Calling-card ads: Enhancement or annoyance?

This week, the FCC halted voting on an item regarding prepaid calling cards that threatened to become a sticky campaign issue for President George W. Bush's re-election campaign if the commission had taken action.

The issue involves a petition filed more than a year ago by AT&T, which does not pay sometimes-expensive intrastate access charges or universal-service charges on the calls made with its cards. AT&T contends most of the these calls actually consist of two "calls"--one to a platform typically in another state, and another from the platform to the terminating phone. Unless both parties on a call and the platform are in the same state, AT&T says the call should not be considered intrastate, which means it does not have to pay intrastate access charges.

While this aspect is interesting, it's not a huge deal, because many states' intrastate access rates mirror the interstate rates. More important is the other aspect of the petition, which asks the FCC to declare AT&T's calling-card an enhanced information service--a classification that is regulated solely by the FCC and does not have to pay access charges or universal-service charge.

AT&T's argument is that calling-card users automatically retrieve information from a stored database--in this case, an advertisement for a retailer like Wal-Mart--which meets the FCC's definition of an enhanced service. Reportedly, Chairman Michael Powell and Commissioner Kathleen Abernathy already filed votes against this notion, with some sources citing the fact that the advertisement was received involuntarily. Of course, the number of people claiming that it's an oxymoron for an advertisement to be considered an enhancement is too great to count.

Ruling against AT&T on this matter would force the long-distance giant and other calling-card providers to raise the rates on the cards, which are used by a disproportionate number of poor people, minorities and military personnel. After being besieged by more than 800,000 calls about the possibility of calling-card rates increasing, the White House asked the FCC to put the item on the backburner until after the election, according to several sources.

Even after the election, opposing the AT&T petition promises to create a political firestorm. But agreeing with AT&T could establish a dangerous precedent, by allowing telecom carriers to be deregulated simply by playing an ad at the beginning of a call--something SBC Communications noted in an FCC filing today.

And the real kicker is that such a scenario would quickly leave no money in the universal-service fund to provide affordable phone service to the poor and those in outlying areas--the exact constituency that is supposedly the greatest benefactor from the use of calling cards.

E-mail me at djackson@primediabusiness.com.