LEGAL ALERT

Clients and Interested Parties:

On December 19, 2005, the FCC’s Enforcement Bureau (“Bureau”) proposed to assess a penalty against Blackstone Calling Card, Inc. (“Blackstone” or “Company”) in the amount of $20,000 for failure to respond to Bureau inquiries regarding its FCC Form 499A registration status and Universal Service Fund (“USF”) obligations.  The Notice of Apparent Liability (“NAL”) represents yet another step by the Bureau to enforce the FCC’s rules against prepaid calling card providers. 

Response to Bureau Inquiries

According to its website, Blackstone is one of the nation’s largest providers of prepaid calling cards with thousands of retail locations, agents and distributors nationwide.  In March, 2004, the Bureau sent a routine letter to Blackstone requesting information regarding the Company’s compliance with FCC Form 499A registration requirements and USF obligations. The Company only partially responded with contact information and a general statement that it is not a carrier.

As a result of this inadequate response, in December, 2004, the Bureau sent a more formal letter of inquiry (“LOI”) to Blackstone requesting a sworn written response to a series of questions relating to the Company’s failure to register with the FCC, file FCC Forms 499A and 499Q and make required USF and other federal regulatory payments.  In response to the Bureau’s LOI, the Company provided a statement that it does not provide telecommunications services, and is not required to file FCC 499 forms or pay USF or other regulatory payments.  Blackstone took the position that it is solely a distributor of prepaid phone cards.  The Company’s response was also not accompanied by a sworn statement as requested by the Bureau.  The Bureau then sent a second LOI to Blackstone in June, 2005 in an attempt to collect additional information to investigate Blackstone’s position that it is not a carrier, but the Company did not respond at all.  The Bureau attempted to contact Blackstone by phone, but its calls were not returned.      

Penalties

The Bureau’s NAL found Blackstone to be apparently liable for a penalty in the amount of $20,000 based solely on the failure to adequately respond to FCC Enforcement Bureau inquiries. The Company had failed to provide requested information, ignored several Bureau inquiries by mail and phone and failed to include a sworn statement with its response to the first LOI.  The proposed penalty does not cover potential non-compliance with the FCC’s Form 499 filing requirements or USF obligations—those issues will be addressed in the future.    

Notwithstanding the NAL, Blackstone remains under obligation to adequately respond to all of the previous Bureau inquiries within 30 days.  Potential USF liability could be extensive and include substantial back payments.  By way of example, AT&T was recently required to make back payments for USF based on its failed legal claim that its “enhanced” prepaid calling cards were unregulated information services.  According to the NAL, further penalties against the Company could include additional monetary assessments, revocation of operating authority and the disqualification of corporate principals from offering carrier services, depending on the Company’s response.

FCC Determines Status from Website

Because Blackstone failed to adequately respond with the information requested, the Bureau reviewed the Company’s website in order to assess whether the Company is operating as a carrier.  Based on that review, the Bureau found that the Company offers interstate and international telecommunications service as a carrier.  For example, such service is offered through Blackstone-labeled calling cards.  In this case, Blackstone’s website supplied information critical to a Bureau finding that was adverse to the Company.

The Bureau’s NAL highlights the importance of corporate website descriptions as well as properly responding to FCC Enforcement Bureau inquiries.  Any company receiving any inquiry from the FCC should work with communications counsel to respond fully and in a timely manner.  In addition, businesses should not overlook the legal and regulatory implications of website descriptions as such material is readily accessible to federal and state regulators.