**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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DECLARATORY RULING AND REPORT AND ORDER

**Adopted:** June 1, 2006 **Released:** June 30, 2006

By the Commission: Commissioner Adelstein issuing a separate statement.

# introduction

1.  In this *Order*, we take steps necessary to protect the federal
    universal service program and promote stability in the market for
    prepaid calling cards. In particular, we will treat certain prepaid
    calling card service providers as telecommunications service
    providers.[^1] As such, these providers must pay intrastate access
    charges for interexchange calls that originate and terminate in the
    same state and interstate access charges on interexchange calls that
    originate and terminate in different states. They also must
    contribute to the federal Universal Service Fund (USF) based on
    their interstate revenues, subject to the limitations set forth
    below.[^2] We also address a petition for interim relief filed by
    AT&T and adopt interim rules to facilitate compliance with the
    universal service and access charge rules.[^3] Specifically, on an
    interim and prospective basis, we require all prepaid calling card
    providers to comply with certain reporting and certification
    requirements.

# background

## Proceeding History

2.  Prepaid calling cards provide consumers the ability to place
    long-distance toll 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 then requests the unique
    personal identification number associated with the card for
    verification and billing purposes. When prompted, the consumer then
    dials the destination number and the platform routes the call to the
    intended recipient. The prepaid calling card is then debited based
    on the price of the completed call.

3.  On May 15, 2003, AT&T filed a petition for declaratory ruling that
    intrastate access charges did not apply to calls made using its
    "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.[^4] AT&T asserted that its cards were "enhanced"
    because they provided additional information to the calling party in
    the form of an advertising message provided by the retailer of the
    card.[^5] Accordingly, AT&T contended that the cards provide an
    information service, rather than a telecommunications service.
    Because revenues from information services are not subject to
    universal service assessments under section 254,[^6] AT&T did not
    include revenue from the cards for purposes of calculating its USF
    contribution. On November 22, 2004, AT&T submitted an *ex parte*
    letter requesting a declaratory ruling on two additional types of
    "enhanced" prepaid calling card offerings: one card that offers the
    caller a menu of options to access non-call-related information, and
    a second card that utilizes Internet Protocol (IP) technology,
    accessed by 8YY dialing, to transport a portion of the calling card
    call.[^7]

4.  On February 16, 2005, the Commission denied AT&T's May 2003
    Petition.[^8] The Commission found that the service described in the
    original petition was a jurisdictionally-mixed telecommunications
    service and that intrastate access charges apply when a call
    originates and terminates in the same state.[^9] The Commission also
    required AT&T to file revised Forms 499-A to report properly its
    prepaid calling card revenue so that the Universal Service
    Administrative Company (USAC) could accurately calculate AT&T's USF
    obligation and bill AT&T for the time period during which it offered
    its prepaid calling cards and did not contribute to the fund.[^10]

5.  The Commission also adopted a Notice of Proposed Rulemaking (NPRM)
    to address additional types of "enhanced" prepaid calling cards,
    including those described in AT&T's November 2004 letter. In the
    NPRM, the Commission solicited comment on how to apply the *Calling
    Card Order and NPRM's* analysis to AT&T's two new "enhanced" calling
    card variations.[^11] It also solicited 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 \[a card's\]
    classification under the Act."[^12] The Commission also sought
    comment on how best to regulate any new technologies or innovations
    in the prepaid calling card services market and whether or not to
    assert exclusive federal jurisdiction over prepaid calling card
    services.[^13] Finally, the Commission sought comment on how best to
    ensure reasonable calling card rates for soldiers and their
    families.[^14]

## AT&T's Emergency Petition

6.  On May 3, 2005, AT&T filed a petition seeking the adoption of
    interim rules pending a final decision by the Commission in this
    docket.[^15] AT&T's Emergency Petition seeks interim rules imposing
    federal universal service funding obligations on all prepaid calling
    card services regardless of whether the Commission ultimately
    decides they are telecommunications services or information
    services.[^16] AT&T also requests that the Commission issue interim
    rules subjecting all prepaid calling card service providers to the
    same types of access charges.[^17] AT&T proposes two means by which
    the Commission may ensure parity among all prepaid calling card
    service providers. First, AT&T proposes that the Commission rule
    that no prepaid calling card service provider is subject to
    intrastate access charges.[^18] Alternatively, AT&T suggests that
    the Commission rule that all prepaid calling card service providers
    are subject to both intrastate and interstate access charges based
    on the location of the calling and called parties.[^19]

7.  AT&T states that it filed its Emergency Petition "because there
    decidedly is not a level playing field for prepaid calling services
    today."[^20] AT&T contends that, rather than protecting universal
    service, the Commission's *Calling Card Order and NPRM* actually
    puts the USF at risk.[^21] Moreover, AT&T asserts that the *Calling
    Card Order and NPRM* might cripple competition and greatly disrupt
    the prepaid calling card market.[^22] AT&T argues that the
    Commission has created regulatory uncertainty and given prepaid
    calling card service providers "powerful incentives to employ any
    device that will reduce their exposure to charges, to find ways to
    evade charges they owe, to exploit regulatory asymmetries and to
    make any questionable activities in which they engage less visible
    and less susceptible to effective sanction."[^23] AT&T believes that
    these unintended results highlight the need for the immediate
    adoption of interim rules.

# discussion

8.  We conclude that immediate action in this proceeding is necessary to
    preserve universal service and provide regulatory certainty while
    the Commission considers systemic reform in the *Contribution
    Methodology* and *Intercarrier Compensation* proceedings.[^24] Any
    uncertainty regarding the regulatory requirements applicable to
    prepaid calling cards creates incentives for providers to reduce
    exposure to charges they may owe or evade them altogether.[^25] The
    actions we take in this *Order* will provide a level regulatory
    playing field for calling card providers, thereby reducing the
    potential for continued "gaming" of the system. In the absence of
    these actions, uncertainty regarding applicability of our rules
    could stifle continued market innovation and encourage providers to
    adapt their products solely to evade contribution to universal
    service funding mechanisms. By leveling the playing field for all
    providers, we hope to encourage efficient development and innovation
    in the prepaid calling services industry, which has played a vital
    role in providing telecommunications services to low-income
    consumers and members of the armed services.[^26]

9.  We disagree with AT&T's argument that any rules we adopt in response
    to its petition should be limited to the access charge and universal
    service contribution issues it raised, and that we should not rule
    on the classification of particular prepaid calling card services as
    telecommunications service or information services.[^27] We reject
    AT&T's narrow approach because it would leave calling card providers
    substantial discretion to determine whether they are subject to
    numerous requirements outside the access charge and universal
    service context. Such an approach would not result in a level
    playing field among prepaid calling card providers, nor would it
    provide the type of regulatory certainty needed to prevent gaming.
    We conclude that the better approach is to resolve the
    classification issues based on the record before us so that there
    will be no doubt as to the requirements that apply to prepaid
    calling card providers.

## Declaratory Ruling

10. In this *Order*, we address the two prepaid calling card variants
    described in the *Calling Card Order and NPRM*: (1) menu-driven
    prepaid calling cards; and (2) prepaid calling cards that utilize IP
    transport to deliver all or a portion of the call.[^28] As we
    explain below, we find that both types of prepaid calling cards are
    telecommunications services and that their providers are subject to
    regulation as telecommunications carriers. In conjunction with the
    Commission's prior rulings regarding basic prepaid calling cards and
    prepaid cards with advertising, all prepaid calling card providers
    will now be treated as telecommunications service providers. In the
    future, if prepaid calling card providers introduce new and
    different card types that they believe should be classified as
    information services, they may seek a declaratory ruling, a waiver,
    or other relief from the requirements that we adopt in this *Order*.

### Menu-Driven Prepaid Calling Cards

11. As requested in the *Calling Card Order and NPRM*, several
    commenters described their menu-driven prepaid calling card
    offerings.[^29] In its comments AT&T described its "newly augmented"
    prepaid calling card service accessed via toll-free, 8YY, dialing.
    Upon dialing the 8YY number, the cardholder is presented with the
    option to make a telephone call or to access several types of
    information, such as additional information about the card
    distributor, sports, weather, or restaurant or entertainment
    information.[^30] Similarly, MCI's "Golden Retriever" prepaid
    calling card greets cardholders with a message and the choice to
    make a telephone call or to access a live operator that can provide
    directory information, time, reverse directory assistance, hotel and
    restaurant information, weather forecasts, directions, movie and
    theater information, stock quotes, sports scores and schedules, and
    horoscope information.[^31]

12. "Telecommunications" is defined as the "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."[^32] "Telecommunications" is thus the
    unaltered transmission of information. Building on the definition of
    "telecommunications," the Act defines "telecommunications service"
    as "the offering of telecommunications for a fee directly to the
    public, or to such classes of users as to be effectively available
    directly to the public regardless of the facilities used."[^33]
    Thus, a "telecommunications service" involves more than the mere
    transmission of information; it requires the "offering" of pure
    transmission capability "for a fee directly to the public."

13. Menu-driven calling cards, such as those described above, are
    marketed to consumers, in large part, as a transmission service.
    Each card allows the user, by choosing the appropriate entry from
    the menu, to have the calling card provider transmit "between and
    among points specified by the user . . . information of the user's
    choosing, without change in the form or content of the information
    as sent and received."[^34] These menu-driven prepaid calling cards
    also may provide the user with an option to access additional
    information, but the information service features and
    telecommunications service are not engaged or used simultaneously.
    Thus, we find that these services are only minimally linked to one
    another. As noted by Sprint, there is no doubt that these cards are
    marketed to consumers as a vehicle for making traditional telephone
    calls. For example, Sprint found that "the packaging materials,
    in-store signage and point-of-purchase materials for AT&T's prepaid
    cards all explain that the cards enable the user to make telephone
    calls."[^35] Sprint also notes that AT&T's menu-driven prepaid
    calling card marketing materials, at that time, did not mention the
    user's ability to use the prepaid calling card to listen to
    information unrelated to placing a telephone call.[^36]

14. Menu-driven prepaid calling cards are just one example of the recent
    proliferation of bundled services that offer both telecommunications
    and information service capabilities. The classification difficulty
    caused by bundled services was discussed in the Commission's 1998
    Report to Congress on universal service.[^37] In that report, the
    Commission observed that the relevant question is whether an entity
    is providing a "single information service with communications and
    computing components" or "two distinct services, one of which is a
    telecommunications service."[^38] In its recent *Brand X* decision,
    the Supreme Court made a similar distinction, stating that the key
    question in classifying offerings with both telecommunications and
    information service capabilities is whether the telecommunications
    transmission capability is "sufficiently integrated" with the
    information service component "to make it reasonable to describe the
    two as a single, integrated offering."[^39] Both the Commission and
    the Court made clear that merely packaging two services together
    does not create a single integrated service. In the *Universal
    Service Report to Congress*, for example, the Commission found that
    a packaged offering of local telephone service and voice mail should
    be treated as separate services.[^40] Expanding upon this reasoning,
    the Court in *Brand X* made clear that a telephone company that
    packages residential local exchange service with voice mail is
    offering a "transparent transmission path -- telephone service --
    that transmits information independent of the information-storage
    capabilities provided by voice mail. . . . \[W\]hen a person makes a
    telephone call, his ability to convey and receive information using
    the call is only trivially affected by the additional voice-mail
    capability."[^41] Similarly, the Court stated that, "were a
    telephone company to add a time-of-day announcement that played
    every time the user picked up his telephone, the 'transparent'
    information transmitted in the ensuing call would be only trivially
    dependent on the information service the announcement
    provides."[^42]

15. Although it may be difficult at times to determine whether a service
    bundle is "sufficiently integrated" to merit treatment as a single
    service, that is not the case here. As with the packaged offerings
    described by the Commission in the *Universal Service Report to
    Congress* and the Court in *Brand X*, there simply is no functional
    integration between the information service features and the use of
    the telephone calling capability with menu-driven prepaid calling
    cards. The menu is a mechanism by which the customer can access the
    separate capabilities that are packaged together in a single prepaid
    calling card. The customer may use only one capability at a time and
    the use of the telecommunications transmission capability is
    completely independent of the various other capabilities that the
    card makes available. For example, an individual may use MCI's
    Golden Retriever card to make a long distance call without obtaining
    restaurant information, sports scores, or stock quotes from the
    operator or otherwise accessing the information made available with
    the card. That card and other menu-driven prepaid calling cards are
    offered to consumers, in large part, as a separate and distinct
    telecommunications service that is packaged with additional
    capabilities. But even if those additional capabilities are
    classified as an information service, the packaging of these
    multiple services does not by itself transform the
    telecommunications component of these cards into an information
    service. The circumstances here thus are markedly different from
    those the Supreme Court considered in its finding that an offering
    of cable modem service does not include a separate
    telecommunications service offering because the telecommunications
    input used to provide that service "is not 'separable from the
    data‑processing capabilities of the service' and is instead 'part
    and parcel of \[the information service\] and is integral to \[the
    information service's\] other capabilities."[^43]

16. Our finding here is consistent with the Commission's conclusions in
    the *Calling Card Order and NPRM.* The prepaid calling card services
    we address in this *Order* offer consumers the ability to make
    telephone calls, just like the AT&T card that the Commission
    addressed in the *Calling Card Order and NPRM*.[^44] Just as the
    Commission found in that order that the addition of an advertising
    message does not convert a telecommunications service into an
    information service, we now find that the addition of an option to
    access other types of information does not convert the
    telecommunications service offered by these prepaid calling cards
    into an information service for regulatory purposes, even if
    standing alone the information processing capability would meet the
    statutory definition of an information service. In short, these
    menu-driven calling cards offer customers a telecommunications
    service that enables them to make telephone calls, and the ability
    to obtain sports scores, stock quotes, and other information through
    the same card does not alter that conclusion.

17. IDT argues that the services at issue here are different than the
    ones addressed by the Commission in the *Calling Card Order and
    NPRM* because they clearly include an element of subscriber
    interaction.[^45] According to IDT, this makes these calling card
    services more like the service the Commission found to be an
    information service in the *Talking Yellow Pages* case.[^46] We
    disagree. The service at issue in *Talking Yellow Pages* consisted
    of the ability to access various types of information via
    telecommunications and did not include the ability to make phone
    calls.[^47] In contrast, the menu-driven prepaid calling cards
    discussed above offer telecommunications services.

### Prepaid Calling Cards that Utilize IP Technology

18. In the *IP-in-the-Middle Order*, the Commission addressed AT&T's use
    of IP technology to transport interexchange telephone calls dialed
    on a 1+ basis.[^48] The Commission found that "an interexchange
    service that: (1) uses ordinary customer premises equipment (CPE)
    with no enhanced functionality; (2) originates and terminates on the
    public switched telephone network (PSTN); and (3) undergoes no net
    protocol conversion and provides no enhanced functionality to end
    users due to the provider's use of IP technology" is a
    telecommunications service.[^49] The Commission limited its ruling
    in the *IP-in-the-Middle Order* to calls that meet all of the above
    criteria and are placed using 1+ dialing.

19. In its November 2004 filing, AT&T stated that it had developed a new
    prepaid calling card that uses IP technology to transport part or
    all of the call.[^50] AT&T requested a ruling that this service was
    not a telecommunications service because it did not use 1+ dialing
    and therefore was not like the service addressed in the
    *IP-in-the-Middle Order*. In the *Calling Card Order and NPRM*, the
    Commission did not decide the appropriate classification of this new
    calling card variant, but instead requested comment on how such an
    offering should be classified.[^51] AT&T reiterated its position
    that these cards should be treated as information services. Other
    parties, however, argue that the Commission's analysis in the
    *IP-in-the-Middle Order* applies equally to the card described by
    AT&T and other cards that use IP transport.[^52] Other commenters
    state that the absence of 1+ dialing is inconsequential to the
    regulatory status of a prepaid calling card.[^53]

20. Other than the use of 8YY dialing instead of 1+ dialing, prepaid
    calling cards that use IP transport appear to be identical to the
    services addressed by the Commission in the *IP-in-the-Middle
    Order*. We see no reason why the use of a different dialing pattern
    to make calls, without more, should result in a different regulatory
    classification. These cards are used to originate calls on the
    circuit-switched network using standard customer premises equipment,
    factors that the Commission previously has used to distinguish
    telecommunications services from information services.[^54]
    Consequently, we find that the use of IP transport in the provision
    of a prepaid calling card service does not alone convert that
    service from a telecommunications service to an information service.

## Report and Order

21. As a result of our finding that providers of the two types of
    prepaid calling cards described in the previous section offer
    telecommunications services, these providers are now subject to all
    of the applicable requirements of the Communications Act and the
    Commission's rules, including requirements to contribute to the
    federal USF and to pay access charges. In this section, we set forth
    some additional requirements that will apply, at least on an interim
    basis, to all prepaid calling card providers. We find that these
    interim requirements are necessary to provide regulatory certainty
    and ensure compliance with our existing access charge and USF
    contribution requirements while we consider broader reform of those
    rules. [^55]

### USF Contributions

22. As noted above, all prepaid calling card providers must contribute
    to the federal USF based on interstate and international
    telecommunications revenues.[^56] IDT argues that it will be
    difficult to implement this USF contribution requirement because it
    is not possible to determine, at the time of purchase, the relative
    extent to which a card will be used to access enhanced services, as
    opposed to merely placing a telephone call.[^57] The Commission's
    existing rules already address this type of situation however. The
    Commission has established two safe harbors for use by carriers that
    offer retail packages that bundle interstate telecommunications
    services with other services (e.g., basic phone service and voice
    mail).[^58] A carrier may elect to treat all bundled revenues as
    telecommunications revenues or it may report revenues from the
    bundled offering based on the unbundled service offering prices,
    with no discount allocated to the telecommunications service.[^59]
    Prepaid calling card providers may avail themselves of these safe
    harbors; should they choose to forego these safe harbors, they must
    be prepared to defend the allocation method they use in an audit or
    enforcement context.[^60]

23. In the *Calling Card Order and NPRM*, the Commission noted that
    military personnel rely heavily on prepaid calling cards and asked
    what steps, if any, it should take to ensure that such cards remain
    reasonably priced.[^61] The Department of Defense (DoD) filed
    comments in this proceeding explaining that any increase in the cost
    of calls would negatively affect soldiers and their families.[^62]
    In its Emergency Petition, AT&T suggests that we exempt prepaid
    calling cards "sold by, to, or on behalf of military exchanges or
    the Department of Defense" from USF contribution requirements.[^63]
    Several commenters oppose any military exemption, contending that an
    exemption is unnecessary because some prepaid calling card service
    providers that make USF contributions are nevertheless able to offer
    their cards at competitive prices.[^64]

24. Based on the record in this proceeding, we find that an exemption
    from the contribution requirement for calling cards sold by, to, or
    pursuant to contract with DoD or a DoD entity will serve the public
    interest. While the effect of the USF contribution requirement on
    the price of a calling card is a decision that is properly left to
    each provider and its individual business strategy, the military
    exemption proposed by AT&T should help ensure that our soldiers are
    able to obtain calling cards at reduced prices. Accordingly, we
    forbear from applying section 254(d) to the extent necessary to
    implement the exemption from USF contribution obligations for
    prepaid calling cards sold by, to, or pursuant to contract with DoD
    or a DoD entity, on an interim basis while the Commission decides
    other USF contribution issues in its *Contribution Methodology*
    proceeding.[^65]

25. We find that this exemption easily meets the three-pronged
    forbearance standard contained in section 10(a). First, mandatory
    USF contribution, with respect to these cards, is not necessary to
    ensure that rates for any service are reasonable and
    nondiscriminatory.[^66] While the benefit of this narrow exemption
    may be significant for soldiers and their families, the consequence
    for all other consumers in terms of increased USF contributions
    should be minimal. Second, such enforcement is not necessary for the
    protection of consumers.[^67] The exemption is available only to
    prepaid calling cards sold by, to, or pursuant to contract with DoD
    or a DoD entity and does not directly affect retail rates. As noted
    above, the only effect on consumers generally might be a minimal
    increase in the USF contribution associated with other retail
    services. Third, forbearance clearly serves the public
    interest.[^68] The potential benefits of this exemption (such as
    maintaining affordable long distance calling options for members of
    the U.S. military) far outweigh any potential costs. Moreover,
    because the exemption will be available to any prepaid calling card
    provider that sells cards by, to, or pursuant to contract with DoD
    or a DoD entity, the exemption will promote competitive market
    conditions pursuant to section 10(b) of the Act.[^69] As such, we
    find that this exemption meets the three-prong test under section
    10(a) and that forbearance is appropriate.

26. Commenters have raised questions about how to implement this
    exemption. For example, GCI questions how to separate and track the
    cards sold by, to, or pursuant to contract with DoD or a DoD entity,
    and points out that AT&T, in its Emergency Petition, has not
    provided any suggestions for doing so.[^70] GCI also questions how
    anyone can be certain that the exempt cards will be used only by
    military personnel and their families.[^71] We do not think
    implementation of the military exemption will be as difficult as GCI
    suggests. The exemption covers only cards sold by, to, or pursuant
    to contract with DoD or a DoD entity, not cards sold to soldiers at
    non-military retail outlets. The revenue attributable to these
    military contracts should be relatively easy for carriers to
    identify and exclude from the calculation of their USF contribution.
    This approach is both administratively feasible and sufficiently
    refined to produce the intended benefits for members of the armed
    forces.

### Access Charges

27. As a result of this *Order*, providers of prepaid calling cards that
    are menu-driven or use IP transport to offer telecommunications
    services are obligated to pay interstate or intrastate access
    charges based on the location of the called and calling
    parties.[^72] As noted above, the Commission previously has found
    that these same access charge obligations apply to basic prepaid
    calling cards and prepaid calling cards with unsolicited
    advertising.[^73] AT&T has expressed concern about how to
    distinguish the interstate and intrastate uses of calling cards for
    access charge purposes.[^74] Other parties also have questioned the
    logistics of requiring all prepaid calling card service providers to
    pay intrastate and interstate access charges. For example, IDT
    suggests that providers would have to require users to call
    different telephone numbers to place intrastate and interstate
    calling card calls, a solution IDT believes is impractical.[^75]

28. As with other services that require the caller to dial an access
    number, the assessment of interstate and intrastate access charges
    based on the location of the called and calling parties can be
    complicated with respect to prepaid calling card traffic because the
    caller initially dials the 8YY number associated with the calling
    card platform and only later dials the number of the called party.
    As a result, the originating carrier will not be able to determine
    the appropriate jurisdiction of the call based on a comparison of
    the calling and called numbers because it only will know the 8YY
    number associated with the platform, not the telephone number of the
    called party. Moreover, unless the calling party number (CPN) is
    passed, the terminating carrier will face a similar problem.

29. We believe that these complications can be addressed through
    certification and reporting requirements that compel the prepaid
    calling card provider to share the necessary information with the
    carriers that it uses to transport traffic to and from the platform.
    In its Emergency Petition, AT&T proposes that any interim rules
    include "(1) reporting requirements that will require prepaid
    calling card providers to disclose the total number of long distance
    minutes provided each month, and the total number of interstate
    long-distance minutes provided each month; and (2) certification
    requirements that confirm that providers are complying with the
    Commission's interim rules."[^76] In subsequent *ex parte* filings,
    AT&T provided additional detail about its suggested certification
    and reporting requirements.[^77] AT&T suggests, for example, that
    every prepaid calling card provider submit to the Commission, on a
    quarterly basis, a certification signed by a company officer under
    penalty of perjury.[^78] AT&T also suggests the Commission require
    each prepaid calling card provider to certify its interstate,
    intrastate and international calling card minutes and revenues, that
    it is passing CPN, that it is paying the appropriate USF obligations
    (except on revenue from cards sold by, to, or pursuant to contract
    with DoD or a DoD entity), and that it is correctly reporting
    PIU.[^79]

30. Some parties also state that AT&T's request is not in the public
    interest due to the burden on carriers associated with the
    additional financial and compliance obligations that AT&T
    seeks.[^80] For example, IDT takes issue with AT&T's proposed
    certification and reporting interim rules.[^81] It contends that the
    proposed requirements will prove costly to the industry and, in
    turn, costly to consumers.[^82] IDT also states that it is
    irresponsible of AT&T to suggest such requirements without providing
    information on potential consequences.[^83] Conversely, GCI supports
    the imposition of certification and reporting requirements, although
    it argues that the specific requirements proposed by AT&T are not
    stringent enough to deter misconduct.[^84]

31. We find that certain certification and reporting requirements are
    necessary to ensure compliance with our existing access charge
    rules. We agree with AT&T that such requirements will promote
    transparency in the prepaid calling card market and that, absent
    such requirements, calling card providers and their underlying
    carriers would have the incentive and the ability to avoid
    intrastate access\
    charges. [^85] Although IDT is correct that similar issues have been
    raised in connection with other types of traffic in the intercarrier
    compensation rulemaking proceeding,[^86] the record in this
    proceeding supports the imposition of requirements on calling card
    providers on an interim basis.[^87] We share IDT's concern, however,
    that such requirements not be unduly burdensome. Consequently, we
    will adopt a more limited set of requirements than proposed by AT&T.
    In particular, while AT&T's proposal would require calling card
    providers to make certifications regarding actions of other
    carriers, the requirements we adopt here require calling card
    providers to certify only with respect to their own activities. As
    with any other service subject to the Commission's rules, if prepaid
    calling card providers do not comply with these rules they will be
    subject to the Commission's enforcement authority, including
    complaints and forfeitures.[^88]

#### Reporting to Other Carriers

32. In a standard interexchange call, the CPN will be passed as part of
    the SS7 signaling message, and the carriers involved in the call
    should be able to determine the jurisdiction based on a comparison
    of the calling and called party telephone numbers.[^89] In
    situations when traffic is exchanged with missing or inaccurate CPN
    information, carriers generally rely on the use of percentage of
    interstate usage (PIU) factors to determine the percentage of
    interstate versus intrastate minutes. The Commission has long
    endorsed the use of PIUs to determine the jurisdictional nature of
    traffic for access charge purposes.[^90] For example, in their
    tariffs, LECs require IXCs to report PIUs to identify the percentage
    of interstate traffic on interconnection trunks.[^91]

33. We conclude that these same basic tools -- CPN and PIU factors --
    should be used for calling card traffic. Prepaid calling card
    providers are subject to the Commission's rules on the passing of
    CPN.[^92] Under these rules, carriers that use SS7 are required to
    transmit the CPN associated with an interstate call to
    interconnecting carriers. In the context of prepaid calling card
    calls, we interpret this to mean that carriers must pass the CPN of
    the calling party (i.e., the number associated with the telephone
    used by the cardholder) and not replace that number with the number
    associated with the platform.

34. For similar reasons, we prohibit carriers that serve prepaid calling
    card providers from passing the telephone number associated with the
    platform in the charge number (CN) parameter of the SS7 stream. In
    response to AT&T's proposal, Verizon explains that industry
    standards provide for the use of CN, when it is signaled, rather
    than CPN in the creation of intercarrier billing records and that
    use of the CN associated with the platform provider, rather than the
    caller, would lead to inaccurate billing records.[^93] AT&T argues,
    however, that the carrier serving the platform provider needs the
    platform provider's CN for retail billing purposes.[^94] AT&T also
    argues that CN is not a reliable indicator of the originating
    location of the call and that it should not be used by the
    terminating carrier.[^95] Because industry standards allow for the
    use of CN to populate carrier billing records, we agree with Verizon
    that passing the number of the calling card platform in the CN
    parameters of the SS7 stream to carriers involved in terminating a
    call may lead to incorrect treatment of the call for billing
    purposes.[^96] We conclude, therefore, that carriers that serve
    prepaid calling card providers may not pass information regarding
    the calling card platform in the CN parameters in the SS7 stream.
    This approach properly balances the need for accurate intercarrier
    billing records with the need of some carriers to use CN for their
    own retail billing purposes. Compliance with the above rules should
    solve many of the current issues related to the jurisdiction of
    calling card calls, at least on the terminating end of such calls.

35. We also require prepaid calling card providers to report PIU factors
    to those carriers from which they purchase transport services.[^97]
    Specifically, a prepaid calling card provider must report prepaid
    calling card PIU factors, and call volumes on which these factors
    were calculated, based on not less than a one-day representative
    sample. These factors must be computed separately for originating
    and terminating traffic on a state-specific basis. This information
    must be provided to the transport provider no later than the 45^th^
    day of each calendar quarter. The transport provider may use the
    reported PIU in calculating any PIU factors it reports to LECs, and
    it may disclose the reported PIU upon request of such LECs.

36. If the prepaid calling card provider fails to provide the
    appropriate PIU information to the transport provider in a timely
    manner, the transport provider may treat the prepaid calling card
    provider's traffic as subject to a 50 percent default PIU.
    Notwithstanding evidence presented by IDT showing a lower percentage
    of intrastate traffic,[^98] we believe a 50 percent default factor
    will provide the necessary incentive for carriers to comply with the
    PIU reporting requirements. At the same time, given the likelihood
    that prepaid calling cards will be used primarily for interstate and
    international calls, we find that a default presumption that 50
    percent of traffic is jurisdictionally intrastate is more reasonable
    than GCI's proposal that transport providers be permitted to assume
    that 80 percent of traffic is jurisdictionally intrastate.[^99] The
    transport provider may notify any originating or terminating LEC
    that it has applied the default PIU to the prepaid calling card
    provider's traffic for that reporting period. A transport provider
    also may audit the PIU reports it receives from a calling card
    provider if it has a reasonable basis to believe that such reports
    contain inaccurate or misleading data. We find that the use of a
    default PIU and the ability to audit are reasonable means by which
    to protect underlying transport providers (who themselves may be
    subject to comparable requirements under LEC access tariffs) and
    encourage the timely submission of accurate information by prepaid
    calling card providers.

37. Commenters disagree over whether the jurisdiction of calls that end
    at a calling card platform should be determined based on PIU factors
    or based on a comparison of the CPN and the platform number.[^100]
    We agree with AT&T and IDT that the platform number should be
    considered the called party number if the caller does not attempt to
    make a call to a third party. In this scenario, the caller is
    completing a call to the platform and there would seem to be no
    reason to resort to a PIU factor.[^101]

#### Certification to the Commission

38. We believe that the exchange of information among carriers, as
    described above, should be sufficient to resolve most issues related
    to the assessment of access charges with respect to prepaid calling
    card traffic. To reduce further the incentive for carriers to report
    false or misleading information, however, we also require prepaid
    calling card providers to file certifications with the Commission.
    On a quarterly basis, every prepaid calling card provider must
    submit a certification, signed by an officer of the company under
    penalty of perjury, stating that it is in compliance with the
    reporting requirements described above. The certification also
    should include the percentage of interstate, intrastate, and
    international calling card minutes for that reporting period.

39. Each prepaid calling card provider also must certify the percentages
    of total prepaid calling card service revenues (excluding revenue
    that is exempt under the military exemption adopted above) that are
    interstate and international and therefore subject to federal
    universal service assessments for the reporting period.[^102]
    Finally, the certification must include a statement that the company
    is making the required contribution based on the reported
    information.

40. Certifications will be due on a quarterly basis and may be filed in
    this docket (WC Docket No. 05-68) using the Commission's Electronic
    Comment Filing System. The first provider certifications are due the
    last day of the first full calendar quarter after OMB approval of
    this requirement.

    **C. Effect of this Order**

41. In contrast to the new reporting and certification rules we adopt in
    this *Order*, which we will apply to all prepaid calling card
    providers on a prospective basis,[^103] our decision to classify
    prepaid calling cards that use IP transport and menu-driven prepaid
    calling cards as telecommunications services is a declaratory
    ruling, which is a form of adjudication.[^104] Generally,
    adjudicatory decisions are applied retroactively when they involve
    "new applications of existing law, clarifications, and
    additions."[^105] Retroactivity will be denied, however, when
    applying the decision to past conduct or to prior events would work
    a "manifest injustice."[^106] The classification decisions that we
    are making here fall into the category of new applications of
    existing law, clarifications, and additions. Consequently, in
    deciding whether to apply our decisions retroactively, we must
    determine whether retroactive application would result in a manifest
    injustice. As we explain below, we see no reason to depart from the
    general rule with respect to calling cards using IP transport, but
    we decline to give retroactive effect to our ruling on menu-driven
    cards to avoid a manifest injustice.

42. The D.C. Circuit has enunciated a non-exhaustive list of five
    factors to consider when determining whether retroactive application
    of an adjudicatory decision is appropriate. Those factors are:

\(1\) whether the particular case is one of first impression, (2)

whether the new rule represents an abrupt departure from well

established practice or merely attempts to fill a void in an

unsettled area of law, (3) the extent to which the party against

whom the new rule is applied relied on the former rule, (4) the

degree of the burden which a retroactive order imposes on a

party, and (5) the statutory interest in applying a new rule

despite the reliance of a party on the old standard.[^107]

Ultimately, these factors "boil down ... to a question of concerns
grounded in notions of equity and fairness."[^108] In the paragraphs
that follow, we consider these factors with respect to our
classification of calling cards that use IP transport and menu-driven
calling cards.

43. Applying these factors to prepaid calling cards that use IP
    transport functionality but are not menu-driven, we conclude that
    the retroactive application of our classification decision to these
    cards is appropriate. These calling cards offer the customer no
    capability to do anything other than make a telephone call, and
    therefore they are just like basic prepaid calling cards that the
    Commission always has treated as telecommunications services.[^109]
    Just as the Commission found in the *Calling Card Order and NPRM*
    that the addition of unsolicited advertising was insufficient to
    justify an expectation that the service would be treated as an
    information service and that, therefore, retroactive application was
    warranted,[^110] in this *Order* we make a similar finding with
    respect to calling cards that use IP transport but provide the
    caller with no additional capabilities. Moreover, the Commission
    previously found, in the *IP-in-the-Middle Order*, that the use of
    IP transport, without more, did not change the regulatory
    classification of the service at issue.[^111] That decision provided
    ample notice that merely converting a calling card call to IP format
    and back does not transform the service from a telecommunications
    service to an information service, and, consequently, it undermines
    any alleged reliance by prepaid card providers on any contrary
    interpretation of our rules.[^112] Thus, our decision in this
    *Order* is not a "departure from well established practice," and
    retroactive application does not result in a "manifest injustice."

44. We disagree with the suggestion of some commenters that, because the
    Commission issued an NPRM, any rulings in this proceeding should
    have prospective effect only.[^113] AT&T first sought guidance from
    the Commission regarding menu-driven and IP-in-the-middle calling
    cards in a letter request for declaratory ruling it submitted prior
    to issuance of the NPRM.[^114] The fact that the Commission
    subsequently solicited comment on the proper classification of these
    cards in an NPRM, rather than a public notice regarding the AT&T *ex
    parte* letter, does not change the adjudicatory nature of the
    statutory interpretation decisions we reach, nor does it somehow
    transform these classification decisions into rulemaking
    decisions.[^115] Our approach here is similar to the approach the
    Commission took in its decision classifying cable modem service as
    an information service, which was a declaratory ruling based on a
    record developed in response to a Notice of Inquiry.[^116]

45. We reach a different conclusion, however, with respect to
    menu-driven prepaid calling card services. In the NPRM section of
    the *Calling Card* *Order and NPRM,* the Commission sought comment
    on the proper treatment of menu-driven prepaid calling cards because
    of the complexities raised by calling card providers that bundle
    both telecommunications and information services and make them
    accessible through a computer-based menu.[^117] Unlike the case of
    cards using IP transport, the Commission's prior decisions did not
    clearly point in the direction of treating providers of menu-driven
    prepaid calling cards as telecommunications carriers.[^118] Indeed,
    during the pendency of this proceeding, the Supreme Court released
    the *Brand X* decision, which informs the Commission's analysis in
    this *Order*.[^119] Given the lack of clarity in the law on this
    issue, both before and as a result of the NPRM, we are concerned
    that retroactive application of this *Order* to menu-driven prepaid
    calling cards would be so unfair to providers of such cards as to
    work a "manifest injustice." For example, we recognize that
    retroactive application of our decision would be burdensome for
    menu-driven prepaid calling card providers, in that the decision
    subjects them to access charges, Universal Service Fund contribution
    obligations, and the full panoply of Title II obligations.[^120] We
    also recognize that, given the state of the law at the time, parties
    may have relied on the assumption that they would not be subject to
    these burdens. For these reasons, we conclude that our decision that
    menu-driven calling cards offer telecommunications services and that
    their providers are subject to regulation as telecommunications
    carriers shall have prospective effect only.[^121]

46. To give prepaid calling card providers sufficient time to implement
    this new regulatory regime, this *Order* will take effect 90 days
    after it is published in the Federal Register. The certification
    requirements set forth in paragraphs 38 and 39 are effective
    according to the timeframe outlined in paragraph 40.

# procedural matters

**A. Certification Filing Procedures**

47. Pursuant to section 64.5001 of the Commission's rules, all prepaid
    calling card providers shall file the quarterly reports described
    above in WC Docket No. 05-68. The first certification reports are
    due the last day of the first full calendar quarter after the
    effective date of this item and OMB approval of this requirement.
    Certification reports may be filed using the Commission's Electronic
    Comment Filing System (ECFS) or by filing paper copies.[^122]
    Certification reports 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. On 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 report by Internet
    e-mail. To get filing instructions for e-mail reports, reporters
    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 instructions will be sent in reply. Parties are strongly
    encouraged to file their certification reports electronically using
    the Commission's ECFS.

48. 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, NE, 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 12^th^
    Street, SW, Washington, D.C. 20554.

49. 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, 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 12^th^ Street,
    SW, Room CY-B402, Washington, D.C. 20554 (202) 488-5300, or via
    e-mail to fcc@bcpiweb.com.

50. 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^ Street, SW, Room CY-A257, Washington,
    D.C. 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.

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B.  **Final Regulatory Flexibility Analysis**

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51. As required by the Regulatory Flexibility Act of 1980, as amended
    (RFA),[^123] an Initial Regulatory Flexibility Analysis (IRFA) was
    incorporated in the *Order and Notice of Proposed Rulemaking* in WC
    Docket Nos. 03-133 and 05-68.[^124] The Commission sought written
    public comment on the proposals in the *Order and Notice of Proposed
    Rulemaking*, including comment on the IRFA.[^125] We received no
    comments specifically directed to the IRFA. This Final Regulatory
    Flexibility Analysis (FRFA) conforms to the RFA.[^126]

**a. Need for, and Objectives of, the Report and Order**

52. On May 15, 2003, AT&T filed a petition for declaratory ruling that
    intrastate access charges did not apply to calls made using its
    "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.[^127] On November 22, 2004, AT&T submitted an *ex
    parte* letter requesting a declaratory ruling on two additional
    types of "enhanced" prepaid calling card offerings: one card that
    offers the caller a menu of options to access non-call-related
    information, and a second card that utilizes Internet Protocol (IP)
    technology, accessed by 8YY dialing, to transport a portion of the
    calling card call.[^128]

53. On February 16, 2005, the Commission released a *Report and Order
    and Notice of Proposed Rulemaking* denying AT&T's petition and
    requiring it to contribute to the federal Universal Service Fund
    based on its interstate prepaid calling card revenue.[^129] The
    *NPRM* portion of that item sought comment on the appropriate
    regulatory treatment of AT&T's additional prepaid calling card types
    and any other current or planned prepaid calling card
    offerings.[^130] On May 3, 2005, AT&T filed an Emergency Petition
    for Interim Relief asking the Commission to impose federal universal
    service funding obligations on all prepaid calling card providers
    regardless of whether the cards offer telecommunications or
    information services.[^131] AT&T's Emergency Petition also requested
    that the Commission issue interim rules subjecting all prepaid
    calling card providers to the same types of access charges.[^132]

54. In this *Order*, we find that providers of the types of cards upon
    which the Commission sought comment in the NPRM offer
    telecommunications services. Consequently, providers of these types
    of prepaid calling cards will be treated as telecommunications
    carriers and therefore must pay access charges, contribute to the
    Universal Service Fund, and comply with all the other applicable
    obligations under the Communications Act and the Commission's
    rules.[^133] Prepaid calling card providers that use SS7 must pass
    the CPN of the calling party (the cardholder), and the CN where
    appropriate, and not pass the telephone number associated with the
    calling card platform in the CPN or CN parameter of the SS7
    stream.[^134]

55. We also adopt interim rules requiring that prepaid calling card
    providers report prepaid calling card PIU factors, and call volumes
    from which these factors were calculated, based on not less than a
    one-day representative sample, to those carriers from which they
    purchase transport services.[^135] We also require that prepaid
    calling card providers certify to the Commission that they are
    providing PIU and CPN information to other carriers as required
    above and that they report their total intrastate, interstate, and
    international calling card minutes and revenues.[^136]

56. The requirements imposed on prepaid calling card providers in this
    *Order* are necessary to preserve and advance the Universal Service
    Fund, provide regulatory certainty and prevent "gaming" of the
    system. The Commission believes the public interest will best be
    served by eliminating any uncertainty and promoting stability in the
    prepaid calling card market through the adoption of this *Order*.

57. In the *Calling Card Order and NPRM*, the Commission noted that
    military personnel rely heavily on prepaid calling cards and asked
    what steps, if any, it should take to ensure that such cards remain
    reasonably priced.[^137] In this *Order* we decide that the public
    interest will be served by exempting revenue from prepaid calling
    cards sold by, to, or pursuant to contract with DoD or a DoD entity
    from the above-described universal service contribution
    obligations.[^138] As such, on an interim basis, prepaid calling
    card providers are not required to pay USF contributions on revenue
    generated from prepaid calling cards sold by, to, or pursuant to
    contract with DoD or a DoD entity.[^139]

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b.  **Significant Issues Raised by Public Comments in Response to the
    IRFA**

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58. No comments were received regarding the IRFA.

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c.  **Description and Estimate of the Number of Small Entities to Which
    the Proposed Rules May Apply**

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59. 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.[^140] The RFA generally defines the
    term "small entity" as having the same meaning as the terms "small
    business," "small organization," and "small governmental
    jurisdiction."[^141] In addition, the term "small business" has the
    same meaning as the term "small business concern" under the Small
    Business Act.[^142] 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.[^143]

60. 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.[^144] The SBA has developed small business size
    standards for wireline and wireless small businesses within the
    three commercial census categories of Wired Telecommunications
    Carriers,[^145] Paging,[^146] and Cellular and Other Wireless
    Telecommunications.[^147] 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.

61. 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."[^148] 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.[^149] 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.

62. *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.[^150] According to Census Bureau data for 1997, there
    were a total of 2,225 firms in this category that operated for the
    entire year.[^151] 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.[^152] Thus, under this size standard, the
    majority of firms can be considered small.

63. *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.[^153] According to Commission data, 1,303
    carriers reported that they were incumbent local exchange service
    providers.[^154] In addition, according to Commission data, 769
    companies reported that they were engaged in the provision of either
    competitive access provider services or competitive local exchange
    carrier services.[^155] Of these 769 companies, an estimated 676
    have 1,500 or fewer employees and 93 have more than 1,500
    employees.[^156] In addition, 39 carriers reported that they were
    "Other Local Service Providers."[^157] Of the 39 "Other Local
    Service Providers," an estimated 38 have 1,500 or fewer employees
    and one has more than 1,500 employees.[^158] Consequently, the
    Commission estimates that most providers of local exchange service,
    competitive local exchange service, competitive access providers,
    and "Other Local Service Providers" are small entities that may be
    affected by the rules and policies proposed herein.

64. *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.[^159]
    According to Commission data, 89 companies reported that they were
    engaged in the provision of prepaid calling cards.[^160] Of these 89
    companies, an estimated 88 have 1,500 or fewer employees and one has
    more than 1,500 employees.[^161] 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.

> **d. Description of Projected Reporting, Recordkeeping, and Other
> Compliance Requirements for Small Entities**

65. In this *Order*, we hold that providers of the types of cards upon
    which the Commission sought comment in the *NPRM* offer
    telecommunications services. As a result of this finding, these
    prepaid calling card providers are now treated as telecommunications
    carriers and therefore are subject to the Communications Act and the
    Commission's rules, including all applicable reporting and
    recordkeeping requirements.[^162] For example, they now must submit
    to USAC the reports required in connection with contributions to the
    federal USF.

66. In this *Order*, we also adopt new interim rules applicable to all
    prepaid calling card providers. Prepaid calling card providers must
    report prepaid calling card PIU factors, and call volumes on which
    these factors were calculated, based on not less than a one-day
    representative sample, to those carriers from whom they purchase
    transport services. They also must certify to the Commission that
    they are complying with this PIU reporting requirement. This
    certification also must include information on total intrastate,
    interstate, and international calling card minutes and revenue, and
    a statement that they are contributing to the federal USF based on
    all interstate and international revenues, except for revenue from
    the sale of prepaid calling cards by, to, or pursuant to contract
    with DoD or a DoD entity.

> **e. Steps Taken To Minimize Significant Economic Impact on Small
> Entities, and Significant Alternatives Considered**

67. 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.[^163]

68. In this *Order*, the Commission finds that certain types of prepaid
    calling card providers are telecommunications carriers and therefore
    subject to applicable requirements of the Communications Act and the
    Commission's rules, including the obligation to pay access charges
    and contribute to the Universal Service Fund. We apply these
    existing rules for the purpose of preserving and advancing universal
    service and providing regulatory certainty. A strong, well-funded
    USF is one of the Commission's regulatory mandates and is in the
    public interest. The clear application of regulations to the prepaid
    calling card industry also will promote regulatory certainty, foster
    innovation and competition, and avoid market disruption during the
    pendency of this and other rulemaking proceedings. We rejected
    AT&T's suggestion to address a more limited set of issues on the
    ground that such an approach would not provide the necessary
    certainty and stability. After reviewing the record, we conclude
    that the best way to meet our goals of preserving and advancing
    universal service and providing certainty to the prepaid calling
    card market is to subject all prepaid calling card providers to the
    same requirements.

69. In this *Order*, we also adopt interim rules requiring all prepaid
    calling card providers to meet certain reporting requirements.
    Specifically, they must report prepaid calling card PIU factors, and
    call volumes from which these factors were calculated, based on not
    less than a one-day representative sample, to those carriers from
    which they purchase transport services. The interim rules also
    require that prepaid calling card providers make quarterly
    certifications to the Commission. Specifically, they must certify
    that they have complied with the reporting requirements discussed
    above. In addition, they must provide information on total
    intrastate, interstate, and international calling card minutes and
    revenues, and include a statement that they are contributing to the
    federal USF based on the reported information.[^164] AT&T proposed
    that prepaid calling card providers comply with a much more
    extensive set of reporting and certification requirements.[^165] We
    rejected these additional reporting and certification requirements
    because they would prove too burdensome to small prepaid calling
    card providers.

70. As described above, the Commission has considered a variety of
    alternative approaches for regulating prepaid calling card
    providers. In weighing these alternatives we tried to balance our
    desire not to unduly burden small entities (small prepaid card
    providers, as well as small LECs and small IXCs) with our goals of
    ensuring regulatory certainty, preserving and advancing universal
    service, and avoiding market disruption during the pendency of other
    rulemakings. The *Order* we adopt achieves this balance by applying
    the same rules to all prepaid calling card providers, while at the
    same time rejecting proposals that would place excessive burdens on
    small companies.

    f.  **Report to Congress**

71. The Commission will send a copy of the *Order*, including this FRFA,
    in a report to be sent to Congress and the Government Accountability
    Office pursuant to the Congressional Review Act.[^166] In addition,
    the Commission will send a copy of the *Order*, including this FRFA,
    to the Chief Counsel for Advocacy of the SBA. A copy of the *Order*
    and FRFA (or summaries thereof) will also be published in the
    Federal Register.[^167]

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C.  **Paperwork Reduction Act Analysis**

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72. This document contains new information collection requirements
    subject to the Paperwork Reduction Act of 1995 (PRA), Public Law
    104-13.  It will be submitted to the Office of Management and Budget
    (OMB) for review under Section 3507(d) of the PRA.  OMB, the general
    public, and other Federal agencies are invited to comment on the new
    or modified information collection requirements contained in this
    proceeding. 

# ordering clauses

73. Accordingly, IT IS ORDERED that, pursuant to the authority contained
    in sections 1, 2, 4(i), 201, 202 and 254 of the Communications Act
    of 1934, as amended, 47 U.S.C. §§ 151, 152, 154(i), 201, 202, and
    254, this Declaratory Ruling and Report and Order in WC Docket No.
    05-68 ARE ADOPTED, and that Parts 54 and 64 of the Commission's
    Rules, 47 C.F.R. Parts 54 and 64, ARE AMENDED as set forth in
    Appendix A.

74. IT IS FURTHER ORDERED that AT&T's Emergency Petition for Immediate
    Interim Relief IS GRANTED IN PART and DENIED IN PART as set forth
    herein.

75. IT IS FURTHER ORDERED that the final rules and rule revisions
    adopted in this Declaratory Ruling and Report and Order SHALL BECOME
    EFFECTIVE ninety (90) days after publication in the Federal
    Register.

76. IT IS FURTHER ORDERED that all prepaid calling card providers SHALL
    FILE an initial certification as required herein no later than the
    last day of the first full calendar quarter after OMB approval of
    this requirement.

77. IT IS FURTHER ORDERED that the Frontier Petition for Declaratory
    Ruling IS GRANTED as set forth herein and otherwise IS DENIED.

78. IT IS FURTHER ORDERED that the Commission's Consumer and
    Governmental Affairs Bureau, Reference Information Center, SHALL
    SEND a copy of this Declaratory Ruling and Report and Order,
    including the Final Regulatory Flexibility Analysis, to the Chief
    Counsel for Advocacy of the Small Business Administration.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

**APPENDIX A**

**FINAL RULES**

A. Part 64 of Title 47 of the Code of Federal Regulations is amended as
follows:

> 1\. The authority citation for Part 64 continues to read as follows:

Authority: 47 U.S.C. 154, 254(k); secs. 403(b)(2)(B), (c), Public Law
104-104, 110 Stat. 56. Interpret or apply 47 U.S.C. 201, 218, 222, 225,
226, 228, and 254(k) unless otherwise noted.

> 2\. A new Subpart DD is added to read as follows:

**Subpart DD -- Prepaid Calling Card Providers**

64.5000 Definitions

64.5001 Reporting and Certification Requirements

**[§ 64.5000 Definitions]{.underline}**

\(a\) *[Prepaid Calling Card]{.underline}*. The term "prepaid calling
card" means a card or similar device that allows users to pay in advance
for a specified amount of calling, without regard to additional
features, functions, or capabilities available in conjunction with the
calling service.

\(b\) *[Prepaid Calling Card Provider]{.underline}*. The term "prepaid
calling card provider" means any entity that provides telecommunications
service to consumers through the use of a prepaid calling card.

**[§ 64.5001 Reporting and Certification Requirements]{.underline}**

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

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

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

> \(1\) The percentage of intrastate, interstate, and international
> calling card minutes for that reporting period;
>
> \(2\) The percentage of total prepaid calling card service revenue
> (excluding revenue from prepaid calling cards sold by, to, or pursuant
> to contract with the Department of Defense (DoD) or a DoD entity)
> attributable to interstate and international calls for that reporting
> period;
>
> \(3\) A statement that it is making the required Universal Service
> Fund contribution based on the reported information; and
>
> \(4\) A statement that it has complied with the reporting requirements
> described in paragraph (a) of this section.

B. Part 54 of Title 47 of the Code of Federal Regulations is amended as
follows:

> 1\. The authority citation for Part 54 continues to read as follows:

Authority: 47 U.S.C. 1, 4(i), 201, 205, 214, and 254 unless otherwise
noted.

> 2\. Section 54.706 is amended by adding new paragraph (a)(19) and by
> adding a new sentence in subsection (d) to be placed after the
> section's first sentence to read as follows:

**[54.706 Contributions.]{.underline}**

\*\*\*\*\*

\(a\)

\(19\) Prepaid calling card providers.

\*\*\*\*\*

\(d\) Prepaid calling card providers are not required to contribute on
the basis of revenues derived from prepaid calling cards sold by, to, or
pursuant to contract with the Department of Defense (DoD) or a DoD
entity.

**APPENDIX B**

Comments regarding the Calling Card NPRM and Order filed April 15, 2005:

AT&T Corporation (AT&T)

American Public Communications Council (APCC)

DJE Teleconsulting, LLC (DJE)

Department of Defense, Defense Information Systems Agency (DoD)

eKit.com, Inc.

General Communication, Inc. (GCI)

IDT Telecom, Inc. (IDT)

Independent Telephone and Telecommunications Alliance (ITTA)

MCI, Inc.

National Association of State Utility Consumer Advocates (NASUCA)

National Exchange Carrier Association, Inc. (NECA)

National Telecommunications Cooperative Association (NTCA)

Organization for the Promotion and Advancement of Small
Telecommunications Companies (OPASTCO)

SBC Communications, Inc.

Sprint Corporation

State of New York Department of Public Service (NY DPS)

The United States Telecom Association (USTA)

VeriSign, Inc.

Verizon Communications, Inc.

Western Telecommunications Alliance (WTA)

WilTel Communications, LLC (WilTel)

Reply comments regarding the Calling Card NPRM and Order filed May 16,
2005:

AT&T

APCC

BellSouth Corporation

GCI

iBasis, Inc.

IDT

MCI, Inc.

Qwest Services Corporation

SBC Communications, Inc.

Sprint Corporation

USTA

The Voice on the Net Coalition (VON Coalition)

Verizon Communications, Inc.

Comments regarding AT&T's Emergency Petition for Immediate Interim
Relief:

GCI

IDT

Qwest Services Corporation

Verizon Communications, Inc.

**STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

*Re: Regulation of Prepaid Calling Card Services*, Declaratory Ruling
and Report and Order, FCC 06-79, WC Docket No. 05-68 (June 1, 2006).

I support this Order, which further clarifies the Commission's rules for
prepaid calling card services and takes another step to solidify the
base of contributions to the universal service fund. Universal service
is one of the bedrocks of telecommunications policy, and the Commission
is charged with ensuring that it is on solid footing.

This is the Commission's second Order addressing the regulatory status
and universal service obligations of calling card providers. When we
adopted the original calling card order, last spring, I called on the
Commission to act quickly to determine the regulatory treatment for the
two remaining calling card variants: menu-driven cards and cards that
utilize IP transport. So, I'm pleased that we clarify today that all
prepaid calling cards will be subject to a level regulatory playing
field.

This Order finds that these additional calling card services are
telecommunications services, a decision that was widely supported in the
record. I do have concern about the Commission's decision to limit
retroactive application of our decision for menu-driven services.
Commenters made strong arguments that the Commission should have taken a
more fact-specific approach for these services, given the equitable
nature of our finding and the Commission's history with this issue. I
approve this Order, however, because I support our effort to clarify
going-forward the regulatory status and obligations for calling cards.
With this Order, we eliminate any lingering uncertainties, which should
redound to the benefit all providers.

[^1]: *See infra* para. 10 (describing two categories of prepaid calling
    cards: menu-driven calling cards and prepaid calling cards that
    utilize IP transport).

[^2]: *See infra* paras. 23-25.

[^3]: *Regulation of Prepaid Calling Card Services*, WC Docket No.
    05-68, Emergency Petition of AT&T for Immediate Interim Relief
    (filed May 3, 2005) (AT&T Emergency Petition).

[^4]: 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's May 2003 Petition).

[^5]: *See id*. at 5-6.

[^6]: *See* 47 U.S.C. § 254.

[^7]: *See* Letter from Judy Sello, Senior Attorney, AT&T, to Marlene H.
    Dortch, Secretary, Federal Communications Commission (Nov. 22, 2004)
    (AT&T Nov. 22, 2004 Letter).

[^8]: *AT&T Corp. Petition for Declaratory Ruling Regarding Enhanced
    Prepaid Calling Card Services*, WC Docket Nos. 03-133, 05-68, Order
    and Notice of Proposed Rulemaking, 20 FCC Rcd 4826, para. 1 (2005)
    (*Calling Card Order and NPRM*), *pet. for rev. pending*.

[^9]: *See id*. at 4835, para. 28.

[^10]: *See* *id*. at 4836, para. 31.

[^11]: *See id*. at 4839-40, para. 39.

[^12]: *Id*. at 4840, para. 40.

[^13]: *See id*. at 4840-41, paras. 41-42.

[^14]: *See id*. at 4841, para. 43.

[^15]: AT&T Emergency Petition at 1.

[^16]: *See* *id*. at 7.

[^17]: *See id*.

[^18]: *See id*.

[^19]: *See id*. at 8.

[^20]: *Id*. at 2.

[^21]: *See id*.

[^22]: *See id*. Parties commenting on the *Calling Card Order and NPRM*
    noted similar concerns. *See*, *e.g.*, GCI NPRM Comments at 19;
    Sprint NPRM Comments at 16-17; Verizon NPRM Comments at 7; WilTel
    NPRM Comments at 2. Appendix B lists all the pleadings filed in
    response to the NPRM and the Emergency Petition.

[^23]: AT&T Emergency Petition at 4.

[^24]: *See Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45, Further Notice of Proposed Rulemaking and Report and
    Order, 17 FCC Rcd 3752 (2002) (*Universal Service FNPRM*);
    *Developing a Unified Intercarrier Compensation Regime*, CC Docket
    No. 01-92, Further Notice of Proposed Rulemaking, 20 FCC Rcd 4685
    (2005) (*Intercarrier Compensation FNPRM*).

[^25]: *See* AT&T Emergency Petition at 2, 4. There is no question,
    however, that all providers offering cards similar to the card
    described in AT&T's original petition are subject to the
    requirements set forth in the *Calling Card Order and NPRM*. *See*
    *Calling Card Order and NPRM*, 20 FCC Rcd at 4835-36, paras. 28, 31.

[^26]: AT&T's May 2003 Petition at 4.

[^27]: Letter from Judy Sello, Senior Attorney, AT&T, to Marlene H.
    Dortch, Secretary, Federal Communications Commission (Aug. 25, 2005)
    at 2.

[^28]: These two variations may be offered separately from one another
    or in combination (e.g., a menu-driven card that uses IP transport
    for a portion of the call).

[^29]: *See Calling Card Order and NPRM*, 20 FCC Rcd at 4840, para. 41.

[^30]: *See* AT&T NPRM Comments at 5-6.

[^31]: *See* MCI NPRM Comments at 4. *See also* Letter from Larry
    Fenster, Senior Economist, MCI, to Marlene Dortch, Secretary,
    Federal Communications Commission (Feb. 2, 2005) (MCI Feb. 2, 2005
    letter).

[^32]: 47 U.S.C. § 153(43).

[^33]: 47 U.S.C. § 153(46).

[^34]: 47 U.S.C. § 153(43) (defining "telecommunications").

[^35]: Sprint NPRM Comments at 8.

[^36]: *Id*.

[^37]: *See In the Matter of Federal-State Joint Board on Universal
    Service*, Report to Congress, 13 FCC Rcd 11501 (1998) (*Universal
    Service Report to Congress*).

[^38]: *Id*. at 11530, para. 60.

[^39]: *National Cable & Telecomm. Ass'n. v. Brand X Internet Services*,
    125 S. Ct. 2688, 2704 (2005) (*Brand X*).

[^40]: "It is plain, for example, that an incumbent local exchange
    carrier cannot escape Title II regulation of its residential local
    exchange service simply by packaging that service with voice mail."
    *Universal Service Report to Congress*, 13 FCC Rcd at 11530, para.
    60.

[^41]: *Brand X*, 125 S. Ct. at 2709.

[^42]: *Id*.

[^43]: *Id*. (quoting *Inquiry Concerning High-Speed Access to the
    Internet Over Cable and Other Facilities*, 17 FCC Rcd 4798, 4823
    (2002) (*Cable Modem Declaratory Ruling*)).

[^44]: *Calling Card Order and NPRM*, 20 FCC Rcd at 4830, para. 14.

[^45]: IDT NPRM Comments at 4-5.

[^46]: *Id*. (citing *Northwestern Bell Telephone Company*, Memorandum
    Opinion and Order, 2 FCC Rcd 5986 (1987) (*Talking Yellow Pages*)).

[^47]: *Talking Yellow Pages*, 2 FCC Rcd at 5986, para. 2 ("This service
    enables customers in Omaha, Nebraska to dial a local number and hear
    recorded advertisements.").

[^48]: *See In the Matter of Petition for Declaratory Ruling that AT&T's
    Phone-to-Phone IP Telephony Services are Exempt from Access
    Charges*, Order, 19 FCC Rcd 7457, para. 1 (2004) (*IP-in-the-Middle*
    *Order*).

[^49]: *Id*.

[^50]: *See* AT&T Nov. 22, 2004 Letter at 1.

[^51]: *Calling Card Order and NPRM*, 20 FCC Rcd at 4826, para. 2.

[^52]: APCC NPRM Comments at 20.

[^53]: "In addition, AT&T's attempt to treat '1+' and toll-free service
    dialing by consumers as materially important in ascertaining the
    regulatory status of a service is overreaching and amounts to little
    more than a distinction without a difference. Regulatory status
    should not be determined by whether a service is accessed and used
    via one form of dialing versus another." DJE Teleconsulting NPRM
    Comments at 3-4.

[^54]: *See IP-in-the-Middle* *Order*, 19 FCC Rcd at 7457, para. 1.

[^55]: "Avoidance of market disruption pending broader reforms is, of
    course, a standard and accepted justification for a temporary rule."
    *CompTel v. FCC*, 309 F.3d 8, 14 (D.C. Cir. 2002) (citing *MCI v.
    FCC*, 750 F.2d at 141; *ACS of Anchorage, Inc. v. FCC*, 290 F.3d
    403, 410 (D.C. Cir. 2002)).

[^56]: *See* 47 U.S.C. § 254; 47 C.F.R. § 54.706.

[^57]: IDT NPRM Comments at 14-15.

[^58]: *See Policy and Rules Concerning the Interstate, Interexchange
    Marketplace*; *Implementation of Section 254(g) of the
    Communications Act of 1934, as amended; 1998 Biennial Regulatory
    Review -- Review of Customer Premises Equipment and Enhanced
    Services Unbundling Rules in the Interexchange, Exchange Access and
    Local Exchange Markets,* CC Docket Nos. 96-61 and 98-183, Report and
    Order, 16 FCC Rcd 7418, 7446-48, paras. 47-54 (2001).

[^59]: *Id*. at 7447-48, paras. 50-51.

[^60]: *Id*. at 7448, para. 53.

[^61]: *Calling Card Order and NPRM*, 20 FCC Rcd at 4841, para. 43.

[^62]: *See* DoD NPRM Comments at 1.

[^63]: AT&T Emergency Petition at 7.

[^64]: GCI NPRM Reply Comments at 4; GCI NPRM Comments at 20; NASUCA
    NPRM Comments at 5; Qwest NPRM Reply Comments at 20-22; Sprint NPRM
    Comments at 15-16.

[^65]: *See* 47 U.S.C. §§ 160(a), 254(d); *Universal Service FNPRM*, 17
    FCC Rcd 3752 (2002).

[^66]: *See* 47 U.S.C. § 160(a)(1).

[^67]: *See* 47 U.S.C. § 160(a)(2).

[^68]: *See* 47 U.S.C. § 160(a)(3).

[^69]: *See* 47 U.S.C. § 160(b).

[^70]: GCI Emergency Petition Comments at 10-11.

[^71]: *Id.*

[^72]: *See* 47 C.F.R. § 69.1 *et seq*.

[^73]: In addition to access charge obligations, we agree with APCC that
    providers of calling cards are obligated to pay dial-around
    compensation to payphone service providers pursuant to section 276
    of the Act when the cards are used in the provision of
    telecommunications services. *See* APCC Comments at 11-12.

[^74]: AT&T NPRM Reply Comments at 9-10.

[^75]: IDT NPRM Comments at 15-17.

[^76]: AT&T Emergency Petition at 18.

[^77]: Letter from Amy Alvarez, AT&T, to Marlene H. Dortch, Secretary,
    Federal Communications Commission (June 6, 2005); Letter from Judy
    Sello, Senior Attorney, AT&T, to Marlene H. Dortch, Secretary,
    Federal Communications Commission (July 15, 2005) (AT&T July 15,
    2005 Letter).

[^78]: AT&T July 15, 2005 Letter, Attachment A, at 1.

[^79]: *See id*. at 2-4.

[^80]: GCI Emergency Petition Comments at 8-9; IDT Emergency Petition
    Comments at 5.

[^81]: *See* IDT Emergency Petition Comments at 6.

[^82]: *Id*.

[^83]: *Id*.

[^84]: Letter from Tina Pidgeon, General Communication Inc., to Marlene
    H. Dortch, Secretary, Federal Communications Commission (June 29,
    2005) at 1-2.

[^85]: *See* AT&T Emergency Petition at 18-19.

[^86]: *See* Letter from Russell M. Blau and Tamar E. Finn, Attorneys
    for IDT Corporation, Swidler Berlin, LLP, to Michelle Carey, Legal
    Advisor, Office of the Chairman, Federal Communications Commission,
    WC Docket Nos. 05-68, 01-92 (Jan. 6, 2006) at 1-3 (IDT Jan. 6, 2006
    Letter).

[^87]: *See supra* paras. 8-9.

[^88]: *See, e.g*., 47 U.S.C. §§ 208, 501. To the extent that prepaid
    calling card providers are "common carriers" under section 208 of
    the Act, a violation of these rules would constitute an actionable
    violation of section 201(b) of the Act, because the requirements
    imposed on calling card providers by these rules are necessary to
    preserve and advance the Universal Service Fund, provide regulatory
    certainty, and prevent "gaming" of the system, as described above.

[^89]: 47 C.F.R. § 64.1601. As noted in the *Intercarrier Compensation
    FNPRM*, the emergence of wireless and IP-based calling options makes
    it less likely that a comparison of telephone numbers will provide
    meaningful information on the geographic end points of a call.
    Nevertheless, for now carriers continue to rely on telephone numbers
    as a proxy for geographic location. *See* *Intercarrier Compensation
    FNPRM*, 20 FCC Rcd at 4696-97, paras. 20-22.

[^90]: *See, e.g., Expanded Interconnection with Local Telephone Company
    Facilities; Amendment of Part 36 of the Commission's Rules and
    Establishment of a Joint Board*, CC Docket Nos. 91-141 Transport
    Phase I and 80-286, Second Report and Order and Third Notice of
    Proposed Rulemaking, 8 FCC Rcd 7374, 7442-43, para. 137 (1993)
    (requiring IXCs to report PIUs for switched access traffic);
    *Telephone Number Portability*, CC Docket No. 95-116, RM 8535,
    Fourth Memorandum Opinion and Order on Reconsideration, FCC 99-151,
    1999 WL 503613 (F.C.C.), para. 80 (July 16, 1999) (allowing carriers
    to use PIU rather than revising their billing systems to implement
    terminating access revenue sharing in meet-point billing
    arrangements).

[^91]: *See, e.g., Joint Application by BellSouth Corporation, BellSouth
    Telecommunications, Inc., and BellSouth Long Distance, Inc. for
    Provision of In-Region, InterLATA Services in Alabama, Kentucky,
    Mississippi, North Carolina, and South Carolina*, WC Docket No.
    02-150, Memorandum Opinion and Order, 17 FCC Rcd 17595, 17719, para.
    222 (2002).

[^92]: 47 C.F.R. § 64.1601.

[^93]: *See* Letter from Donna Epps, Vice President, Federal Regulatory,
    Verizon, to Marlene H. Dortch, Secretary, Federal Communications
    Commission, WC Docket No. 05-68 (Sept. 9, 2005) (Verizon Sept. 9,
    2005 Letter).

[^94]: *See* Letter from Judy Sello, Senior Attorney, AT&T, to Marlene
    H. Dortch, Secretary, Federal Communications Commission, WC Docket
    No. 05-68 (Sept. 21, 2005) at 2.

[^95]: *See id*.

[^96]: *See* Verizon Sept. 9, 2005 Letter at 3.

[^97]: Prepaid calling card providers that purchase access service
    directly from LECs will continue to be subject to any PIU provisions
    in the LECs' access tariffs.

[^98]: *See* IDT Jan. 6, 2006 Letter at 3-4.

[^99]: *See* Letter from Tina Pidgeon, Vice President, Federal
    Regulatory Affairs, General Communication, Inc., to Marlene H.
    Dortch, Secretary, Federal Communications Commission, WC Docket No.
    05-68 (Oct. 19, 2005).

[^100]: *See* *id*. at 3; Letter from Judy Sello, Senior Attorney, AT&T,
    to Marlene H. Dortch, Secretary, FCC (Oct. 28, 2005) at 2; IDT Jan.
    6, 2006 Letter at 3.

[^101]: For similar reasons, we agree with APCC that our rules require
    the payment of dial-around compensation to a payphone service
    provider when the cardholder completes a call to the platform
    without attempting to call a third party. *See* APCC Comments at 13,
    n.12.

[^102]: The certification we require in this *Order* is not a
    replacement for the Form 499 -- Telecommunications Reporting
    Worksheet. As such, prepaid calling card providers are responsible
    for filing both the certification required in this *Order* and a
    Form 499.

[^103]: *See supra* paras. 32-40.

[^104]: *See* *In the Matter of Petitions of Sprint PCS and AT&T Corp
    for Declaratory Ruling Regarding CMRS Access Charges*, WT Docket No.
    01-316, Declaratory Ruling, 17 FCC Rcd 13192, 13200 n.51 (2002)
    ("The Commission rule that authorizes us to issue declaratory
    rulings specifically cites the adjudications provision of the APA as
    its source of authority."); 47 C.F.R. § 1.2 (citing 5 U.S.C. § 554).

[^105]: *Verizon Telephone Cos. v. FCC*, 269 F.3d 1098, 1109 (D.C. Cir.
    2001) (*Verizon*). *See also PSC of Colo. v. FERC*, 91 F.3d 1478,
    1488 (D.C. Cir. 1996); *Health Ins. Ass'n of America v. Shalala,* 23
    F.3d 412, 424 (D.C. Cir. 1994); [*Williams Natural Gas Co. v. FERC,*
    3 F.3d 1544, 1554 (D.C. Cir.
    1993)](http://web2.westlaw.com/find/default.wl?rs=WLW6.04&serialnum=1993172951&tf=-1&db=506&tc=-1&fn=_top&referenceposition=1554&mt=Westlaw&vr=2.0&sv=Split&referencepositiontype=S&rp=%2Ffind%2Fdefault.wl&findtype=Y)).

[^106]: *Verizon*, 269 F.3d at 1109. *See also* [*Clark-Cowlitz Joint
    Operating Agency v. FERC,* 826 F.2d 1074, 1081 (D.C. Cir.
    1987)](http://web2.westlaw.com/find/default.wl?rs=WLW6.04&serialnum=1987100058&tf=-1&db=350&tc=-1&fn=_top&referenceposition=1081&mt=Westlaw&vr=2.0&sv=Split&referencepositiontype=S&rp=%2Ffind%2Fdefault.wl&findtype=Y)
    (en banc) (*Clark-Cowlitz*); [*Consolidated Freightways v. NLRB,*
    892 F.2d 1052, 1058 (D.C. Cir.
    1989)](http://web2.westlaw.com/find/default.wl?rs=WLW6.04&serialnum=1990014755&tf=-1&db=350&tc=-1&fn=_top&referenceposition=1058&mt=Westlaw&vr=2.0&sv=Split&referencepositiontype=S&rp=%2Ffind%2Fdefault.wl&findtype=Y).
    *Cf.* 47 U.S.C. § 154(j) ("The Commission may conduct its
    proceedings in such manner as will best conduce to the proper
    dispatch of business and to the ends of justice.").

[^107]: *See Clark-Cowlitz*, 826 F.2d at 1081 (citing *Retail, Wholesale
    & Department Store Union v. NLRB*, 466 F.2d 380, 390 (D.C. Cir.
    1972)).

[^108]: *Clark-Cowlitz*, 826 F.2d at 1082 n.6. *See also Verizon*, 269
    F.3d at 1110 (noting that the D.C. Circuit has not always considered
    each of the factors).

[^109]: *See The Time Machine Inc*., Memorandum Opinion and Order, 11
    FCC Rcd 1186 (CCB 1995).

[^110]: *See Calling Card Order and NPRM*, 20 FCC Rcd at 4836-37, para.
    32.

[^111]: *See IP-in-the-Middle Order*, 19 FCC Rcd at 7457, para. 1.

[^112]: The fact that the *IP-in-the-Middle Order* only addressed
    services that use 1+ dialing does not change this conclusion. *See
    id.* at 7466, n.58. As the Commission explained, the scope of that
    order was limited to the service at issue. Nothing in that order
    suggests that the Commission intended to foreclose the application
    of the same reasoning to similar services that use a different
    dialing pattern, such as the calling card services we address in
    this *Order*.

[^113]: *See, e.g.,* Letter from Kathleen Grillo, Vice President,
    Federal Regulatory, Verizon, to Marlene H. Dortch, Secretary,
    Federal Communications Commission, WC Docket No. 05-68 (Apr. 26,
    2006); Letter from Jack Zinman, General Attorney, AT&T Services,
    Inc., to Marlene H. Dortch, Secretary, Federal Communications
    Commission, WC Docket No. 05-68 (Apr. 27, 2006).

[^114]: *See* AT&T Nov. 22, 2004 Letter*.*

[^115]: *See, e.g.,* Letter from Vonya B. McCann, Vice President,
    Government Affairs, Sprint Nextel, to Marlene H. Dortch, Secretary,
    Federal Communications Commission, WC Docket No. 05-68 (Apr. 18,
    2006) (initiation of NPRM does not preclude retroactivity); *see
    also* *Viacom Int\'l v. FCC*, 672 F.2d 1034, 1042 (2d Cir. 1982)
    (Commission has discretion to proceed by declaratory ruling rather
    than rulemaking); *Chisholm v. FCC*, 538 F.2d 349, 364-65 (D.C. Cir.
    1976) (Commission may adopt new statutory interpretation through
    declaratory ruling rather than rulemaking); *North American
    Telecommunications Association*, ENF File No. 84-2, Memorandum
    Opinion and Order, 101 FCC 2d 349, 365, paras. 1, 54 (1985)
    (classification of services under existing rule may be accomplished
    through declaratory ruling, but rule changes are more appropriately
    handled in rulemaking).

[^116]: *See Cable Modem Declaratory Ruling*, 17 FCC Rcd at 4818, para.
    31 ("In the Notice, we raised questions about the appropriate legal
    and policy framework for cable modem service.").

[^117]: *Calling Card Order and NPRM*, 20 FCC Rcd at 4839-40, para. 39.

[^118]: Consequently, we disagree with Qwest's argument that "the law is
    (and has been) clear" that tariffed access charges applied to
    providers of these cards. *See, e.g*., Letter from Melissa E.
    Newman, Vice President-Federal Regulatory, Qwest, to Marlene H.
    Dortch, Secretary, Federal Communications Commission, WC Docket No.
    05-68 (May 18, 2006) at 3.

[^119]: *See supra* para. 14.

[^120]: While we acknowledge that retroactive application of our
    decision with respect to prepaid calling cards that use IP transport
    will impose similar burdens on the providers of those cards, that
    factor is not decisive in our analysis of those cards because of our
    conclusion that providers had "ample notice that merely converting a
    calling card call to IP format and back does not transform the
    service from a telecommunications service to an information
    service." *See supra* para. 43.

[^121]: During the pendency of this proceeding, Frontier Telephone of
    Rochester, Inc. (Frontier) filed a petition for declaratory ruling
    that MCI's menu-driven Golden Retriever calling card service is a
    telecommunications service and therefore subject to interstate and
    intrastate access charges. As noted above, we agree that MCI's
    service is a telecommunications service, and MCI will be subject to
    access charges upon the effective date of this *Order*. With respect
    to the period prior to the effective date of this *Order*, however,
    we deny Frontier's Petition for Declaratory Ruling. As explained in
    paragraph 45, it would be inequitable to require retroactive
    compliance with the obligations imposed by this *Order* in light of
    the uncertain and unsettled state of the law with respect to
    menu-driven calling cards.

[^122]: *See Electronic Filing of Documents in Rulemaking Proceedings*,
    GC Docket No. 97-113, Report and Order, 13 FCC Rcd 11322 (1998).

[^123]: *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, 100 Stat. 857 (1996).

[^124]: *Calling Card Order and NPRM*, 20 FCC Rcd at 4826, 4843-47,
    paras. 49-61.

[^125]: *Id*.

[^126]: *See* 5 U.S.C. § 604.

[^127]: *See* *supra* para. 3.

[^128]: *See* *id*.

[^129]: *See* *supra* para. 4.

[^130]: *See* *supra* para. 5.

[^131]: AT&T Emergency Petition at 2.

[^132]: *Id*.

[^133]: *See* *supra* para. 10.

[^134]: *See* *supra* paras. 33-34.

[^135]: *See supra* para. 35.

[^136]: *See* *supra* paras. 38-40.

[^137]: *See Calling Card Order and NPRM*, 20 FCC Rcd. at 4826, 4841,
    para. 43.

[^138]: *See supra* para. 24.

[^139]: *See* *supra* para. 25.

[^140]: 5 U.S.C. §§ 603(b)(3), 604(a)(3).

[^141]: 5 U.S.C. § 601(6).

[^142]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in the Small Business Act, 15 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."

[^143]: 15 U.S.C. § 632.

[^144]: *Trends in Telephone Service*, Federal Communications
    Commission, Wireline Competition Bureau, Industry Analysis and
    Technology Division (April 2005) (*Trends in Telephone Service*)*.*

[^145]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) code 513310 (NAICS code 513310 was changed to 517110
    in October 2002).

[^146]: 13 C.F.R. § 121.201, NAICS code 517211.

[^147]: 13 C.F.R. § 121.201, NAICS code 517212.

[^148]: 15 U.S.C. § 632.

[^149]: 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). Since 1996, out of an abundance of
    caution, the Commission has included small incumbent LECs in its
    regulatory flexibility analyses. *See*, *e.g.*, *Implementation of
    the Local Competition Provisions in the Telecommunications Act of
    1996*, CC Docket No. 96-98, First Report and Order, 11 FCC Rcd
    15499, 16144-45 (1996), 61 FR 45476 (Aug. 29, 1996).

[^150]: 13 C.F.R. § 121.201, NAICS code 517110.

[^151]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    Information, "Establishment and Firm Size (Including Legal Form of
    Organization)," Table 5, NAICS code 513310.

[^152]: *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."

[^153]: 13 C.F.R. § 121.201, NAICS code 517110.

[^154]: *Trends in Telephone Service*, Table 5.3.

[^155]: *Id*.

[^156]: *Id*.

[^157]: *Id*.

[^158]: *Id*.

[^159]: 13 C.F.R. § 121.201, NAICS code 517310.

[^160]: *Trends in Telephone Service*, Table 5.3.

[^161]: *Id*.

[^162]: *See supra* para. 10.

[^163]: 5 U.S.C. §§ 603(c)(1)-(c)(4).

[^164]: *See* *supra* paras. 38-40.

[^165]: *See* AT&T July 15, 2005 Letter, Appendix A.

[^166]: *See* 5 U.S.C. § 801(a)(1)(A).

[^167]: *See* 5 U.S.C. § 604(b).