Another Prepaid Card Provider Reduces Its Universal Service Revenue Reporting

Following on the heels of AT&T and Verizon’s announcements, prepaid card provider Allcom Telink Corporation informed the FCC that it, too, would no longer report for universal service purposes the face value of the prepaid cards that it sells. In a June 11 letter to the FCC, Allcom stated that it likewise intends to cease contributing on the basis of its non-contributing resellers’ revenues (or our best estimate of those revenues) for this year and future years.” In other words, Allcom will only report the revenue that it receives when selling the cards for distribution, not their ultimate face value. Given that prepaid cards often are sold to distributors at 35-40% below the face value, these actions could significantly reduce the amount of USF paid for prepaid calling card sales.

Allcom cited to the AT&T and Verizon letters and to USAC’s August 2009 request for clarification from the FCC. Allcom then explained:

It is Allcom’s preference that the Commission issue an order or guidance resolving this matter. Given the reality of the prepaid calling card market, however, Allcom now has little choice. To avoid an untenable competitive disadvantage in 2010 and future years, absent intervening Commission action, like AT&T and Verizon, we also intend to contribute only on the prepaid calling card revenue Allcom actually receives, not the ultimate retail sale price of those prepaid calling cards that Allcom sells to non-contributing resellers.

For good measure, Allcom also expressed support of a numbers-based USF contribution methodology.

Undoubtedly, Allcom is not the only prepaid card provider that has followed AT&T and Verizon’s lead in reporting prepaid card revenues. We expect most other providers to report revenues in this way pending FCC action on the USAC request.