Court Upholds 2005 FCC Prepaid Calling Card Order
The FCC wasn’t “unjust” making AT&T pay universal service contributions on revenue from an enhanced prepaid calling card service, the U.S. Appeals Court, D.C., ruled Fri. “Rather than exercising caution in light of ambiguous agency law, AT&T unilaterally chose not to pay universal service contributions without Commission sanction or approval,” the court said: “In doing so, it assumed the risk of an adverse Commission decision.”
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The case involved an earlier prepaid card AT&T since has replaced. In Feb. oral arguments, AT&T limited its challenge to application of contribution obligations “retroactively” (CD Feb 14 p5). The FCC in Feb. 2005 ruled AT&T had a duty to pay into the universal service fund as well as pay intrastate access charges. The company’s appeal seemed to focus mainly on universal service, but legal experts said it also would apply to the intrastate access charge part of the FCC order.
Judge Raymond Randolph, writing the opinion, said the issue was “enhanced” calling cards’ regulatory classification. AT&T deemed its card enhanced because it added advertising messages for distributors that could design or choose the ad messages played. Terming the cards an information service, AT&T asked the FCC to rule them jurisdictionally interstate, so only interstate access charges would apply. The FCC found instead that the cards were telecom services and subject to universal service and intrastate access fees.
The court said AT&T didn’t challenge FCC’s classification but contended only that the agency improperly made its ruling retroactive. Randolph cited earlier rulings indicating courts don’t “balk” when agencies apply a new rule to past conduct in adjudicative proceedings but do object when an agency “alters an established rule” to redefine conduct on which an industry has relied. The court dubbed the FCC order “new policy,” not “a departure” from the old. “The Commission’s decision in this case did not change settled law,” Randolph wrote: “AT&T does not and indeed cannot point us to a settled rule on which it reasonably relied.” Also on the panel were Judges Merrick Garland and Stephen Williams.
Eric Branfman, an attorney litigating intrastate access charge claims against AT&T by medium and small ILECs, said one AT&T arguments in his cases was that the FCC order’s retroactivity was on appeal and probably would be reversed. The court instead affirmed the order, so AT&T’s legal defense against retroactive claims seems to have been “reduced,” Branfman said. The appeal focused on universal service payments, but the whole order has been upheld, including requirements for intrastate access charges, Branfman said.