FCC Says AT&T; Not Exempt From Fees on Calling Cards

AT&T; Corp. may be forced to pay as much as $500 million in fees on prepaid telephone calling cards after regulators rejected the company’s arguments that it should be exempt, people familiar with the matter said Friday.

The Federal Communications Commission ruled that the cards are a telecommunications service subject to fees, said the people, who asked not to be named. AT&T; said the cards provided an “enhanced” service not covered by regulation.

The decision will require AT&T; to repay $160 million owed to the government and gives competitors such as Verizon Communications Inc. grounds to take AT&T; to court to recover other card-related fees, the people said. The ruling adds to financial and legal battles facing Bedminster, N.J.-based AT&T;, which expects sales to fall for a sixth straight year in 2005 as it seeks approval for a sale to SBC Communications Inc.

An FCC spokesman declined to comment, as did an AT&T; spokeswoman.

AT&T; is the second-largest company in the $3.5-billion U.S. prepaid-card market behind IDT Corp., said Judy Reed Smith, chief executive of Atlantic-ACM, a Boston-based researcher.

AT&T; shares fell 1 cent to $19.41 on the New York Stock Exchange.

The fees date to 1999 and include $160 million to a fund that subsidizes phone service for rural and low-income customers, and $340 million that AT&T; would have paid to competitors to connect calls over their networks that begin and end within a single state.