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AT&T Fights Phone Fees on Calling Cards

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By Christopher Stern
Washington Post Staff Writer
Thursday, July 22, 2004; Page E04

AT&T Corp., in league with some of the nation's largest retailers, has launched a lobbying effort to derail a proposal that the company says could lead to a 20 percent price increase for prepaid long-distance calls.

Under a proposal that sources said has the support of Federal Communications Commission Chairman Michael K. Powell, AT&T would be liable for more than $100 million in regulatory fees, retroactively, related to its calling-card business.

Powell has the support of Commissioner Kathleen Q. Abernathy but it was not clear yesterday whether he had secured a third vote that would give him a majority at the five-member agency.

The pending FCC action is in response to a request by AT&T for a declaratory ruling on the regulatory status of its prepaid calling-card business. AT&T asked for the ruling last year after state regulators in Alaska found that prepaid long-distance calls should be subject to all the fees and charges applied to other phone services. AT&T claims that the calling-card business is not a traditional telecommunications service and therefore should not face the same level of regulation.

AT&T has enlisted some of its biggest retail partners, including Wal-Mart Stores Inc. and its Sam's Club unit, to take the case directly to the White House.

Late last week, Sam's Club and Wal-Mart recorded messages providing the White House's toll-free number to calling-card users, asking them to "to tell the White House you want prepaid card rates to stay low."

According to AT&T, more than 300,000 prepaid calling-card customers have called the White House in the last week.

At the heart of the dispute is AT&T's claim that calling cards are an "information service," a regulatory term of art that refers to an offering that is more than a simple telephone call. For instance, directory assistance and call waiting are "information services."

AT&T claims that its prepaid cards are an information service because callers are subjected to recorded advertisements during their calls.

Information services are not required to contribute to the Universal Service Fund, a federal program that provides subsidies for low-income and rural telephone users. Information services also are not required to pay access fees, which are designed to compensate regional phone companies such as Verizon Communications Inc. for the cost of connecting customers to the local telephone network.

In filings with the Securities and Exchange Commission, AT&T has claimed that it may be required to pay as much as $110 million in access charges and Universal Service Fund payments if it loses the fight at the FCC.

Prepaid cards offer discount rates on long distance, ranging from 1 cent to 3 1/2 cents a minute. Fees are slightly higher for international calls.

AT&T is also opposed by rivals such as Sprint Corp. Sprint has argued that the prepaid calling-card business is clearly a standard telecommunications service and is liable for all access fees and payments to the Universal Service Fund.


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