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Nov 15, 2006

The Legal Line

Ed Maldonado

Opposition to DAC GrowsLegal Line Reader Please Note:The following Legal Line submission was a result of e-mails sent from the Maldonado Law Group to several prepaid providers to alert and call them to file industry Comments to the FCC regarding the June 30th 2006 Prepaid Calling Card Order, and join Arizona Dialtone, Inc. in opposing certain aspects of the Order. Arizona Dialtone’s lead regulatory counsel contacted me about mustering up support this past October 2006. The author has approved its use as a Legal Line submission, although it was not originally submitted as such. The submission author has specifically asked to be pen named “Growing Opposition” and that his company remains anonymous.Original email:Mustering up FCC Comments to the June 30th 2006 Prepaid Calling Card Order: Please be advised that the FCC is seeking comment to the last Prepaid Card Order and companies are starting to respond. I have been contacted by counsel for Arizona Dialtone, Inc. from Kelley Drye who is submitting Comment and is asking others in the industry who are affected to do the same. Base costs to the FCC for filing a Comment are about $2,500, plus legal fees. Arizona Dialtone, Inc is much more focused on the DID and local access aspects of the Order. The basic points that they are contesting are:∑ That the FCC further clarifies which party is responsible to pay access charges when local access is used to place a prepaid calling card call.∑ That the FCC establish reporting requirements and additional duties on LECs that provide DIDs that are used for originating long distance prepaid calling card calls,∑ That the FCC establish intermediate carrier reporting obligations on resellers in the DID call path if the party responsible to pay access charges for DID-routed calls is the prepaid service provider,∑ That the FCC further clarify that if a prepaid calling card provider’s underlying transport carrier is not the party paying access charges, then this intermediate carrier has a duty to pass on the percentage interstate usage (PIU) factors to its underlying carrier so that the data ultimately reaches the LEC,∑ That the FCC require prepaid calling card service providers to provide, along with their quarterly PIU factors, quarterly lists of local DID numbers utilized in the provision of long distance calling. While these are the points of comment that Arizona Dialtone, Inc. is pursuing, yours do not have to be exactly the same. The idea is to secure industry comment and opposition to the proposed FCC rulemaking before it is too late. The window of opportunity closes by October 12th 2006. Please respond back if you have any interest. Time is of the Essence here – the entire Comment Period Closes on 10/23/06. - EAMDear Ed:Saw your e-mail last night and realized there is not much time at all to respond to this one. Wow. I must admit coughing up US$2,500 or more for just an FCC Comment is not in our regular budget. We have been scrambling just to get our 499-Q and PIU Certifications in order for November 1st 2006 and this is now taking up most of my time and budget. We have had no time to think of submitting FCC Comment opposing the Rules. I honestly don’t think I can get the budget approval for this on such short notice, but I’ll try. What’s the real deal here? How many prepaid providers have responded so far to this Comment? Are there any Associations taking on this Comment that we may be able to join in their comment or opposition? Let me know while I check on the cost issue.- Growing Opposition -Dear GO:A few have expressed interest, however the short notice combined with payment of the $2,500 FCC filing fee (plus legal costs to prepare the formal comment filing) are major deterrents for most small to mid-sized providers right now. Although the comment period has been set for some time, there was not much interest in it until now. They, like you, seem to be absorbed in meeting compliance. There are still others that still have their heads in the sand, and are just now starting to line themselves up for compliance. From news reports, IDT (IDT Telecom, Inc.) appears to have filed a petition to the FCC asking to further clarify the Prepaid Calling Card Order in that payment of dial-around compensation to payphone service providers is required for calls that cardholders access as an “information service” from the provider’s platform. This is a separate issue from any direct comments as to the application of the Rule on Prepaid Calling Card Providers.Dear Ed:Upper Management has several issues/questions regarding the FCC Comment on the Prepaid Calling Card Order:1. Is the $2,500 just for the FCC with the cost to write, research & file the comment being in addition to that amount?2. What are the alternatives if we don’t make the deadline?3. How much weight will the FCC place on our input as a Prepaid Calling Card Provider after the June 2006 Order? Or, is it just better to try to comply with what been set so far?4. Will companies, like ours, always have to bear the burden of individual comments to FCC regulations from this point forward?Sorry for getting back to you on the final day and in the final hours, but it was comparable to pulling teeth to get management to pay attention to this. I understand how important this could be from the regulatory side; however, the priority for us right now is compliance, not lobbying. If it is too late to move on this, please let us know. Even with answers to all the above, I don’t think we can prepare and respond with the issues that concern us regarding CPN reporting and certifications in time. What can we do? If nothing can be done at this time, call me to submit this as a question to Legal Line. Opportunities like this keep slipping by us and maybe if we can get more attention on them earlier we can all react before the last hours of the deadline.- Growing Opposition -Dear GO:Sorry to inform you that the deadline passed while we were crisscrossing e-mails. There may be a way for the industry to have some input by means of Reply Comments submitted to existing Comments, however, this is a practice highly disfavored by the FCC. Ideally, they want industry players to ante-up with a Comment before having something responsive to say. The Reply Comments are due October 23, 2006 if this is of interest at this point. Here are the brief answers to your Company’s previous questions:Q: Is the $2,500 USD just for the FCC with the cost to write, research & file the Comment being in addition to that amount?I am sure you are aware that telecom regulatory attorneys don’t work for free – even if committed to the issue. Aside from FCC fees, there would be legal costs that would vary depending upon the nature and substance of your comment. FCC Comments should not be taken lightly. The last thing that you want to do is file a vanilla comment that is not well supported in statutory and regulatory authority. That would be a waste of FCC fees and legal costs. However, in making the decision to submit any FCC Comment, you must evaluate the overall cost that your company may incur related to post rule compliance. If you must now invest into infrastructure, personnel, and possibly equipment to better record and report under the new FCC Rules, then maybe it would be worth the investment into an FCC Comment to mitigate the final or overall cost to your company. You are in the best position to evaluate that economic question. However, without any participation in the process, you effectively acquiesce to whatever is proposed, and thereby accept all additional costs that are associated with the rule changes.Q: What are the alternatives if we don’t make the deadline?If you want participation in the process, alternatives are few to none. The idea of participating in the Reply Comment process was the only creative alternative I heard of if the deadline was missed.Q: How much weight will the FCC place on our input as a Prepaid Calling Card Provider after the June 2006 Order or is it just better to try to comply with what been set so far?Well, considering your company is the subject matter of the Prepaid Calling Card Order, the FCC must address, at least in some way shape or form, your input. Should the FCC completely blow you off in the Comment process, then it will be documented on the public record and may be the source of other legal and administrative remedies. However, by virtue of filing a Comment to ask them to clarify; reconsider other factors; or take stock of impact to small businesses (less than 1500 employees), the issue is placed on the table, and the FCC must either give further directions as to how to handle the rule change, evaluate if it needs modification, or consider if it will actually impact small businesses in some significant way. All of which must be in writing and in the public record.I still believe that being ready for compliance is very important. Including possible Comments as a part of your compliance program is a far better way of conducting business than merely addressing these issues only after a Letter of Apparent Liability from the FCC Enforcement Bureau.Q: Will companies, like ours, always have to bear the burden of individual Comments to FCC regulations from this point forward?Until there is a solid association addressing the needs of the prepaid calling card industry, you are on the hook for the full costs of your own FCC Comments and lobbying. The Prepaid Press recently published an article (TPP October issue) by former IPCA Executive Director, Howard Segermark, on the issue of an association and lobbying. Read it, he squares the industry issues out very well, down to how regulatory sometimes target companies. If the industry wants a voice in Washington (or elsewhere) then it needs to first get its act together, and second, then get together under an association. I agree with Mr. Segermark.Without an association to consolidate monies and lobbying efforts, be they FCC Comments or state rules, prepaid providers honestly trying to comply with new requirements will bear the entire burden of lobbying, and small businesses with limited resources will have no voice. At some point, choices will have to be made by those who earn their living in the prepaid industry whether to organize interests or let the market and regulations sort everyone out. Until then, upper management in prepaid calling card companies should not short-change the importance of FCC Comments and regulatory lobbying efforts. Long run cost saving in compliance by virtue of a few successful FCC Comments may actually justify itself. As much as it is a regulatory issue, it is a bottom line question for your individual company to resolve if it wishes to be successful.Good Luck and Success in the Industry.Send your questions

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