FCC Enforcement Action
Sends Signals to Prepaid Wireless Providers
On December 6, 2013, the Enforcement Bureau of the Federal Communications Commission (the FCC or the Commission) issued a Notice of Apparent Liability for Forfeiture (NAL) finding Star Wireless Group, Inc., d/b/a Page Plus Cellular (Page Plus), liable for forfeiture penalties totaling $43,200 for alleged violations of Section 43.61(a) of the Commission’s rules. Page Plus allegedly failed to file annual reports of its international telecommunications traffic data (International Traffic Report) with the FCC’s International Bureau.
Fines for this particular violation are very rare. In fact, the Page Plus NAL appears to be only the second time that the FCC proposed a forfeiture penalty for a provider’s failure to file the annual International Traffic Report. Furthermore, this is the first instance in which the rule was enforced against a wireless service provider. This enforcement action may foretell the FCC’s increased enforcement of other routine regulatory filings, reports, and certifications.
Additionally, the NAL appears to clarify the FCC’s position vis-à-vis prepaid calling cards used to “top up” (refill or recharge) wireless devices. Based on the limited facts disclosed in the NAL, it would seem the Enforcement Bureau considered Page Plus’ prepaid, PIN-accessible refill plans to be the equivalent of traditional, wireline prepaid calling cards for regulatory purposes. If this turns out to be accurate, prepaid top up service providers must be mindful of this development, and ensure that their compliance practices comport with the FCC’s clarified expectations.
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According to the NAL, Page Plus sells prepaid phone cards with minutes purchased from Cellco Partnership, d/b/a Verizon Wireless. Practically speaking, Page Plus sells wireless recharge services via downloadable, prepaid PINS. Page Plus sells PINS directly to end-user customers through its website, www.pagepluscellular.com/plans/. Consumers are then able to make domestic and international telephone calls from their wireless devices once the top up is added to their account.
The Enforcement Bureau alleged that from 2003 until 2011, Page Plus provided international telecommunications service through its “calling card business,” without obtaining an international Section 214 authorization. Following an investigation, the FCC’s Enforcement Bureau issued a notice in January 2012 that Page Plus willfully violated Section 214 by providing international telecommunications service without a license. Further, the Bureau found that Page Plus did not file International Traffic Reports during the 2003-2011 reporting years as required under Section 43.61(a) of the Commission’s rules. Section 43.61(a) directs that “[e]ach common carrier engaged in providing international telecommunications service between the United States . . . and any country or point outside” the United States “shall file a report with the Commission not later than July 31 of each year” including specified traffic and revenue data. In the subsequent Page Plus NAL, the Commission found that Page Plus willfully and repeatedly violated this Section.
The Page Plus NAL is significant because it highlights three important issues for both wireless and PIN-accessible top up service providers. First, the NAL potentially reveals that the FCC perceives prepaid wireless top up services as being no different than traditional forms of prepaid calling card/prepaid PIN services for regulatory purposes. Second, it demonstrates that wireless carriers providing international origination and termination services are required to obtain Section 214 international authorization from the FCC, known throughout the industry as a “214 License.” Finally, the NAL demonstrates that these service providers are expected to file annual International Traffic Reports, which fall under the Title II regulatory requirements. This means that wireless providers, including both Mobile Virtual Network Operators (MVNOs) and resellers, must obtain an international Section 214 license, and file annual International Traffic Reports if international calling services are offered to consumers.
The Page Plus NAL may also influence state regulation of prepaid services. To the extent wireless top up is viewed as a “prepaid calling card” service, and not a “wireless” service, the NAL may precipitate increased State Public Utility Commission oversight of prepaid wireless top up providers.
Providers of prepaid wireless and/or top up services should pay close attention to the Page Plus NAL, and solicit the advice of experienced telecommunications counsel to evaluate the implications of this enforcement action for their businesses.
The Deeper Issue
For the past several years, we have observed that the FCC is generally hostile to the prepaid telecommunications industry. While the root cause of this hostility is unclear, the negativity can be traced to the mid-2000s, an era marked by aggressive marketing and billing practices throughout the prepaid calling card industry. Despite significant improvements over the past decade, coupled with the continued manifestation of the importance of communications services to consumers of all economic strata (as evidenced by the diversity and proliferation of prepaid services in the marketplace), the FCC’s perception remains largely unchanged: it seems to be as negative, pessimistic, and hostile as ever.
In 2009, our firm established the Ad Hoc Coalition of International Telecommunications Companies (www.telecomcoalition.com) to raise awareness of the FCC’s hostility towards providers of international telecommunications services, including prepaid carriers; and to advocate for well-conceived, balanced, and fair regulatory treatment of these important industry sectors. Conditioned on its receipt of necessary industry support and backing, the Coalition is poised to begin the process of changing the “hearts and minds” of the FCC’s staff. More than anything, the Coalition must convince the FCC that it is necessary to accept a little bit of the “bad” with the whole lot of “good” that is provided to the American public by an industry essential to health and well-being of the American economy. The Coalition will be hard-pressed to convince the FCC to change their attitudes and beliefs based solely on platitudes and anecdotal evidence. Until the agency’s perception is changed, we can expect the policies and decisions emanating from the FCC to continue to remain harmful to competition.
What is needed to change the FCC’s perception is hard data demonstrating the immense value delivered by the prepaid international telecommunications industry to American consumers. The evidence needs to be based on sound, intellectually honest economic theory in order to convince an otherwise skeptical FCC successfully. Furthermore, this evidence must come from a respected, trustworthy, and independent source.
Without an independent and reputable economic analysis, the industry will be fighting an uphill battle to convince regulators throughout the country that, far from protecting consumers and enhancing competition, the current policies regarding the prepaid international telecommunications sector have been harmful to American consumers.
Until the negative perception of the industry is expunged, we caution all providers of prepaid communications services to be diligent and conservative in their approach to regulatory compliance.
Jonathan S. Marashlian is the Managing Partner at Marashlian & Donahue, LLC, The CommLaw Group, a Washington, DC-area law firm specializing in federal and state telecom and technology matters. Marashlian is the winner of two 2013 Lexology/International Law Office (ILO) Client Choice Awards, named overall winner in the Telecommunications Law-US category; his firm was named Leading Customer Service Law Firm of the Year and Best Communications Law Firm in the US by ACQ Awards. Marashlian was assisted by Keenan Adamchak, Law Clerk and a 2014 Juris Doctor candidate, currently attending the George Washington University Law School.
Disclaimer: This article is intended for informational purposes only and is not for the purpose of providing legal advice. You should not act upon the information in this article without seeking professional counsel.