The following article was published in The Prepaid Press on February 1, 2011. The full interview can be found here: http://www.prepaid-press.com/wordpress/?page_id=4238.
We have talked before with Pete Pattullo, whose day job is the CEO of NetworkIP. But, this time, Pete is talking to us as the working leader of the Ad Hoc Coalition of International Telecommunications Companies. This group of industry leaders has been meeting to address a very serious problem, the advocacy of the prepaid calling card industry at the FCC. The last industry association, the IPCA, folded in 2005. Since then, the only advocacy on the part of prepaid calling card providers at the FCC has been by big companies who are more intent on the interests of their company than the industry at large. So, Pete and Jonathan Marashlian started enlisting other independent companies to come together. What Pete has accomplished at the FCC is preliminary, but very important. Listen to how he sees this unfolding.
GR: Tell us what you have been doing at the FCC regarding USF.
PP: We've been working with the FCC about the direction of the USF (Universal Service Fund). They originally committed to have something in December. We are looking now at, maybe February or March for an NPRM (Notice of Proposed Rule Making). When that does come out, that's going to be an opportunity for not only us, but hopefully other parts of the industry to chime in and give them feedback on their position before it becomes final.
GR: What are you expecting them to do in the NPRM?
PP: They are tasked with making USF more equal across the board, not just our industry, but all industries; how you assess it, how you administer it, how it applies to all the different situations within the telecom industry as a whole. Make sure that no specific part of the industry gets penalized or is unfairly treated. That's a big task. That isn't just changing a couple of things.
What we have seen in our discussions is that they are really stepping back, and relooking at the whole picture. What's worked, what hasn't worked, and what do we do next? They are trying to redo all that and make it the best they can for this moment in time.
GR: Let's break that down. What has not worked?
PP: If you look at how USAC has applied the rules, they will be the first to tell you that it is very fuzzy, trying to apply the rules to the prepaid long distance industry. Who are the players, and who does it really apply to? Who is supposed to be paid? Those are all unclear. They are trying to get that better defined, to make USAC's life easier. Hopefully then everybody will know who is supposed to pay and who is not.
GR: Wasn't there an issue involving the USAC forms?
PP: Oh yes, there certainly is not, from our perspective, continuity between the FCC rules and the USAC forms. They are not really together at this point, and that's one of the things they have to solve. It's still broke and we, NetworkIP, have been an example of that, but they continue to have those problems.
GR: So you expect that to be fixed in the upcoming NPRM?
PP: I don't think it will solve it by one magic bullet, but hopefully they will make the rules clearer, especially as those rules apply to our industry. Making it clearer for everybody, including USAC.
GR: Have you talked to USAC about this?
PP: Yes, last year we talked to USAC directly about our specific audit and, during that meeting, their reply was, 'well, someone has to pay.'
PP: They don't care who, they really don't, just someone has to pay. I repeated that to the FCC and they all shook their heads. They have assured me that is not the real case. They are not all on the same page, they don't have clear enough instructions to apply the rules, and so they are doing the best they think they can, but at the end of the day, they are making all of our lives miserable.
GR: Wow, that sounds like a pretty broken process. How do you think the industry should approach that?
PP: I think, even if you take NetworkIP's experience over the last 14 years, there are times when we have done nothing. We've put our head in the sand and let somebody else worry about it. We've attempted to hire an attorney and let them handle it, and tell us when we need to do something. We found that did not work for us either. It's come down to being proactive and engaged with the FCC.
GR: How has that worked for you?
PP: Some of the previous attorneys we have had in years past were telling us we could not meet with the FCC, that is not something that is done. We found that to be very bad advice. So, the attorneys we use now have been more proactive in helping us talk directly to the FCC. In the last year, I have met with the FCC six times, every couple of months. Only about an hour each time, but I feel that time spent has advanced my understanding of their problems and them understanding ours. It has resolved not only our specific problems, but how this affects the entire industry.
GR: Who have you been meeting with?
PP: The Wireline Competition Bureau, everybody from the Chief of the Wireline Competition Bureau to the Deputy Chief and other staff. A lot of this has been educating and dialoging directly with the Bureau.
GR: The Bureau will then issue an NPRM to the Commission itself, right?
PP: Yes, the Commission does not have the facts yet, and they are not the ones that are going to determine the facts, so getting with the Bureau and getting them to understand the industry helps them to write the NPRM so the Commission makes the right decisions.
GR: On a scale of 1 to 10, 1 being the lowest, how knowledgeable were the people at the FCC about the calling card industry?
PP: I believe they are all intelligent people. But, there is no way they can understand our industry as well as we do. I would give them a score of about 2 when we started, and I believe that they are now at about a 7 or 8.
GR: That's a pretty significant improvement.
PP: It has improved significantly, and they better understand our industry now. You do that through dialog. When you are in discussions with them, and you bring up something that you have discussed before, and they answer that intelligently back with the right responses, then you know they are getting it. You can only do that through dialog, not emails back and forth.
GR: When you first started the dialogs, how did it go?
PP: The first couple of meetings we were just educating them about the industry. One of the things we noted, as well, is that other large prepaid companies had met with the same people at the FCC, but we took it more from a neutral point of view. They even commented that the other people were more self-serving. They are coming in, touting their own compliance, which does not further the education of the Commission. When you come in as self-serving, they tend to write you off. People think you can trick them that way, but I don't believe that. I believe these are intelligent people and the issue is to educate them about the industry as a whole, and then get down to your specific case and deal with the facts. It's surprising how many companies come in with their attorneys and do the opposite.
GR: Tell me a little about the Coalition.
PP: One of the things we realized in the meetings was, that although we were sitting there having a good dialog, their response was, 'well, what does the rest of the industry think?' You can try to portray that as best you can, but at the end of the day, you need to have other people in the room. About halfway through last year, I realized that as much as we are trying to educate, which will ultimately help us and everybody else, we really needed more people in the room. Jonathan (Marashlian) had the Ad Hoc Coalition going, so we invited him into those meetings, but also tried to expand that to other industry executives.
We have a group now that has met a couple of times. We are really waiting for the FCC NPRM. After we get that, we will sit down as a group and see what we agree and disagree on. What the FCC, down to the Wireline Chief, has accepted is that we are willing to bring a group of executives from the industry and sit down with them and give them our feedback. They [the FCC] have closed off meetings and they are doing their writing and then they will release that. That will be another opportunity for us to sit down with them, review it and give our feedback.
GR: How important is it that you are representing more than one company? Is that a positive to the FCC?
PP: I believe so. They have given us very positive feedback about that. They have expressed their appreciation more than once, personally and in writing. I truly believe they appreciate our help. Everybody I have met there wants to do the right thing, but without information, what can they do? Without information, they don't even understand the key elements to this industry, how the ecosystem works. It's hard to put into place a policy or rules that don't break the system.
I'm shocked that no one else has done this, all this time. Most of the industry is afraid to lift their head, that the FCC will come after them. Or, their lawyers are dancing, billing costly hours, hoping that they find some loophole. We had an expensive lesson in the past, with the payphone issue. But, when we got everybody in the room after the fact, we realized that if we had only met earlier, we probably could have had a different outcome. Proactive engagement is critical if you trying to run a real company.
GR: What should the industry do next, once this is over?
PP: Have a voice. If there are other companies that are out there that want to have a voice, take my advice and get active. They either get in touch with me and join our meetings and join the Coalition and be part of that, out front, or anonymously.
Pete Pattullo is a Member of Ad Hoc Coalition of International Telecommunications Companies, and CEO of NetworkIP. Visit NetworkIP online at www.networkip.net. If you need more information on the Coalition or want to become involved, go to the TPP website for information, or send an email to firstname.lastname@example.org.