Obtaining start-up authority under Section 214 is one of the most important regulatory hurdles a new telecommunications provider must overcome before offering international service in the U.S. This fact was recently underscored by a Notice of Apparent Liability issued by the FCC’s Enforcement Bureau proposing to assess a $100,000 penalty or forfeiture against a prepaid calling card provider which had operated without such authorization. Obtaining Section 214 authority also potentially subjects a provider to a range of other federal compliance obligations.
All telecommunications providers (including facilities-based carriers, resellers, prepaid calling card providers and many wireless service providers) offering calling between the U.S. and foreign points must obtain a certificate of authority under Section 214 of the Communications Act of 1934 (“Act”). It is unlawful to offer or advertise services allowing international calling without first obtaining a Section 214 license. While the application is pending, a provider generally may not commence offering services. In short, a 214 authorization is a license to offer international telecommunications service. Because this requirement stems from Section 214 of the Act, it is generally referred to as a “214 license,” “214 authority,” “214 certificate,” “214 authorization” or simply “214.”
Potential Penalties
On June 4, 2009, the FCC proposed to levy a fine or forfeiture in the amount of $100,000 against a prepaid calling card provider offering international services without Section 214 authority. The company originally applied for Section 214 authority on February 17, 2006, after having begun to offer service in May 2005. Its application was eventually granted on June 18, 2008, following referral of its application to the Executive Branch (i.e., the Federal Bureau of Investigation, the Department of Justice, and/or the Department of Homeland Security) for a protracted review of national security, law enforcement, foreign policy and trade concerns. During the course of the review, the company indicated that it had accumulated a customer base of at least 1,000 retail end-users and had earned several million dollars in revenue from its prepaid calling card services in calendar year 2007 alone. Subsequent to the grant, the FCC’s Enforcement Bureau initiated an investigation into whether the company had violated FCC rules by operating without prerequisite Section 214 authority.
The FCC’s decision to levy the proposed forfeiture is based on several factors. First, the Commission found that the company operated unlawfully without Section 214 authority from May 2005 until June 18, 2008. Second, the FCC found that the company failed to obtain interim temporary authority (called a “special temporary authority”) while its application was pending. Third, the FCC found the violation to be “egregious” warranting a higher forfeiture amount since the company’s revenues during the period of unlawful operation were high. This decision will likely serve as the model for future Enforcement Bureau actions against providers operating without Section 214 authority.
