Washington, D.C. – Senate Commerce Committee Chairman Ted Stevens (R-Alaska) made the following statement today at a press conference about AT&T’s use of prepaid calling cards to lobby on Universal Service Fund payments: I am here because my office has been inundated with calls from other Senators about the practice of AT&T. And, I have been informed that AT&T has launched a disinformation campaign on the Universal Service program - a program that I helped begin back in 1996. The Universal Service Program assesses a small fee on long distance calls to help offset the high cost of telephone service to rural America. In addition, the fund is used to bring the Internet to schools, libraries, and health facilities across the nation.

Long distance calls made with an AT&T calling card traditionally paid into the Universal Service Fund just like any long distance call. By simply including small advertising, in some cases to buy more AT&T calls, AT&T has claimed its card is no longer subject to the payment of the Universal Service Fund fees. It argues that instead of a telecommunications service, the call is transformed into an information service that does not have to pay the USF. Based on its own unilateral interpretation, AT&T stopped paying into the fund and avoided paying $160 million.

AT&T should have been paying into the Universal Service Fund. It now claims that if the FCC rules that it should have paid, the FCC is increasing the cost of its card. The telephone companies that our Committee staff has talked to have said that they would offer service to our troops. Some have even offered to make these calls available for free. They cannot do that because AT&T has the contract for this service with the Department of Defense.

This campaign is an attack on the Universal Service Fund, an attack on rural communities, and an attack on the nation’s schools and libraries – all of whom are served by the Universal Service Fund.

I oppose what AT&T is proposing and believe that the FCC should act immediately to require AT&T to pay into the Fund. When I originally heard of this problem, the AT&T version of this issue, I said that I opposed retroactive application of regulatory decisions. But I found this is not a retroactive decision. The FCC has been asked simply decide whether AT&T unilaterally determined that it did not have to make Universal Service payments on the calls made using their calling card. That determination would be whether it’s correct or incorrect, what AT&T decided. But, the campaign against the Universal Service Fund is misplaced. I’m hopeful AT&T will cease and desist from the use of these cards to call Members of Congress, particularly Senators, to ask that we put pressure on the FCC to decide in their favor.

Questions and answers following the Chairman’s statement: Question: When did these calls begin to come into Members of Congress?

Chairman Stevens: Today.

Question: Do you believe that AT& should repay the entire $160 million to the government?

Chairman Stevens: As I understand it AT&T owes the $160 million it did not pay and should have paid into the Universal Service Fund. When I originally heard about it, they told me they asked me to oppose the retroactive decision that they thought the FCC was going to make. We looked into it and it’s not a retroactive decision. What AT&T did was unilaterally decide it did not have to pay that money because it had sold a card, which was a card that was an information service. Yet, the person that bought the card used it to make a telephone call. And, they’re absolutely wrong in saying that it’s a retroactive interpretation and they’re very wrong to put this pressure on Members of the Senate and the Congress to call the FCC to do something the FCC should not do.

Question: Do you have any reason to doubt that the FCC will rule against AT&T?

Chairman Stevens: I’m hopeful they’ll rule very quickly that this should be settled and I think AT&T has precipitated a decision by the FCC, a certainly hope they have.

Question: So, your concern is the speed with which the FCC will rule, rather than whether they will rule. I’m just trying to figure why.

Chairman Stevens: The reason I’ve come here is this is very unfair. We have no way of dealing with this. The public is using these cards and being asked to call us and tell us to do something that is wrong. And, I think the use of the card in this fashion, to put onto a card that someone has purchased to make telephone calls, a message telling them to call their Senator and lobby the FCC is absolutely wrong. As a matter of fact, it’s a lobbying activity in my opinion and they should cease and desist that.

Question: What’s your opinion on the $340 million of inter-carrier compensation, the access fees that AT&T also says it has not paid in this case because it’s an information service. Do you have any opinion on that?

Chairman Stevens: That’s another issue and it’s really not covered by the telephone call that I’m concerned with right now. There’s another $340 million out there that’s in question in terms of whether or not they should have paid access charges to those people who allowed access to the users of the cards, as has normally been the case. Now, that’s, I understand, subject to litigation if I’m informed correctly.

Question: Can you just walk me through exactly what happens, so somebody buys an AT&T calling card?

Chairman Stevens: They buy it make calls, primarily to allow members of the Armed Services or their families to call long distance.

Question: And in the process they call and get a recording?

Chairman Stevens: As they use the card and they put in the telephone system, a recording comes on and provides this statement and AT&T says that makes it an information card, not a telephone card. But, the person who is putting the card in the telephone system is using it to make a telephone call. So, they’re absolutely wrong. This is what the call says, if you use this card, it says: Thank you for calling to speak out against higher calling card fees. Due to the overwhelming response all circuits are currently busy, but your call is very important to us. By simply entering your zip code, when prompted, we will make sure your opposition to a higher calling card rate is passed onto to your Senator and Congressman in Washington, D.C. Please enter your zip code right after the tone. But the person using the card didn’t call to decide to speak out against higher rates. As a matter of fact, I don’t think they even inform on what the issue is – it’s not high rates, it’s payment into the Universal Service Fund.

Question: Does the card even work?

Chairman Stevens: Oh yes. After you get that message, your phone call goes through. I haven’t tried it myself. I’m relying on my staff.

Question: If AT&T does not decide to stop selling these cards, is there anything you can do? Have they broken any laws by getting calls sent to you?

Chairman Stevens: I’m asking that. I don’t know yet. As you know, I’m the new Chairman. I’ve got facilities available to me, I’ve never used before. The concept on investigation of this is still in my mind. Mind you now, originally when AT&T came to me and gave me their side of the story, I said I’m opposed to retroactive application of regulatory decisions. If that’s what this is, I will ask the FCC not to decide to do that. But, when we looked into it, it was not a retroactive application, it was merely to try to get the FCC to agree with their interpretation of the law that by adding to that little squib onto their call, as the person tried to make the call, they were providing an information service and the person really bought the card for the information service. I don’t know how, that’s absurd really, just really absurd. So, I backed off and said I wasn’t going to do it and the net result is this campaign now. And, by the way, if you dial in my zip code, you don’t get my name, you get Senator Murkowski’s name. That’s another thing, they didn’t want to take me on directly, they’ll do it tomorrow.

Question: Is it all prepaid calls or…?

Chairman Stevens: This is just a card that is sold – prepaid telephone card call.

Question: Is this just the one card going to Armed Services?

Chairman Stevens: You can buy cards for any purposes, whether it’s overseas or not. Mainly that people that use cards like this are calling overseas.

Question: Will you recommend that AT&T lose their contract to provide calling cards to our military?

Chairman Stevens: I would hope that the next contract with the Department of Defense is not so exclusive and we have the ability to have competition providing service to members of the Armed Services. I think that contract is up for renegotiation and I do believe it will not be as exclusive in the future.

Question: It sounds like AT&T kind of acted – by coming in and saying it was retroactive and subsequently not contributing they kind of erred in how they approached this?

Chairman Stevens: It really was presented, as I said, as being in opposition to the retroactive impact of the decision they thought the FCC was going to make. As I said, I don’t believe that is a retroactive decision. The regulation applies to everyone and in the past, in the past, before this little tab was entered into what they call the information part of their message, AT&T paid into the Universal Service Fund. It’s only long distance that pays into the Universal Service Fund, as you know. So, this is a very important matter to get decided as quickly as possible. But above all, I just wanted people to understand. I hope that Members of the Senate will somehow or other get this message too. This is not something that we should interfere with – to stop the FCC from deciding what it currently is going to decide which I believe is correct – that these fees should have been paid all along.

Question: Have you had any conversations with AT&T executives today and what was the subject of those?

Chairman Stevens: I had a talk with AT&T executives some time ago about the matter. I have not talked to them today. I do have a meeting scheduled with members of AT&T and other entities on Monday and I expect we’ll discuss it then.