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Aug 15, 2006

The Legal Line

Ed Maldonado

Dear Ed:What’s with all these DAC attacks against established providers reported in the Prepaid Press this past June? I thought that several prepaid companies had already administratively appealed the Tollgate Order and that the issue of enforcement was still open for some DAC applications on prepaid services. These recent FCC actions look bad and we are concerned about how to defend against DAC charges that are clearly in error. Since […], we have been contesting a good portion of the DAC charges the […] payphone association has billed us because the calls were never fully completed from our users to party destination. They hit our soft switch but never completed due to busy signals or inaccurate dialing by the card’s user. The […] payphone association doesn’t seem to care and has been playing hardball by threatening to bring this before the FCC if we don’t concede those charges. Our official position is “go ahead […]” let’s formally contest this but we are starting to fear that the FCC categorically favors the payphone companies over prepaid service providers on anything related to the DAC. We know that prepaid providers have lost almost every major regulatory battle related to DAC before the FCC and it seems more than a trend. What’s going on here?Alamo DACDear Alamo:I understand that you read the TPP June report on the APCC referrals of 25 companies to the FCC, but remember that the article was based in large part on a press release by the APCC itself and really did not speak of the FCC’s position. There are always two sides to any debate and DAC is no exception. In my opinion, the underlying problem with DAC and the prepaid calling card industry has been apathy and disorganization on the part of small to mid-sized prepaid providers in the processes shaping DAC. Before the FCC ever issued the 2003 Tollgate, a comment period was opened to gather input from the prepaid calling card and payphone industries. Needless to say the Payphone Associations submitted actively to the DAC comment process, advocating the evils of past non-paying prepaid providers. On the part of the prepaid industry, larger telecom companies (with vastly different interests than small to mid sized providers) and the ICPA provided input. The ICPA comments to the FCC represented their constituency but were far outnumbered in sheer volume to those payphone providers and the interests of larger telecom companies.Historically, prepaid providers have tended to “lay low” when it comes to regulatory issues, be it licensure, compliance reporting, regulatory fee payment or lobbying interest – they tend to do it only when they “have to.” The result of this “off-the-radar” tendency has been a substantial under-reporting of prepaid calling card/service providers and almost no organized lobbying. This may have cost them in regard to DAC. In its 2003 Order, the FCC used the 2002 Telephone Trends Report to identify the potential impact of the Order on the Prepaid Industry. In the FY 2002 Telephone Trends Report only 20 companies reported themselves as providing prepaid calling card services and having less than 1500 employees. If you feel that past DAC rulings may not have been in your favor, there is definitely a reason: non-participation by the industry on a timely basis.For example, did you know that the FCC opened comment on DAC this past Spring 2006? Go to the FCC website at: Request to Update Default Compensation Rate for Dial-Around Calls and take a look. The comment period closed already, however, the FCC did open the Docket to the prepaid industry for input. Did your company send comment? Most of my clients did not, even when they were aware of the Docket. Most prepaid providers do not even think about DAC until the APCC or other associations are ready to sue or submit to the FCC. The industry needs to be proactive NOT reactive when it comes to DAC.Enough of my DAC soapbox here, my point is that the FCC may not be categorically opposed to prepaid providers when it comes to DAC. If it were, more and more appeals would be before the U.S. Court of Appeals monthly. So I would not “be afraid” of the FCC when it comes to bona fide challenges to payphone associations and DAC charges that may be improper. If fact, they are likely to agree with you based on the facts that you gave me. In the First Report and Order, November 7, 1996 found at 11 FCC Rcd, 20573-74, para. 63, the FCC stated where DAC charges begin: “the Commission found that a call is completed for purposes of determining compensation if it is answered by the called party.” Bring this point to your legal counsel for further exploration and research in your current negotiations with the Payphone Association. It may be a point that your legal counsel should raise when contesting the charges re-directed by the soft switch. Definitely check with your legal counsel on this. Likewise, make sure that your legal counsel is preserving the record of communication and correspondence with the Association. This may be evidence should you go before the FCC that you were defending proper application of the DAC. Finally, make sure that you respond in writing to their claims – simply stating this over the phone to the Association’s representative is not enough – have your legal counsel document it well. Be prepared, not afraid.In closing Alamo, I just want to express some food for thought about the pseudonym you gave: the actual Alamo gave up a hell of a fight against the odds; Prepaid Calling Providers have yet to fight when it comes to DAC. Be proactive, not reactive when it comes to the DAC.Good Luck and Success in the Industry.Send your questions

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