Sympathy for AT&T

(Sponsor: Lok Technology)

Last week the news came out that the AT&T pre-paid calling card plan is about to take a hit from the FCC (perhaps as much as $500 million in fines according to TelecomWeb). A mid-nine-figure hit is not insignificant (even for them) in an industry where disputing, withholding, then mitigating payment on such fees is not just a job, it's a bonus-paying adventure (but enough about MCI...).

However, the FCC fine is just the beginning of AT&T's problems. You can expect the Bells to line up at the courts with lawsuits demanding payments for the card-related connection and Universal Service Fund charges that AT&T hasn't paid for a decade. Investors beware...


This all started as a clever way for AT&T to get around USF and connection fees. AT&T claims that calls placed through these cards is an "information service" because when you use them there's an AT&T "information" ad placed in the middle of the service you use. Not exactly what cable, Vonage, the FCC, any PUC, or quite frankly anyone has in mind when the term information service is floated about.


Despite the fact that this all started long before the industry noticed this upstart VoIP, one can feel a little sympathy for AT&T given the ongoing debates right now about whether there should be USF charges applied to those calls.


But I'll save my sympathy for the men and women of the armed forces with whom the cards are so popular because the likely result (USA Today) is that AT&T will pass the new costs onto them, even though AT&T could charge the same rates on these cards and still make acceptable margins...like "industry leader" Sprint can, for example.