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Nov 15, 2005

The Legal Line

Ed Maldonado

Dear Ed:I finally have a question for Legal Line. I just finished the article in The Prepaid Press online ( regarding the APCC complaint against Radiant and I am still confused. Is this an enforcement action or is this some other kind of complaint? I know that the FCC has enforcement actions against companies that don’t pay, or dispute an FCC fee like the USF. Is the FCC now enforcing the DAC? Also, what does this mean to companies like mine that are clients of prepaid service bureaus that charge through the cost of the DAC? Could you clear this up for me? Thank you.Private Label PedroDear PLP:The APCC recently filed a formal FCC Complaint against Radiant for non-payment of the DAC, and this was not an Enforcement Action. Formal FCC Complaints are different from Enforcement Actions in two basic ways: 1) the party initiating it; and 2) the specific type of violation underpinning the complaint. Your understanding of an Enforcement Action is good and fairly accurate. In an FCC Enforcement Action, the FCC is the complainant bringing the administrative action against the common carriers, and the violation relates to compliance with a regulation requiring compliance or the payment/contribution of fees or an affirmative course of conduct by the carrier. It is a compliance tool, and an administrative process, used by the FCC in connection with all common carriers (214 holders). Recent publicity on FCC Enforcement Actions has largely focused on compliance with USF contributions and 499 reporting, however, this is not exclusive and FCC has the ability to use this type of regulatory mechanism in an array of compliance issues with common carriers. The bottom line is that FCC Enforcement Actions are processes by which the FCC is seeking to enforce a regulation or statutory obligation over common carriers. A Formal FCC Complaint is different in that a private “person” may bring action against a common carrier before the FCC for violations of the Telecommunications Act. Specifically, Section 207 of the 1996 Telecommunications Act allows “any person claiming to be damaged by any common carrier subject to the provisions of the Act” to bring an administrative action before the FCC for that violation, or, bring the claim in suit before in any U.S. District Court of proper jurisdiction. Section 207 is structured is such a way to allow consumers, carriers and “interested parties” alike to bring forth allegations of a violation. In legal terms, the standing for the complainant and the actual damage caused by the violation are set low. This means that the complainant may not have to allege a specific degree or level of damage prior to bring forth the FCC Complaint, but, simply state that the damage (generally) as stems from a violation of the Telecommunications Act by the Carrier in question. Key to the FCC Complaint being taken on by the FCC is that the alleged damages arise from a specific violation of the Telecommunication Act. In the case of APCC and Radiant, the fundamental violation underpinning the FCC Complaint is a question of whether Radiant violated 47 USC §§ 151 et. seq. and § 276 of the 1996 amended Telecommunications Act which call for “fair compensation” to be given to payphone providers for toll free calls from a payphone. The problem in reading Section(s) 151 and 276 of the Act is that, while Congress stated that “fair compensation” be given payphone providers for toll-free calls accessed through their phones, it stood silent as to what constitutes “fair” and how that may be tabulated. For nearly ten years, the FCC has proffered a series of Orders and Regulations in an effort to establish how “fair compensation” is accounted for, and paid by, common carriers. After several FCC Orders, an Appellate Remand back to the FCC in the favor of common carriers, and a Reconsideration and Comment period taken from the industry on the subject matter, the “Tollgate” Order and subsequent Regulation was promulgated. At issue in the APCC/Radiant complaint are a variety of issues related to “fair compensation” including: 1.) Who is actually the completing carrier of a payphone call; 2.) Did the FCC give Proper and Required Notice of regulation to increase the per call amount payable as fair compensation; and 3.) How are Prepaid Service Bureaus and Prepaid Providers defined per the last “Tollgate” Order and current regulations on DAC. A unique aspect of a Formal FCC Complaint is that instead of the matter being brought before the U.S. District Court, with Federal Civil Procedure of Discovery and fact finding available, the matter is brought before the FCC with a very limited scope of Discovery. The Complaint is then managed and decided by FCC staff with industry expertise on the subject matter raised in the Complaint and the Complaint Response. Therefore, issues considered, and the neutrality of the FCC’s interpretation of promulgated Orders and regulations in this case may come into question. I definitely smell an appeal in the D.C. District after the FCC decides this matter either way.As to your concerns as a client of a prepaid service bureau or provider that allows you to private label your cards and services, we must wait and see what happens here. The Radiant response has raised some interesting issues that may have an impact on the rate paid as “fair compensation”. If overpayments were (in fact) made by Prepaid Providers, then this should be remedied in credits or refunds back for over-compensation. You stated that the DAC is already collected from your services, so in the most immediate implication for your company related to the basis as found in the APCC/Radiant case is relatively low. There may be issues of credits between monies paid by your service bureau and the payphone fee collection bodies – but that does not necessarily implicate you. Key here is having the audit systems in place to register overpayments if this is found to be the case. My advice to you is to keep updated on the status of all of this and see what ground Radiant may win or lose in this case before really strategizing your own contingency DAC plans. Time will tell either way.Good Luck and Success in the Industry.Send your questions

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