The Federal Communications Commission proposed a $493,327 forfeiture against PTT Phone Cards, Inc., for allegedly providing international telecommunications services without FCC authority and disregarding virtually all of its regulatory obligations for over three years. This includes:
- Failing to obtain International Section 214 authority before providing international telecommunications services;
- Failure to timely file its Annual Telecommunications Reporting Worksheets (FCC Form 499-A);
- Failure to timely contribute to the Telecommunications Relay Service (TRS) Fund;
- Failure to timely contribute to the Local Number Portability (LNP) Cost Recovery Mechanism;
- Failure to timely pay FCC Regulatory Fees;
- Failure to timely file its Prepaid Calling Card Certification;
- Failure to timely file its International Traffic and Revenue Reports; and
- Failure to timely file its annual Customer Proprietary Network Information (CPNI) certifications.
What business is PTT in?
PTT is a prepaid calling card service provider reselling international telecommunications. Between 2010 and early 2014, it operated under the trade name “Star Pinless.” It sold its prepaid calling card services through grocery stores that served as distributors to PTT’s end user customers. PTT also used the Internet to market its international telecommunications services to other potential distributors and resellers.
What made the FCC investigate them?
In January 2013, the FCC’s Enforcement Bureau learned that PTT might not be complying with various provisions of the Communications Act and the FCC’s rules applicable to prepaid calling card providers. After a preliminary investigation, the Bureau sent a Letter of Inquiry to PTT. After reviewing PTT’s responses, the FCC issued a Notice of Apparent Liability for Forfeiture to PTT. PTT now has 30 days to either pay the proposed forfeiture or file a written statement seeking reduction or cancellation of the proposed forfeiture.
What exactly did they do wrong?
The FCC found that PTT apparently willfully or repeatedly violated the Communications Act or failed to comply with the FCC’s rules in eight important areas. It assessed a separate forfeiture for each area of violation, as follows.
International 214 Authorization- $100,000
The FCC’s rules require that carriers obtain a certificate from the FCC before providing international telecommunications service. However, PTT began providing service without first obtaining the necessary authorization and continued to operate without authorization for more than 41 months. Consistent with precedent, the FCC found PTT apparently liable for a forfeiture of $100,000 for its willful or repeated failure to obtain international Section 214 authority prior to providing international telecommunications service.
Form 499-A Filing- $150,000
The FCC is required to establish and administer various programs to promote universal service and TRS and to ensure LNP and effective numbering administration. Accordingly, the FCC’s rules require carriers to file annual worksheets (Form 499-A) reporting their revenues from various types of services during the preceding calendar year. This information is used by the administrators of the various programs to calculate and assess required contributions. The FCC found that PTT failed to timely file the required worksheets for three years. In the past, the FCC has proposed a forfeiture of $50,000 for each failure to file a Form 499-A. Consistent with this precedent, it found PTT apparently liable for a forfeiture of $150,000 for willful or repeated failure to timely file its Form 499-A for three years.
TRS Contributions- $53,237
The FCC established the TRS Fund to reimburse TRS providers for the costs of providing interstate telecommunications relay services. As a telecommunications provider, PTT was required to contribute to this fund based on its international end-user telecommunications revenues (as shown on the 499-A) but failed to do so. The FCC has established a base forfeiture amount of $10,000 for each instance in which a contributor fails to make required TRS Fund contributions. In addition, it has upwardly adjusted such forfeitures based on a percentage of one half of the Company’s unpaid TRS balance. Accordingly, the FCC found PTT apparently liable for a total proposed forfeiture of $53,327 for its apparent willful and repeated failures to timely contribute to the TRS Fund for three contribution periods.
LNP Cost Recovery Mechanism- $30,000
The FCC established the LNP cost recovery mechanism to ensure that the costs of number portability are borne by all telecommunications carriers on a competitively neutral basis. FCC rules require that all telecommunications carriers contribute to the costs of LNP on the basis of their end-user telecommunications revenue as shown on the Form 499-A. PTT failed to make timely payments to the LNP cost recovery mechanism. The FCC has established a base forfeiture of $10,000 for each year in which there is a failure to timely make required LNP contributions. Accordingly, it found PTT apparently liable for a forfeiture of $30,000 for its willful or repeated LNP contribution failures in connection with three billing cycles.
Regulatory Fees- $20,000
The FCC is required to collect fees to recover the costs of certain of its activities, including enforcement, policy, rulemaking, and international activities. FCC rules require that all telecommunications carriers remit such fees to the FCC. As a provider of international telecommunications services, PTT was obligated to pay regulatory fees based on its international end-user revenues as recorded on its Form 499-A. Failures to make regulatory fee payments are continuing violations until they are cured by the payment of all monies owed. The FCC established a base forfeiture amount of $10,000 for failure to timely make required regulatory fee payments for one calendar year. Accordingly, it found PTT apparently liable for a forfeiture of $20,000 for its willful or repeated failure to make full regulatory fee payments for two fiscal years.
Prepaid Calling Card Certification- $48,000
FCC rules require that an officer of each prepaid calling card provider submit a quarterly certification stating, among other information, that the provider is making any required USF contributions. PTT failed to timely file its certifications for 16 quarters. Under FCC rules, the applicable base forfeiture amount for “failure to file required forms or information” certifications is $3,000 per violation. Accordingly, the FCC found PTT apparently liable for a forfeiture of $48,000 for willful or repeated failures to timely file its USF compliance certifications for 16 quarters.
International Traffic and Revenue Reports- $12,000
FCC rules require that common carriers providing international telecommunications services file reports containing data on overseas traffic. Failures to timely file international telecommunications traffic reports constitute continuing violations until the violations are cured. The FCC’s rules prescribe a base forfeiture of $3,000 for failure to file required forms or information, and the FCC has applied that base forfeiture amount to international traffic and revenue reports. Therefore, it found PTT apparently liable for a forfeiture of $12,000 for its willful or repeated failure to timely file international telecommunications traffic reports for four separate years.
Annual CPNI Certification- $80,000
In the course of providing prepaid calling card services, PTT collects personal information relating to its customers’ calling practices, such as the number of calls a customer makes, the type of services the customer subscribes to, the destination or numbers called by a customer, the location of the customer and information contained in a subscriber’s bills. This information is CPNI. The FCC requires that carriers establish and maintain systems to ensure that they adequately protect their subscribers’ CPNI and file an annual certification attesting to their compliance with these requirements. In prior decisions, the FCC has assessed a $20,000 forfeiture for a failure to timely file a CPNI certification. The FCC found PTT apparently liable for a forfeiture of $80,000 for its willful or repeated failure to timely file CPNI certifications for four years.
