Section 276 of the Communications Act, and FCC rules implementing the statute, permit operators of payphones to get paid a set per-call amount by long-distance carriers who “complete” calls dialed from payphones by means of an “800” or other toll-free number. These are known as “dial-around” or “coinless” calls, because the caller, by using the 800 number, “dials around” the presubscribed long-distance carrier selected by the payphone operator. The FCC’s rules entitle the payphone operator to compensation for such calls.
While the payphone operator is entitled to be paid by the carrier that “completes” a dialaround call, the FCC’s rules governing this matter have changed three times in the last six years. Just a few days ago the FCC issued a “correction” to an order originally issued more than a year ago regarding the per-call dial-around compensation rate1 .
In the context of this shifting and confusing regulatory background, certain payphone industry representatives have taken an aggressive and, we believe, erroneous view of which entities are responsible for paying them. For example, APCC Services, Inc., a payphone provider trade group (and chief collection agency) has stepped up collection efforts and initiated well-publicized litigation at the FCC. See, e.g., Payphone Providers File Complaint at FCC Against Long-distance Companies Over Dial-around Compensation, Communications Daily (Aug. 5, 2005). (We represent the defendants in this litigation.) Here is our view of what the FCC’s rules require:
1. The entity responsible for paying the payphone provider is the last facilities-based carrier in the call path that hands off the call to the terminating local exchange carrier for completion. In some cases this is obvious, as when a payphone user dials the 800 number of a major long distance carrier and then uses that carrier’s network to complete a call. But some situations are more complicated. For example, a customer with a prepaid calling card will dial the 800 number on the card to reach a platform that processes the call, and then switches it to the network of a long distance company that actually completes it. In that situation, the FCC’s rules seem clearly to direct the long distance company, not the calling card provider or platform operator, to pay the payphone owner. APCC, however, is taking the position that long distance resellers and/or platform operators are liable.
2. Only Completing Carriers are required to file System Audit Reports. The FCC’s rules designate the carrier that actually completes the call as a “Completing Carrier,” and requires such entities to generate and retain “System Audit Reports” documenting the number of payphone-originated dial-around calls they complete. These reports must be audited by an outside entity. Other carriers involved in getting a payphone-originated dial-around call to the Completing Carrier are known as “Intermediate Carriers.” These entities have to generate and retain a less-burdensome “Intermediate Carrier” report. APCC, however, is taking the position that long distance resellers and/or calling card platform operators have the obligation to generate the more burdensome “System Audit Reports” and is further taking the position that Intermediate Carriers that fail to file the necessary reports should be liable.
3. The applicable per-call rate is in flux. APCC is seeking to recover $0.49 per-call from completing carriers for the 4th Quarter of 2004 and later. This reflects the FCC’s attempt to raise the rate in October 2004. Until the FCC issued its Erratum on December 22, 2005, however, our view is that the actual rule only required carriers to pay $0.24 per call. Thus, if your company is a Completing Carrier under the FCC’s rules, it should evaluate whether it is entitled to a refund for payphone compensation already paid.
If you are receiving bills from payphone providers or their representatives for supposedly completing payphone-originated dial-around calls, please feel free to contact us. In addition, given the FCC’s complex and ever-changing rules, all carriers and calling card providers should evaluate their operations to ensure their compliance. We would be pleased to assist with that process.
1Erratum, Request to Update Default Compensation Rate for Dial-Around Calls from Payphones, WC Docket No. 03-225, DA 05-3268 (Dec. 22, 2005).