FCC rules against AT&T on calling cards

WASHINGTON (AP) - Federal regulators ruled yesterday that AT&T skirted the law by failing to pay fees on its popular prepaid calling cards, a decision that could cost the long distance company about $500 million (euro378.7 million).

AT&T Corp contended that the cards should not be subjected to the fees, which go to local phone companies to cover their cost for connecting calls on their lines and to a federal fund that subsidises phone and Internet service in rural areas and for schools and libraries.

The company used to pay the fees, but in 1999 it added advertisements heard when someone placed a call using the prepaid cards. The ads, AT&T argued, made the cards an "information service", which are exempt from fees.

But the Federal Communications Commission disagreed, ruling the ads are incidental to the underlying telecommunications service offered to the cardholder.

"Companies cannot engage in misdirection or word games to avoid their universal service obligations," FCC chairman Michael Powell said.

ATT CALLING CARDS