The Prepaid Press - December 15, 2007 - (Page 11)

GENERAL PREPAID December 15 · 2007 - 11 THE LEGAL LINE by Ed Maldonado Dear Ed: I am in the process of planning our 2008 prepaid calling card products and a co-worker mentioned the issue of regulatory compliance. With unfair trade competition issues being all over the industry, I think we need to have a plan. I have “Googled” several items I think important, but was wondering if you know of a “short list” I could use. Do you have one? Martin from Business Development Martin: I do not have one that is found on the Internet, however, I can provide you a brief check list to at least get you organized and in the ballpark toward compliance. The problem, generally, with compliance, is that it is always industry, and company, speciﬁc. This is why speaking to your regulatory counsel is important for really organizing this well. Your counsel will know you and your business model and products. That is why they are your regulatory attorney. If you don’t have one, you’d be wise to engage one, as there are a lot of problems in the market right now that will cause regulatory issues to bubble-up. Another aspect you may want to consider is creating an FCC Compliance Manual. This type of manual is usually compiled to settle a FCC enforcement action, but having one is not a bad idea. Here are some things to consider in organizing your compliance list when you sit with your regulatory counsel. Trafﬁc Report would conﬁrm this. FCC CPN (Calling Party Number) Reports due Quarterly. Why: This ﬁling became a requirement for all FCC 214 holders in 2006, but is speciﬁcally aimed at ensuring that carriers are properly identifying the trafﬁc that they are passing down the pipeline for termination through the network of another carrier. Speciﬁcally, the Report is targeted at prepaid calling card providers who may not charge all fees required by law and to report call ﬂows with other carriers (VoIP or otherwise). Public Utility Commission (PUC) Certiﬁcations and Regulatory Assessment Reporting. Why: Each state has the ability to regulate services offered and rendered within its jurisdiction. All states require that prepaid calling cards and telephony services obtain certiﬁcates of public necessity ﬁrst and register with the individual state’s PUC. Once certified, companies will be required to report their intrastate and interstate revenues for the assessment of state regulatory fees. In some states, it is an actual part of the process to renew the registration. In most states, failure to ﬁle will result in cancellation of the certiﬁcation and/or ﬁnes for failing to report and pay assessments. A running list of where you are certiﬁed and where you actually place prepaid calling cards or services in the hands of consumers will be key to determining what states need state PUC reports or renewals to be compliant, and, what states you should obtain certiﬁcation to avoid ﬁnes or consumer actions as an unlicensed provider. State PUC Tariff Revisions and Tariff Updates. Why: When companies ﬁle for state certiﬁcations as an IXC or CLEC, an initial tariff or price list is filed with the respective Commission. Most prepaid carriers neglect to update tariffs to match products, billing increments, surcharges and other fees levied on the consumer. If the actual charges and those listed in your tariff differ, then the PUC - or other state agencies – may commence investigations or inquiries from consumer complaints or simply by purchasing and testing your services while reviewing your Tariff. To ensure that state compliance is complete, review of your charges and business practices in combination with your tariff is important. If you have not already done so with your regulatory counsel, it’s a good idea to do so and make revisions along with your state renewals and reporting. Review of Tariffs in combination with Consumer Disclosures on Cards and Marketing Materials. Why: Much like revising a tariff to match your charges and business practices, it is best practice to review the language and coverage of disclosures on the cards or associated with the service to consumers. A disclaimer on service cannot be contrary to regulations or your current tariff ﬁled with the state. The state has jurisdiction to declare certain disclaimers and practices as unreasonable or unfair. If you review your own tariff, you will ﬁnd that there are sections detailing how refunds will be given and consumer complaints remedies. It is best to review this and make changes earlier in the year to ensure disclaimers and practices are clear in the event you may need to defend this. PUC Universal Support Mechanism (Annual, Monthly, Quarterly). Why: These are regulatory assessment fees applicable to telecommunication services sold within the state that enable the respective state to support telecommunications infrastructure and other service programs to the impoverished, disabled and rural communities. State Universal Support Mechanism fees are not to be confused with FCC Federal Support Mechanism fees, like USF, TRS and etc. These must be determined on a state-by-state basis. If you are already certiﬁed in a particular state, they will send you the forms or request to report. Don’t ignore these in your compliance review. Annual Secretary of State Corporation or Foreign Qualiﬁcation Renewal. Why: Annual ﬁling required for companies registered to do business or actually doing business within the respective state. If you have an IXC or CLEC certiﬁcation to provide prepaid calling services (PPCS) in a particular state, you must have a legal presence in that state as a precondition to the certiﬁcation. Companies doing business in a state other than their home state of incorporation must maintain qualiﬁcation as a foreign corporation doing business in the particular state. This implicates maintaining active registered agents, who are usually paid on an annual basis. This ﬁling may be a simply renewal ﬁling or it may be tied to a Department of Revenue annual ﬁling as a precondition and must be reviewed on a stateby-state basis to meet compliance. State Tax Authority Sales Tax on Retail Sales. Why: Sales tax can be imposed on retail telecommunications operations and service provided that there is a tax nexus within a respective state. The leading authority on this is Goldberg v. Sweet 488 U.S. 252 (1989). Have your regulatory counsel and CPA review Goldberg and the twoout-of –three rule created by this Supreme Court decision to see if you do, or don’t, have a taxable nexus to the state by virtue of your prepaid telecommunications services. It really is a case by case determination. State Tax Authority Sales Tax Exemption Renewal. Why: Sales tax exemption authority and certiﬁcate renewal ﬁling is targeted for wholesalers and others that do not have the direct responsibility for collecting or paying sales tax in the state since they do not directly sell to the end user; do not themselves consume the service; and/or have some sort of contractual understanding with another party where the responsibility for sales tax has been transferred. This is usually an item addressed between distributors, hard card or electronic, and the prepaid carrier. Like most things at the state level, annual renewals apply to keep all state certiﬁcates current and pass down any tax liabilities that may exist by virtue of the sale and re-sale of your services. I hope this helps you organize your compliance issues. Again consult your regulatory counsel for a complete compliance plan as this is just a “short list” check list. Good Luck and Success in the Industry. Attorney Edward A. Maldonado is President of the Regnum Group, Inc. and the Maldonado Group. He can be reached at eam@maldonado-group.com. An End of Year Check List for Prepaid Calling Cards and Prepaid Telephony Carriers: What you may need to ﬁle in 2008 and, why? Annual FCC CPNI (Customer Proprietary Network Information) Certiﬁcation. Why: Federal annual consumer privacy protection oath is required for all FCC 214 holders. It came about as a result of telecom retail and wholesale companies selling consumer data without proper authorization. In addition to the annual certiﬁcation, a corporate ofﬁcer needs to detail what safeguards and policies are in place to protect consumer information. FCC 499 Reports due on April 1st of every year and quarterly depending on revenue. Why: It is a federal requirement for common carriers and 214 holders and is used to report interstate and international call revenue data. It is a requirement for all license holders and can result in a FCC Enforcement Action, with the possibility of ﬁnes and revocation of license if not ﬁled. The report has a perjury oath by the corporate ofﬁcer signing the documents, so accurate reporting is a must. FCC Circuit Report (Annual) due March 31st of every year. Why: Federal annual report to detail your company’s telecommunications capacity and capabilities is required by federal Rules and Regulations. The report is used for statistical purposes by the FCC, however, it can be matched or compared with other ﬁlings, such as the 499-A, to ascertain correct reporting of services and revenues. Failure to ﬁle this report can result in a ﬁne by the FCC. FCC International Trafﬁc Report (Annual) due July 31st of every year. Why: Federal annual report of your company’s trafﬁc or telecom minutes is required by federal Rules and Regulations. Like the Circuit Report, it is used for statistical purposes by the FCC, however, the report can be compared with other ﬁlings, such as the 499-A, to ascertain correct reporting of services and revenues. For example, if a carrier claims it is exempt because all its trafﬁc is point to point international, the http://www.pentagon.ca http://www.pentagon.ca

Table of Contents Feed for the Digital Edition of The Prepaid Press - December 15, 2007

The Prepaid Press - December 15, 2007 GENERAL PREPAID 2007: Prepaid in Review New Prepaid Association? Contents A Funny Thing Happened on the Way to the Forum Regulatory Rundown: FCC Enforcement, SEC Cracks Down, VoIP Hacking, & Wireless Regulation The Legal Line WIRELESS Prepaid Wireless Roundup kajeet to Offer Horoscopes, Jokes and Trivia Redknee Extends Converged Billing Solution AT&T GoPhone Offers Roaming Option in Mexico Total Call Mobile Introduces Holiday Bonus Wireless in Brief INTERNATIONAL Spot Rates Keycorp to Distribute Hypercom in Canada International in Brief Mobile Communications in Latin America Gets a Leg Up TELECOM & TECHNOLOGY T&T in Brief Phone House Launches New Card Facebook Goes Mobile CVT and Total Call Settle IDT Lawsuit Wireline Capex Grows 7% in Third Quarter PAYMENTS Transcard Selected for Discover Payroll Cards Vesdia and MXT Card Services Form Alliance The Giving Tree Card Gives Back MasterCard Launches Prepaid Travel Card Payments in Brief 7-Eleven Pushes Video Games Capital One and NetSpend Merger Off i2c Launches New Release of Campaign Manager Prepaid Card Dispensing from ATMs Credit Card Design Competition Begins NRF Says Gift Cards Gaining Popularity EXTRAS Classifieds Contact Us Our Advertisers

The Prepaid Press - December 15, 2007

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.