fcc.gov>, and should include the
    following words in the body of the message, "get form." A sample
    form and directions will be sent in reply. Parties are strongly
    encouraged to file comments electronically using the Commission's
    ECFS.

45. Parties who choose to file by paper must file an original and four
    copies of each filing. Paper filings can be sent by hand or
    messenger delivery, by commercial overnight courier, or by
    first-class or overnight U.S. Postal Service mail (although we
    continue to experience delays in receiving U.S. Postal Service
    mail). The Commission\'s contractor will receive hand-delivered or
    messenger-delivered paper filings for the Commission\'s Secretary at
    236 Massachusetts Avenue, N.E., Suite 110, Washington, D.C. 20002.
    The filing hours at this location are 8:00 a.m. to 7:00 p.m. All
    hand deliveries must be held together with rubber bands or
    fasteners, and any envelopes must be disposed of before entering the
    building. Commercial overnight mail (other than U.S. Postal Service
    Express Mail and Priority Mail) must be sent to 9300 East Hampton
    Drive, Capitol Heights, MD 20743. U.S. Postal Service first-class
    mail, Express Mail, and Priority Mail should be addressed to 445
    12th Street, SW, Washington, D.C. 20554.

46. All filings must be addressed to the Commission\'s Secretary,
    Marlene H. Dortch, Office of the Secretary, Federal Communications
    Commission, 445 12^th^ Street, SW, Washington, D.C. 20554. Parties
    should also send one copy of their filings to the Chief, Pricing
    Policy Division, Wireline Competition Bureau, Federal Communications
    Commission, 445 12^th^ Street, SW, Washington, D.C. 20554. In
    addition, parties should send one copy to the Commission's copy
    contractor, Best Copy and Printing, Inc. (BCPI), Portals II, 445
    12th Street, SW, Room CY-B402, Washington, D.C. 20554, (202)
    488-5300, or via e-mail to <fcc@bcpiweb.com>.

47. Documents in WC Docket No. 05-68 are available for public inspection
    and copying during business hours at the FCC Reference Information
    Center, Portals II, 445 12^th^ St. SW, Room CY-A257, Washington,
    DC 20554. The documents may also be purchased from BCPI,
    telephone (202) 488-5300, facsimile (202) 488-5563, TTY (202)
    488-5562, e-mail <fcc@bcpiweb.com>. Accessible formats (computer
    diskettes, large print, audio recording and Braille) are available
    to persons with disabilities by contacting the Consumer &
    Governmental Affairs Bureau, at (202) 418-0531, TTY (202) 418-7365,
    or at <fcc504@fcc.gov>.

### Ex Parte Requirements

48. This matter shall be treated as a "permit-but-disclose" proceeding
    in accordance with the Commission's *ex parte* rules.[^93] Persons
    making oral *ex parte* presentations are reminded that memoranda
    summarizing the presentations must contain summaries of the
    substance of the presentations and not merely a listing of the
    subjects discussed. More than a one or two sentence description of
    the views and arguments presented generally is required.[^94] Other
    rules pertaining to oral and written *ex parte* presentations in
    permit-but-disclose proceedings are set forth in section 1.1206(b)
    of the Commission's rules.[^95]

### Initial Regulatory Flexibility Analysis

49. As required by the Regulatory Flexibility Act of 1980, as amended
    (RFA),[^96] the Commission has prepared this Initial Regulatory
    Flexibility Analysis (IRFA) of the possible significant economic
    impact on a substantial number of small entities by the policies and
    rules proposed in this NPRM. Written public comments are requested
    on this IRFA. Comments must be identified as responses to the IRFA
    and must be filed by the deadlines for comments on the NPRM provided
    in paragraph 44 of the item. The Commission will send a copy of the
    NPRM, including this IRFA, to the Chief Counsel for Advocacy of the
    Small Business Administration (SBA).[^97] In addition, the NPRM and
    IRFA (or summaries thereof) will be published in the Federal
    Register.[^98]

#### Need for, and Objectives of, the NPRM

50. In the past, the Commission has treated prepaid calling cards as
    jurisdictionally mixed telecommunications services subject to state
    and federal regulation. As companies introduce "enhanced" prepaid
    calling cards, questions arise as to whether these new services
    should be subject to the same regulatory treatment. In this NPRM,
    the Commission seeks comment on two types of "enhanced" prepaid
    calling card services offered or planned by AT&T as well as other
    existing or potential prepaid calling card services incorporating
    features that are not currently addressed by our rules or this item.
    Specifically, the Commission seeks comment on the classification of
    such services as telecommunications services or information services
    and whether, or under what circumstances, the Commission should
    exercise exclusive federal jurisdiction over such services. The
    Commission also seeks comment on whether there are steps it can take
    to ensure that prepaid calling cards continue to be available to
    soldiers and their families at reasonable rates.

#### Legal Basis

51. This rulemaking action is supported by sections 4(i), 4(j), 201,
    202, 203, and 254 of the Communications Act of 1934, as
    amended.[^99]

#### Description and Estimate of the Number of Small Entities to Which the Notice will Apply

52. The RFA directs agencies to provide a description of, and, where
    feasible, an estimate of the number of small entities that may be
    affected by the proposed rules, if adopted.[^100] The RFA generally
    defines the term "small entity" as having the same meaning as the
    terms "small business," "small organization," and "small
    governmental jurisdiction."[^101] In addition, the term "small
    business" has the same meaning as the term "small business concern"
    under the Small Business Act.[^102] A "small business concern" is
    one which: (1) is independently owned and operated; (2) is not
    dominant in its field of operation; and (3) satisfies any additional
    criteria established by the SBA.[^103]

53. The most reliable source of information regarding the total numbers
    of certain common carrier and related providers nationwide, as well
    as the number of commercial wireless entities, appears to be the
    data that the Commission publishes in its *Trends in Telephone
    Service* report.[^104] The SBA has developed small business size
    standards for wireline and wireless small businesses within the
    three commercial census categories of Wired Telecommunications
    Carriers,[^105] Paging,[^106] and Cellular and Other Wireless
    Telecommunications.[^107] Under these categories, a business is
    small if it has 1,500 or fewer employees. Below, using the above
    size standards and others, we discuss the total estimated numbers of
    small businesses that might be affected by our actions.

54. We have included small incumbent LECs in this present RFA analysis.
    As noted above, a "small business" under the RFA is one that, inter
    alia, meets the pertinent small business size standard (e.g., a
    telephone communications business having 1,500 or fewer employees),
    and "is not dominant in its field of operation."[^108] The SBA's
    Office of Advocacy contends that, for RFA purposes, small incumbent
    LECs are not dominant in their field of operation because any such
    dominance is not "national" in scope.[^109] We have therefore
    included small incumbent LECs in this RFA analysis, although we
    emphasize that this RFA action has no effect on Commission analyses
    and determinations in other, non-RFA contexts.

55. *Wired Telecommunications Carriers*. The SBA has developed a small
    business size standard for Wired Telecommunications Carriers, which
    consists of all such companies having 1,500 or fewer
    employees.[^110] According to Census Bureau data for 1997, there
    were 2,225 firms in this category, total, that operated for the
    entire year.[^111] Of this total, 2,201 firms had employment of 999
    or fewer employees, and an additional 24 firms had employment of
    1,000 employees or more.[^112] Thus, under this size standard, the
    majority of firms can be considered small.

56. *Local Exchange Carriers*. Neither the Commission nor the SBA has
    developed a size standard for small businesses specifically
    applicable to local exchange services. The closest applicable size
    standard under SBA rules is for Wired Telecommunications Carriers.
    Under that size standard, such a business is small if it has 1,500
    or fewer employees.[^113] According to Commission data, 1,310
    carriers reported that they were incumbent local exchange service
    providers.[^114] Of these 1,310 carriers, an estimated 1,025 have
    1,500 or fewer employees and 285 have more than 1,500
    employees.[^115] In addition, according to Commission data, 563
    companies reported that they were engaged in the provision of either
    competitive access provider services or competitive local exchange
    carrier services.[^116] Of these 563 companies, an estimated 472
    have 1,500 or fewer employees and 91 have more than 1,500
    employees.[^117] In addition, 37 carriers reported that they were
    "Other Local Exchange Carriers."[^118] Of the 37 "Other Local
    Exchange Carriers," an estimated 36 have 1,500 or fewer employees
    and one has more than 1,500 employees.[^119] Consequently, the
    Commission estimates that most providers of local exchange service,
    competitive local exchange service, competitive access providers,
    and "Other Local Exchange Carriers" are small entities that may be
    affected by the rules and policies proposed herein.

57. *Telecommunications Resellers*. The SBA has developed a size
    standard for a small business within the category of
    Telecommunications Resellers. Under that SBA size standard, such a
    business is small if it has 1,500 or fewer employees.[^120]
    According to Commission data, 32 companies reported that they were
    engaged in the provision of prepaid calling cards.[^121] Of these 32
    companies, an estimated 31 have 1,500 or fewer employees and one has
    more than 1,500 employees.[^122] Consequently, the Commission
    estimates that the great majority of prepaid calling card providers
    are small entities that may be affected by the rules and policies
    proposed herein.

#### Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

58. In this NPRM, we are seeking comment on, among other things, the
    appropriate classification of certain prepaid calling card services
    and the scope of federal jurisdiction over such services. If we
    determine that particular prepaid calling card services are
    telecommunications services, providers of any such services that
    have not complied with applicable regulatory requirements in the
    past would be subject to additional reporting or recordkeeping
    burdens related to those requirements. If the Commission determines
    that it should exercise exclusive federal jurisdiction over prepaid
    calling card services, any current reporting and recordkeeping
    burdens related to state regulation likely would be reduced.

#### Steps Taken To Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

59. The RFA requires an agency to describe any significant alternatives
    that it has considered in reaching its proposed approach, which may
    include the following four alternatives (among others): (1) the
    establishment of differing compliance or reporting requirements or
    timetables that take into account the resources available to small
    entities; (2) the clarification, consolidation, or simplification of
    compliance or reporting requirements under the rule for small
    entities; (3) the use of performance, rather than design, standards;
    and (4) an exemption from coverage of the rule, or any part thereof,
    for small entities.[^123]

60. In this NPRM, the Commission seeks comment on the classification of
    prepaid calling card services, the scope of federal jurisdiction
    over such services, and whether the Commission should take steps to
    ensure that prepaid calling cards remain affordable to members of
    the military and their families. The Commission's resolution of
    these issues will affect not only small providers of prepaid cards,
    but also small LECs that exchange traffic with these providers and
    small IXCs that compete with these providers. Options that reduce
    burdens for one type of small entity may increase the burden on
    another type of small entity. We therefore seek comment on the types
    of burdens small entities could face if the Commission alters its
    treatment of prepaid calling card providers as proposed in the NPRM.
    Entities, especially small businesses, are encouraged to quantify,
    if possible, the costs and benefits of potential reporting,
    recordkeeping, and other compliance requirements. We will consider
    any proposals made to minimize significant economic impact on small
    entities.

#### Federal Rules That May Duplicate, Overlap, or Conflict With the Proposed Rules

61. None.

### Paperwork Reduction Act

62. This document does not contain proposed information collection(s)
    subject to the Paperwork Reduction Act of 1995 (PRA), Public Law
    104-13. In addition, therefore, it does not contain any new or
    modified "information collection burden for small business concerns
    with fewer than 25 employees," pursuant to the Small Business
    Paperwork Relief Act of 2002, Public Law 107-198.[^124]

# ordering clauses

63. Accordingly, IT IS ORDERED that, pursuant to sections 4(i), 4(j),
    201, 202, 203, and 254 of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 154(i), (j), 201, 202, 203, 254, the AT&T
    Corp. Petition for Declaratory Ruling Regarding Enhanced Prepaid
    Calling Card Services IS DENIED as set forth herein.

64. IT IS FURTHER ORDERED that, within 30 days of the effective date of
    this Order, AT&T SHALL FILE with the Universal Service
    Administrative Corporation (USAC) revised Forms 499-A for the entire
    period that AT&T provided the "enhanced" calling card service
    described in its original petition, consistent with the findings in
    this Order.

65. IT IS FURTHER ORDERED that, within 60 days of the effective date of
    this Order, USAC SHALL ISSUE revised invoices consistent with the
    findings in this Order for all new or revised Forms 499-A filed
    pursuant to this Order.

66. IT IS FURTHER ORDERED that, pursuant to the authority contained in
    sections 4(i), 4(j), 201, 202, 203, and 254 of the Communications
    Act of 1934, as amended, 47 U.S.C. §§ 154(i), 154(j), 201, 202, 203,
    254, NOTICE IS HEREBY GIVEN of the proposed rulemaking described
    above and COMMENT IS SOUGHT on those issues.

67. IT IS FURTHER ORDERED that the Commission's Consumer Information
    Bureau, Reference Information Center, SHALL SEND a copy of this
    Notice of Proposed Rulemaking, including the Initial Regulatory
    Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
    Business Administration.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

**Appendix A**

**Comments (filed June 26, 2003)**

Alaska Exchange Carriers Association, Inc.

BellSouth Corp.

General Communications, Inc. (GCI)

Qwest Services Corp.

Regulatory Commission of Alaska

SBC Communications, Inc.

Sprint Corp.

Verizon

**Reply Comments (filed July 24, 2003)**

AT&T Corp.

New York State Dep't of Public Service

WorldCom, Inc. d/b/a MCI

**Appendix B**

Prepaid calling cards are a vital means of communications for members of
the armed services, particularly those serving overseas. This appendix
provides information on several ongoing programs through which the
public may donate calling cards to military personnel. We also highlight
a number of recent donations by the telecommunications industry of
prepaid calling cards and long-distance minutes. This summary is not
intended to be an exhaustive list of calling card donation programs or
service provider contributions.

**[Calling Card Donation Programs]{.underline}**

**Cell Phones for Soldiers**

Cell Phones for Soldiers is a non-profit organization that provides
prepaid calling cards to American soldiers serving in the Middle East.
Cell Phones for Soldiers, which was started by teenager Brittany
Bergquist and her younger brother Robbie, raises money by collecting old
cell phones and selling them to companies for refurbishment, and through
cash donations. To learn more about this program or to make a donation,
visit the organization's website,
[http://www.cellphonesforsoldiers.com](http://www.cellphonesforsoldiers.com/).

**Help Our Troops Call Home**

This program is sponsored by the Armed Services Exchanges, which sell
prepaid calling cards to any individual or organization that wishes to
purchase cards for service members deployed in support of Operation
Enduring Freedom or Operation Iraqi Freedom. To learn more about this
program or to make a donation, visit any of the Armed Service Exchange
websites: the Army and Air Force Exchange Service,
[http://www.aafes.com](http://www.aafes.com/); the Navy Exchange
Service, [http://navy-nex.com](http://navy-nex.com/); or the Marine
Corps Exchange, [http://www.usmc-mccs.org](http://www.usmc-mccs.org/).

**Operation USO Care Package**

United Service Organizations, Inc. (USO) sponsors a program that
delivers care packages to members of the U.S. military deployed around
the world. A donation of \$25 sponsors a care package that includes a
pre-paid worldwide phone card. To learn more about this program or to
make a donation, visit the care package website,
[http://www.usocares.org](http://www.usocares.org/).

**Operation Uplink**

Operation Uplink provides free prepaid phone cards to active-duty
military personnel and hospitalized veterans, and has distributed more
than 4,000,000 prepaid phone cards since it was launched by the Veterans
of Foreign Wars in 1996. To learn more about this program or to make a
donation, visit the Operation Uplink website,
[http://www.operationuplink.org](http://www.operationuplink.org/).

**USO Operation Phone Home**

The USO accepts donations for calling cards through its Operation Phone
Home program. Since it launched Operation Phone Home in March 2003, the
USO has distributed more than 80,000 free cards. To learn more about
this program or to make a donation, visit the program's website,
<http://www.uso.org/pubs/8_20_2733.cfm>.

**[Donations by Telecom Providers]{.underline}**

**AT&T**

In a news release dated November 29, 2004, AT&T noted that since the
onset of hostilities in the Middle East, it has donated more than \$6
million in prepaid phone cards to our troops. The press release is
available on AT&T's military headquarters website,
<http://www.usa.att.com/military/events/support_troops.jsp>.

**BellSouth**

BellSouth states on its Pioneer Volunteers website that employees that
donate to the USO qualify for a corporate match through the BellSouth
Matching Gift program. See
<http://www.bellsouthpioneers.org/TroopDonations.htm>.

**MCI**

In a press release dated November 16, 2004, MCI stated that it would
provide to U.S. Armed Forces personnel stationed in Iraq free phone
calls on November 21-27 and December 21 through January 1. MCI also
stated that it had provided pre-paid calling cards to military support
groups for distribution during the 2004 holiday season. The press
release is available on MCI's website,
<http://global.mci.com/about/news/news2.xml?newsid=12450&mode=long&lang=en&width=530&root=/about/&langlinks=off>.

**Qwest**

In a press release dated February 4, 2004, Qwest announced that it had
recently donated 500, 30-minute long-distance calling cards to members
of the military recuperating at Walter Reed Army Medical Center in
Washington, DC. The press release is available on Qwest's website,
<http://www.qwest.com/about/media/pressroom/1,1281,1436_archive,00.html>.

**SBC**

On April 17, 2003, SBC launched a public service campaign to promote the
Operation Uplink program, which provides free international calling
cards for military personnel stationed overseas. In the press release
announcing the public service campaign, SBC stated that it had
contributed \$250,000 to Operation Uplink. The press release is
available on SBC's website,
<http://www.sbc.com/gen/press-room?pid=4800&cdvn=news&newsarticleid=20454>.

**Sprint**

In a press release dated February 6, 2002, Sprint announced that it had
donated prepaid long-distance calling cards to the 5,000 military
personnel that served to protect the Olympic Winter Games in Salt Lake
City. The press release is available on Sprint's website,
<http://www2.sprint.com/mr/news_dtl.do?id=1128>.

**Verizon**

On June 21, 2004, Verizon announced the donation of 5,000 prepaid
calling cards to the USO for distribution to American soldiers wounded
in battle and being treated at U.S. Army hospitals. In the same
announcement, Verizon stated that in the previous year it had donated
over 450,000 calling cards to support all branches of the military and
their families. The press release containing these announcements is
available on Verizon's website,
<http://newscenter.verizon.com/proactive/newsroom/release.vtml?id=85633&PROACTIVE_ID=cecdc9cdcdc9c9cec7c5cecfcfcfc5cecec9c7cfcbc6cacbccc5cf>.

**Vonage**

In a press release dated December 28, 2004, Vonage announced that its
donation of free phone service to the United States military stationed
in Iraq and Afghanistan has allowed our soldiers to spend over two
million minutes on the phone with loved ones back in the U.S. Vonage
stated that it plans to continue this program throughout 2005. The press
release is available on Vonage's website,
<http://www.vonage.com/corporate/press_index.php?PR=2004_12_28_0>.

**STATEMENT OF**

**CHAIRMAN MICHAEL K. POWELL**

> *Re: AT&T Corp. Petition for Declaratory Ruling Regarding Enhanced
> Prepaid Calling Card Services, WC Docket No. 03-133; Regulation of
> Prepaid Calling Card Services, WC Docket No. 05-68.*

Companies cannot engage in misdirection or word games to avoid their
universal service obligations. And they certainly cannot unilaterally
decide when and where they pay their universal service charges. These
payments are the law of land -- and they apply to all calling cards that
offer telecommunications services. Today we reject any ambiguity created
by these companies' efforts to duck their universal service
responsibilities.

The original calling card service described in the petition is a
telecommunications service and therefore the provider must pay universal
service fees. Recent filings with the Securities and Exchange Commission
indicate that one company alone has withheld approximately \$160 million
from the Fund. That amount would subsidize telephone service for over 6
million low income consumers for an entire quarter. Or provide enough
resources for the first four years of the rural telemedicine program.
One carrier's 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.

AT&T has engaged in a campaign to suggest that consumer rates would rise
20 percent or more if carriers are required to pay their fair share.
They have gone so far as to take the extraordinary step of conscripting
consumers into a lobbying effort directed at this Commission and members
of Congress. Shamelessly, they trumpet the impact of this decision on
our soldiers serving in Iraq. 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. The FCC must be and is
concerned about the impact of our rulings on servicemen and their
families. However some companies' advocacy on this issue is better seen
as an attempt to distract the public from companies' underlying effort
to evade their regulatory responsibilities to the Universal Service
Fund. Today we level the playing field so that all calling card carriers
pay their fair share.

**STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

*Re:* *AT&T Corp. Petition for Declaratory Ruling Regarding Enhanced
Prepaid Calling Card Services,* WC Docket Nos. 03-133, 05-68 (FCC
05-41).

This Order clarifies that the Commission's existing rules for
telecommunications services apply to calling card services even when
consumers are played a recorded advertising message. This result is the
most logical reading of our rules and best preserves our universal
service policies. Accordingly, I support the Order.

I have concern, however about the scope of the issues we address here.
In particular, I am concerned that the Commission defers ruling and
instead seeks comment through a Notice of Proposed Rulemaking on two
alternative forms of calling card services, which the petitioner in this
case now uses to provide service. Indeed, commenters have raised the
possibility that a significant portion of the multi-billion dollar
calling card industry may use these alternative forms of service.

By not addressing these two alternative forms of calling card services
here, we leave for another day questions about whether these calling
card services must also contribute to the universal service fund and how
these services are classified for purposes of our intercarrier
compensation rules. This ambiguity may be read by providers to signal a
regulatory edge for one form of technology over another, despite the
fact that the services appear functionally the same from the perspective
of the consumer. Alternatively, when the Commission finally does address
these other forms of service, a portion of the calling card industry may
face the same sort of liability contemplated in this Order. Either way,
I am concerned that we perpetuate a marketplace dynamic where success is
significantly affected by tolerance for regulatory risk. As
policymakers, and as stewards of universal service, we should move to
address these issues quickly and comprehensively.

**STATEMENT OF\
COMMISSIONER MICHAEL J. COPPS,**

**CONCURRING**

Re: *AT&T Petition for Declaratory Ruling Regarding Enhanced Prepaid
Calling*

*Card Services; Regulation of Prepaid Calling Card Services*, Order and
Notice of

Proposed Rulemaking (WC Docket No. 03-133)

By law, this Commission has a duty to preserve and advance universal
service. In some ways we live up to that charge today. But in others our
analysis falls short. We clarify in this item that AT&T calling card
services that include incidental announcements or advertisements are
basic telecommunications services, subject to universal service
obligations. This sets straight a messy situation and I support the
result.

Still, I am concerned with the backward-looking nature of our decision.
By starting a Notice of Proposed Rulemaking, the Commission suggests
that going forward the boundary between calling cards subject to
universal service and those that are not is whether they feature an
automated voice that coos on the line "press 1 for more information."
There may be a bright line out there between services subject to
regulatory authority and those that are not. But I doubt this is it. And
by initiating a proceeding based on this distinction, the Commission all
but ensures that calling card confusion from the past is perpetuated in
the future. Because I believe we have deeper analytical duties when it
comes to universal service, I choose to concur.

[^1]: *AT&T Corp. Petition for Declaratory Ruling Regarding Enhanced
    Prepaid Calling Card Services*, WC Docket No. 03-133, Petition of
    AT&T (filed May 15, 2003) (AT&T Petition).

[^2]: *See* Letter from Judy Sello, Senior Attorney, AT&T, to Marlene H.
    Dortch, Secretary, Federal Communications Commission (Nov. 22, 2004)
    (*AT&T Nov. 22 Letter*).

[^3]: *See* 47 U.S.C. § 153 (43), (46); *see also* *The Time Machine*,
    Memorandum Opinion and Order, 11 FCC Rcd 1186, 1192-93, para. 40
    (CCB 1995) (provision of information regarding the time remaining on
    the card is "incidental to the provision of basic communications
    services, and therefore is not an enhanced service").

[^4]: *See* Telecommunications Reporting Worksheet, FCC Form 499-A, Line
    411. The instructions for this form specifically state that "\[a\]ll
    prepaid card revenues are classified as end-user revenues."
    Instructions to the Telecommunications Reporting Worksheet, FCC Form
    499-A at 22.

[^5]: *See Time Machine*, 11 FCC Rcd at 1190, para. 29 (debit card
    service is jurisdictionally mixed because both interstate and
    intrastate calls can be completed); *see also Southwestern Bell Tel.
    Co.*, CC Docket No. 88-180, Order Designating Issues for
    Investigation, 3 FCC Rcd 2339, 2341, para. 28 (CCB 1988) (credit
    card services are jurisdictionally mixed).

[^6]: *Teleconnect Co. v. Bell Tel. Co. of Pennsylvania*, File No.
    E-88-83, *et al.*, Memorandum Opinion and Order, 10 FCC Rcd 1626,
    1629-30, paras. 12-14 (1995) ("both court and Commission decisions
    have considered the end-to-end nature of the communications more
    significant than the facilities used to complete such
    communications"); *Time Machine*, 11 FCC Rcd at 1190, para. 29 ("a
    debit card call that originates and ends in the same state is an
    intrastate call, even if it is processed through an 800 switch
    located in another state"); *see also* *Southwestern Bell*, 3 FCC
    Rcd at 2341, para. 28 ("\[s\]witching at the credit card switch is
    an intermediate step in a single end-to-end communication"). As the
    Commission recently noted, the end-to-end analysis might not be
    applicable depending on the nature of the service. *See Petition for
    Declaratory Ruling that pulver.com's Free World Dialup Is Neither
    Telecommunications Nor a Telecommunications Service*, WC Docket No.
    03-45, Memorandum Opinion and Order, 19 FCC Rcd 3307, 3320-21, para.
    21 (2004) (*Pulver Order*) (end-to-end analysis is "unhelpful" where
    service simply consists of an Internet server, the portable nature
    of the service makes it difficult to determine customers' locations,
    and the service provider does not provide any transmission
    capability).

[^7]: AT&T Petition at 5.

[^8]: *Id*. at 6. The customer can also choose to replenish the minutes
    on the card, and then place a call or merely hang up. *Id.*

[^9]: *Id.* at 1. On June 5, 2003, the Wireline Competition Bureau
    released a Public Notice seeking comment on AT&T's petition. *See
    Pleading Cycle Established for AT&T Petition for Declaratory Ruling
    on Enhanced Prepaid Calling Card Services*, WC Docket No. 03-133,
    Public Notice, 18 FCC Rcd 11393 (WCB 2003). A list of commenting
    parties is attached as Appendix A.

[^10]: AT&T Petition at 8-9. AT&T concedes that intrastate access
    charges apply in the relatively rare situation when the centralized
    switching platform is in same state as both the calling and called
    parties. *Id.* at 14.

[^11]: *Id*. at 14-16.

[^12]: *Id.* at 9.

[^13]: *Id.* at 8.

[^14]: AT&T Reply at 18-19 (citing 47 U.S.C. § 153(20)). Notwithstanding
    its argument that "enhanced" calling cards are information services,
    AT&T states that it does not intend to avoid paying interstate
    access charges under the ESP exemption, because providers of prepaid
    cards use "Feature Group D access for which there is no ESP
    exemption equivalent." *Id.* at 20. AT&T notes that the ESP
    exemption merely "permits the purchase of access from tariffs
    offering local business services." *Id.* AT&T has, however,
    apparently stopped reporting revenues for these services for
    purposes of calculating universal service contributions. *See* AT&T
    Corp. Form 10-Q at 16 (filed with the Securities and Exchange
    Commission on November 4, 2004) (*AT&T November 10-Q Report*)
    (identifying \$160 million in "USF contribution savings since the
    beginning of 1999" as a result of characterizing "enhanced" calling
    card services as information services); *see also* Letter from Robin
    Tuttle, USTA, to Marlene H. Dortch, Secretary, Federal
    Communications Commission (Nov. 22, 2004).

[^15]: AT&T Petition at 18.

[^16]: AT&T Reply at 9 (citing 47 C.F.R. § 64.702(a)) & 12 n.6
    (qualifies as information service via *either* changed information
    *or* interaction).

[^17]: AT&T Reply at 4 ("half of households with incomes below \$20,000
    and 70% of African-American households have used prepaid cards, and
    consumers 55 and older represent the fastest-growing segment of
    prepaid card users").

[^18]: *Id.* (noting that intrastate access charges may be as high as 14
    cents per minute on both ends of the call).

[^19]: *See* AT&T Petition at 5; AT&T Reply at 4; Letter from Mark
    Evans, Vice President-Prepaid Services, AT&T, to Marlene H. Dortch,
    Secretary, Federal Communications Commission (July 20, 2004) (*AT&T
    Evans Letter*).

[^20]: *See* *AT&T Nov. 22 Letter* at 2-3.

[^21]: *See* Letter from Amy Alvarez, AT&T, to Marlene H. Dortch,
    Secretary, Federal Communications Commission (Nov. 30, 2004).

[^22]: *AT&T Nov. 22 Letter* at 3-4.

[^23]: *Id*. (citing *Petition for Declaratory Ruling that AT&T's
    Phone-to-Phone IP Telephony Services are Exempt from Access
    Charges*, WC Docket No. 02-361, Order, 19 FCC Rcd 7457 (2004) (*AT&T
    IP Telephony Order*)).

[^24]: 47 U.S.C. § 153(43).

[^25]: 47 U.S.C. § 153(46).

[^26]: Section 3(20) of the Act defines an information service as the
    "offering of a capability for generating, acquiring, storing,
    transforming, processing, retrieving, utilizing, or making available
    information via telecommunications." 47 U.S.C. § 153(20). The
    Commission's rules further provide that an enhanced service:
    (1) acts on subscriber-provided information; (2) provides the
    subscriber additional, different or restructured information; or
    (3) involves subscriber interaction with stored information. 47
    C.F.R. § 64.702(a). The Commission has found that the terms
    telecommunications service and information service used in the 1996
    Act are similar to the terms basic service and enhanced service that
    were used by the Commission prior to 1996. *Implementation of the
    Non-Accounting Safeguards of Sections 271 and 272 of the
    Communications Act of 1934, As Amended*, CC Docket No. 96-149, First
    Report and Order and Further Notice of Proposed Rulemaking, 11 FCC
    Rcd 21905, 21955-58 paras. 102-07 (1996) (*Non-Accounting Safeguards
    Order*).

[^27]: Sprint Comments at 8.

[^28]: *See, e.g., Policies and Rules Concerning Local Exchange Carrier
    Validation and Billing Information for Joint Use Calling Cards*, CC
    Docket No. 91-115, Report and Order and Request for Supplemental
    Comment, 7 FCC Rcd 3528, 3531, para. 19 (1992) (validation and
    screening services are "incidental" to the provision of local
    exchange access service and therefore subject to Title II regulation
    ) (*Joint Use Calling Card Order*); *North American
    Telecommunications Association Petition for Declaratory Ruling Under
    § 64.702 of the Commission's Rules Regarding the Integration of
    Centrex, Enhanced Services, and Customer Premises Equipment*, ENF
    84-2, Memorandum Opinion and Order, 101 FCC 2d 349, 359-361,
    paras. 24-28 (1985) (*NATA Order*) (services that "facilitate the
    provision of basic services without altering their fundamental
    character" are not considered enhanced services), *recon.*, 3 FCC
    Rcd 4385, 4386, paras. 8-9 (1988) (*NATA Reconsideration Order*);
    *Beehive Telephone v. The Bell Operating Companies*, File No.
    E-94-57, Memorandum Opinion and Order, 10 FCC Rcd 10562, 10566,
    para. 21 (1995) ("services that are incidental or adjunct to the
    common carrier transmission service are to be regulated in the same
    way as the common carrier service"), *aff'd on remand*, Memorandum
    Opinion and Order, 12 FCC Rcd 17930 (1997); *AT&T 900 Dial-It
    Services and Third Party Billing and Collection Services*, File No.
    ENF-88-05, Memorandum Opinion and Order, 4 FCC Rcd 3429, 3431, para.
    20 (CCB 1989) (service is an enhanced service if the information
    provided is "not incidental" to the basic telecommunications
    service, but rather is "the essential service provided").

[^29]: *Non-Accounting Safeguards Order*, 11 FCC Rcd at 21958, para. 107
    ("services the Commission has classified as 'adjunct-to-basic'
    should be classified as telecommunications services, rather than
    information services").

[^30]: *See Time Machine*, 11 FCC Rcd 1192-93, para. 40 (information
    regarding time remaining on card is not an enhanced service).

[^31]: *See Non-Accounting Safeguards Order*, 11 FCC Rcd at 21958, para.
    107; *Joint Use Calling Card Order*, 7 FCC Rcd at 3531, para. 21
    (service may be incidental to transmission even if it is not
    strictly necessary to complete a call). For similar reasons, we
    reject AT&T's argument that the "enhanced" calling card service is
    an electronic publishing service under section 274 of the Act. 47
    U.S.C. § 274.

[^32]: AT&T Petition at 9; AT&T Reply at 11-12 (citing *Northwestern
    Bell Telephone Company Petition for Declaratory Ruling*, Memorandum
    Opinion and Order, 2 FCC Rcd 5986, 5988, para. 20 (1987) (*Talking
    Yellow Pages*)).

[^33]: *Talking Yellow Pages*, 2 FCC Rcd at 5988, para. 20 (citing 47
    C.F.R. § 64.702(a)).

[^34]: For that reason, we reject MCI's argument that the customer
    "interacts" with the information because it affirmatively consents
    to listen to it. MCI Reply at 4.

[^35]: *See* Letter from David Lawson, Counsel for AT&T, to Marlene H.
    Dortch, Secretary, Federal Communications Commission, WC Docket No.
    03-133 (filed May 11, 2004) at 4 (*AT&T May 11 Ex Parte Letter*)
    (citing *American Telephone and Telegraph Company Comparably
    Efficient Interconnection Plan for Enhanced Services Complex*,
    Memorandum Opinion and Order, 6 FCC Rcd 4839 (CCB 1991) (*AT&T CEI
    Order*)).

[^36]: *AT&T CEI Order*, 6 FCC Rcd at 4840, para. 6.

[^37]: *Independent Data Communications Manufacturers Ass'n Petition for
    Declaratory Ruling that AT&T's InterSpan Frame Relay Service Is a
    Basic Service*, Memorandum Opinion and Order, 10 FCC Rcd 13717,
    13723, para. 43 (CCB 1995).

[^38]: *AT&T May 11 Ex Parte Letter* at 7 (citing *NATA Reconsideration
    Order*, 3 FCC Rcd at 4391, para. 42).

[^39]: *NATA Reconsideration Order*, 3 FCC Rcd at 4391, paras. 42-46.

[^40]: *AT&T May 11 Ex Parte Letter* at 5 (citing *Inquiry Concerning
    High-Speed Access to the Internet Over Cable and Other Facilities*,
    GN Docket No. 00-185, Declaratory Ruling and Notice of Proposed
    Rulemaking, 17 FCC Rcd 4798, 4822-23, para. 38 (2002) (*Cable Modem
    Ruling*), *vacated in part and remanded,* *Brand X Internet Services
    v. FCC*, 345 F.3d 1120 (9^th^ Cir. 2003), *cert. granted*, 125 S.
    Ct. 655 (2004), *and cert. granted sub nom. National Cable &
    Telecomms. Ass\'n v. Brand X Internet Services*, 125 S. Ct. 654
    (2004)).

[^41]: *Cable Modem Ruling*, 17 FCC Rcd at 4822-23, para. 38 n.153.

[^42]: *Id*. at 4823, para. 39.

[^43]: As noted above, the packaging materials for AT&T's "enhanced"
    prepaid calling cards do not mention their use as devices for
    listening to advertisements and AT&T does not bill its customers for
    the time they spend listening to the advertisements. Sprint Comments
    at 8*.*

[^44]: *See Time Machine*, 11 FCC Rcd at 1190, para. 30.

[^45]: Verizon Comments at 5; GCI Comments at 7.

[^46]: SBC Comments at 5.

[^47]: AT&T Petition at 11 (citing *AT&T Corp. v. Bell
    Atlantic-Pennsylvania*, File Nos. E-95-006, *et al*., Memorandum
    Opinion and Order, 14 FCC Rcd 556, 587, paras. 69-70 (1988)
    (*Three-Way Calling Order*)).

[^48]: SBC Comments at 5-6; GCI Comments at 6.

[^49]: Verizon Comments at 5-6 (citing *Three-Way Calling Order*, 14 FCC
    Rcd at 587, paras. 69-70).

[^50]: *Implementation of the Local Competition Provisions in the
    Telecommunications Act of 1996; Intercarrier Compensation for
    ISP-Bound Traffic*, CC Docket Nos. 96-98 and 99-68, Order on Remand
    and Report and Order, 16 FCC Rcd 9151, 9178, para. 58 (2001) (*ISP
    Remand Order*), *remanded on other grounds*, *WorldCom v. FCC*, 288
    F.3d 429 (D.C. Cir. 2002), *cert. denied*, 123 S. Ct. 1927 (2003).
    The *WorldCom* decision remanding the *ISP Remand Order* did not
    take issue with the Commission's jurisdictional finding. *See also*
    *GTE Telephone Operating Cos*., *GTOC Tariff No. 1, Transmittal No.
    1148*, CC Docket No. 98-79, Memorandum Opinion and Order, 13 FCC Rcd
    22466, 22478-80, paras. 22-26 (1998).

[^51]: AT&T Petition at 16.

[^52]: BellSouth Comments at 5-6.

[^53]: *ISP Remand Order*, 16 FCC Rcd at 9177, para. 57.

[^54]: AT&T Petition at 18-19 (citing *Filing and Review of Open Network
    Architecture Plans*, CC Docket No. 88-2, Phase I, Memorandum Opinion
    and Order, 4 FCC Rcd 1, 141, para. 274 (1988)).

[^55]: AT&T Petition at 19.

[^56]: *Id.* at 19-20.

[^57]: *See* Letter from Judy Sello, Senior Attorney, AT&T, to Marlene
    H. Dortch, Secretary, Federal Communications Commission (October 12,
    2004) at 5 (non-facilities-based resellers obtain interstate 800
    services from unaffiliated IXCs to provide the connection between
    their cardholders and the platform, and separately obtain long
    distance services to route communications from the platform to
    called parties).

[^58]: Claims for unpaid intrastate access charges should be filed in
    the appropriate court or state commission. The Commission has held
    that it does not act as a collection agent for carriers with respect
    to unpaid tariff charges. *See, e.g., U.S. TelePacific Corporation*,
    File No. EB-04-MD-005, Memorandum Opinion and Order, FCC 04-284 at
    para. 8 (released Dec. 14, 2004).

[^59]: *See* AT&T Petition at 14 n.19 ("Intrastate access charges
    generally are higher than interstate access charges, and therefore
    classifying these calls as intrastate or interstate on the basis of
    the content of the communication is 'presumptively inconsistent'
    with the First Amendment."); *see also* *AT&T May 11 Ex Parte
    Letter* at 6.

[^60]: *See, e.g*., 47 C.F.R. § 54.706.

[^61]: *See AT&T November 10-Q Report* at 16.

[^62]: AT&T must limit the revisions on its Forms 499-A to information
    concerning prepaid calling card revenue (currently line 411 on Form
    499-A).

[^63]: *See* Letter from Amy Alvarez, AT&T, to Marlene H. Dortch,
    Secretary, Federal Communications Commission (Nov. 2, 2004).

[^64]: *Id.*

[^65]: *See Time Machine*, 11 FCC Rcd at 1192-93, para. 40.

[^66]: In 1999, when AT&T decided not to contribute to the Universal
    Service Fund based on its prepaid calling card revenues, the
    Commission released both its Telecommunications Reporting Worksheet,
    FCC Form 499-A, and Instructions to the Telecommunications Reporting
    Worksheet, Form 499-A.  Both documents made clear that carriers were
    expected to report prepaid calling card revenues and contribute to
    the Universal Service Fund based on those revenues.  *See, e.g.*,
    Instructions to the Telecommunications Reporting Worksheet, FCC Form
    499-A at 18 (dated July 1999) (stating that Line 223 should "include
    revenues from pre-paid calling cards provided either to customers or
    to retail establishments.  Gross billed revenues should represent
    the amounts actually paid by customers and not the amounts paid by
    distributors or retailers, and should not be reduced or adjusted for
    discounts provided to distributors or retail establishments.  All
    pre-paid card revenues are classified as end-user revenues.").

[^67]: AT&T argues that if it is subject to a retroactive contribution
    obligation, the Commission must impose a similar obligation on other
    providers of prepaid calling cards. *See* Letter from David L.
    Lawson, Counsel for AT&T, to Marlene H. Dortch, Secretary, Federal
    Communications Commission (July 13, 2004) at 6-8. We agree with AT&T
    that services similar to the service it offers are also subject to
    the contribution obligation. If AT&T or any other entity has reason
    to believe that another carrier is evading its universal service
    obligations, it should contact the Universal Service Administration
    Company.

[^68]: *See* Letter from Stephen Earnest, Regulatory Counsel, BellSouth,
    to Marlene H. Dortch, Secretary, Federal Communications Commission
    (Dec. 8, 2004) at 3.

[^69]: *See In the Matter of Motion of AT&T Corp. to be Reclassified as
    a Non-Dominant Carrier*, Order, 11 FCC Rcd 3271 (1995).

[^70]: *See* AT&T Petition at 4-7; *AT&T Evans Letter* at 1-2.

[^71]: *See, e.g*., Letter from Erik Winborn, Vice President National
    Government Relations, Wal-Mart Stores, Inc., to Michael K. Powell,
    Chairman, Federal Communications Commission (July 21, 2004) at 2;
    Letter from Richard P. Siliakus, GMM/VP-Merchandising, Family Dollar
    Stores, Inc., to Marlene H. Dortch, Secretary, Federal
    Communications Commission (July 15, 2003) at 1; Letter from Scott L.
    Ross, Executive Director, Florida Student Association, Inc., to
    Michael K. Powell, Chairman, Federal Communications Commission (Nov.
    8, 2004) at 1.

[^72]: *AT&T Evans Letter* at 1-2. AT&T states that its contract to
    supply prepaid calling cards to the military contains a change of
    law provision that allows for price adjustments in response to
    regulatory changes. *See* Letter from Judy Sello, Senior Attorney,
    AT&T, to Marlene H. Dortch, Secretary, Federal Communications
    Commission (Nov. 8, 2004).

[^73]: *See* Letter from Charles Abell, Principal Deputy, Office of the
    Undersecretary of Defense for Personnel and Readiness, to Michael K.
    Powell, Chairman, Federal Communications Commission (July 23, 2004)
    (*DOD Letter*).

[^74]: *See, e.g*., Letter from Elaine B. Rogers, President, USO of
    Metropolitan Washington, to Michael K. Powell, Chairman, Federal
    Communications Commission (July 15, 2004); Letter from Joe A. Ortiz,
    National Civil Rights Director, American GI Forum, to Michael K.
    Powell, Chairman, Federal Communications Commission (Dec. 12, 2004);
    Letter from Robert E. Wallace, Executive Director, Veterans of
    Foreign Wars, to Michael K. Powell, Chairman, Federal Communications
    Commission (Dec. 9, 2004).

[^75]: *See* Letter from Judy Sello, Senior Attorney, AT&T, to Marlene
    H. Dortch, Secretary, Federal Communications Commission (Oct. 12,
    2004) at 3 (17-20 percent of calls involve only an interstate
    communication between the platform and the calling party and more
    than 65 percent of calls are entirely interstate or international).

[^76]: *See* Letter from Glenn Reynolds, Vice President-Federal
    Regulatory, BellSouth, to Marlene H. Dortch, Secretary, Federal
    Communications Commission (Aug. 5, 2004) at 5.

[^77]: *See* Letter from Judy Sello, Senior Attorney, AT&T, to Marlene
    H. Dortch, Secretary, Federal Communications Commission (Nov. 8,
    2004) at 3.

[^78]: *DOD Letter* at 1; *see also, e.g.*, note 74, *supra*.

[^79]: *See* Letter from Richard Juhnke, Vice President-Regulatory
    Affairs, Sprint, to Marlene H. Dortch, Secretary, Federal
    Communications Commission (Aug. 2, 2004) at 2 ("AT&T's unlawful
    practices have not translated into marked savings for its customers.
    . . . Sprint currently distributes cards through major retailers at
    rates that are at the lower part of the range cited by AT&T"); *see
    also* Letter from Ann Rakestraw, Assistant General Counsel, Verizon,
    to Marlene H. Dortch, Secretary, Federal Communications Commission
    (July 15, 2004). For these reasons, and because the action we take
    in this Order is consistent with the requirements of the Act, we
    believe this Order is consistent with Congress' non-binding
    direction "not to take any action that would directly or indirectly
    have the effect of raising the rates charged to military personnel
    or their families for telephone calls placed using prepaid phone
    cards." H.R. Conf. Rep. No. 108-792, at 839 (2004).

[^80]: *AT&T Nov. 22 Letter* at 2-3.

[^81]: *Id*. at 3-4.

[^82]: *Id*.

[^83]: *AT&T IP Telephony Order*, 19 FCC Rcd at 7457, para. 1.

[^84]: *Id*. at 7457-58, para. 1.

[^85]: *AT&T Nov. 22 Letter* at 4.

[^86]: *Id*. (citing Net2Phone and IDT as examples).

[^87]: The Commission has previously stated that, "unless an information
    service can be characterized as 'purely intrastate,' or it is
    practically and economically possible to separate interstate and
    intrastate components of a jurisdictionally mixed information
    service without negating federal objectives for the interstate
    component, exclusive Commission jurisdiction has prevailed." *Pulver
    Order*, 19 FCC Rcd at 3320, para. 20 (footnote omitted).

[^88]: *See Vonage Holdings Corporation Petition for Declaratory Ruling
    Concerning an Order of the Minnesota Public Utilities Commission*,
    WC Docket No. 03-211, Memorandum Opinion and Order, FCC 04-267 (rel.
    Nov. 12, 2004) (*Vonage Order*).

[^89]: *See, e.g*., Letter from G.R. Rowan, President, Armed Forces
    Marketing Council, to Michael K. Powell, Chairman, Federal
    Communications Commission (Dec. 21, 2004) at 1.

[^90]: The offering of comparably priced services by Sprint while paying
    such charges, and the other means of support set forth in Appendix
    B, would tend to indicate that there are alternatives in the market
    that would limit any such impact, but we seek comment on whether
    this is actually the case.

[^91]: 47 C.F.R. §§ 1.415, 1.419.

[^92]: *See* *Electronic Filing of Documents in Rulemaking Proceedings*,
    GC Docket No. 97-113, Report and Order, 13 FCC Rcd 11322 (1998).

[^93]: *See* 47 C.F.R. §§ 1.1200, 1.1206.

[^94]: *See* 47 C.F.R. § 1.1206(b).

[^95]: 47 C.F.R. § 1.1206(b).

[^96]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. §§ 601-12, has been
    amended by the Small Business Regulatory Enforcement Fairness Act of
    1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).

[^97]: *See* 5 U.S.C. § 603(a).

[^98]: *See id*.

[^99]: 47 U.S.C. §§ 154(i), (j), 201, 202, 203, 254.

[^100]: 5 U.S.C. § 603(b)(3).

[^101]: 5 U.S.C. § 601(6).

[^102]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in the Small Business Act, 5 U.S.C. § 632).
    Pursuant to 5 U.S.C. § 601(3), the statutory definition of a small
    business applies "unless an agency, after consultation with the
    Office of Advocacy of the Small Business Administration and after
    opportunity for public comment, establishes one or more definitions
    of such term which are appropriate to the activities of the agency
    and publishes such definition(s) in the Federal Register."

[^103]: 15 U.S.C. § 632.

[^104]: *Trends in Telephone Service*, Federal Communications
    Commission, Wireline Competition Bureau, Industry Analysis and
    Technology Division (May 2004) (*Trends in Telephone Service*).

[^105]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) code 513310 (NAICS code 513310 was changed to 517110
    in October 2002).

[^106]: 13 C.F.R. § 121.201, NAICS code 517211.

[^107]: 13 C.F.R. § 121.201, NAICS code 517212.

[^108]: 15 U.S.C. § 632.

[^109]: Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to
    William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business
    Act contains a definition of "small business concern," which the RFA
    incorporates into its own definition of "small business." *See* 15
    U.S.C. § 632(a); 5 U.S.C. § 601(3). SBA regulations interpret "small
    business concern" to include the concept of dominance on a national
    basis. 13 C.F.R. § 121.102(b).

[^110]: 13 C.F.R. § 121.201, NAICS code 517110.

[^111]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    Information, "Establishment and Firm Size (Including Legal Form of
    Organization)," Table 5, NAICS code 513310.

[^112]: *Id.* The census data do not provide a more precise estimate of
    the number of firms that have employment of 1,500 or fewer
    employees; the largest category provided is "Firms with 1,000
    employees or more."

[^113]: 13 C.F.R. § 121.201, NAICS code 517110.

[^114]: *Trends in Telephone Service*, Table 5.3.

[^115]: *Id*.

[^116]: *Id*.

[^117]: *Id*.

[^118]: *Id*.

[^119]: *Id*.

[^120]: 13 C.F.R. § 121.201, NAICS code 517310.

[^121]: *Trends in Telephone Service*, Table 5.3.

[^122]: *Id*.

[^123]: 5 U.S.C. §§ 603(c)(1)--(c)(4).

[^124]: *See* 44 U.S.C. § 3506(c)(4).