Issuers of Prepaid Calling Cards Ordered to Pay Fees

The Federal Communications Commission has ruled that issuers of prepaid calling cards must pay connection fees and help subsidize phone service in rural areas.

AT&T; Inc. will have to repay the $553 million in access fees -- charges paid to other carriers to connect calls -- and Universal Service Fund payments that its predecessor, then known as AT&T; Corp., had withheld on phone calling cards.

AT&T; had argued that because its cards offered “enhancements” such as advertising, the cards were information services exempt from fees that apply to telecommunications services. In February 2005, the FCC had ruled against AT&T;, potentially leaving the company on the hook for the withheld payments. AT&T; had challenged the decision in court.

“We are pleased the commission clarified the regulatory status of prepaid calling cards,” an AT&T; spokesman said in a statement.

The FCC also said Monday that prepaid calling card providers could not reduce payments by classifying certain calls as Internet traffic. Regulators said that calling cards that used “Internet in the middle” technology must make rural phone-subsidy contributions and pay access fees. Any payments that were withheld must be repaid, the commission said.

As for military personnel, the FCC said that prepaid calling cards sold under a contract with the Defense Department would be exempt from universal service payments. The exemption “should help ensure that our soldiers are able to obtain calling cards at reduced prices,” the commission said.