Prepaid Phone Services
The following information is provided to consumers and prepaid phone card service providers alike, but it should not be relied on as a matter of law. If you have specific legal questions, please contact the Commission’s Legal or Communications Divisions.
TWO TYPES OF PREPAID PHONE SERVICES
There are two main forms of prepaid phone services: (1) offering of prepaid services via the “telephone prepaid debit cards” as referenced in Public Utilities Codes §§ 885-887, which may be used to make long distance telephone calls from any existing telecommunication device; and (2) offering of “prepaid wireless services with assigned phone number” which require a customer to purchase and activate a carrier specific handset and load usage minutes. “Prepaid wireless refill cards” can be used as a form of prepayment device to load the minutes for the full-service telephone account (service tied to a specific telephone number and handset).
Telephone Prepaid Debit Cards (a.k.a. Prepaid Calling Cards): Telephone prepaid debit cards (referred to as prepaid calling cards under California Business & Professions Code Section 17538.9), offer the consumer the convenience of making (primarily) long distance calls, domestically or internationally, from any phone or phone number, without using cash, even where the customer may not have his or her own service account.
Telephone prepaid debit card calls are typically made by calling a toll-free number and entering a Personal Identification Number (PIN) printed on the back of the phone card. Customers normally purchase phone debit cards for specific dollar amounts. The debit cards provide long distance minutes based upon rates set by the debit card service provider. As calls are made, the usable minutes are automatically deducted from the card balance. Some debit cards are re-chargeable, allowing the user to add more calling time by dialing a toll-free number or accessing a website and using a major credit card.
Some telephone prepaid phone services are being sold on websites as “card-less” or “PIN-less”. With either offering, the physical phone cards are not needed. For the card-less offering, customers get the PIN directly from the provider when they purchase the service online. For the PIN-less offering, customers typically register their existing personal phone number and make direct calls without using a PIN (but using the service provided by the PIN-less card provider, rather than the service presubscribed to that number).
Prepaid Wireless Services with Assigned Phone Number: This form of prepaid service requires a customer to purchase and activate a carrier specific handset (a mobile phone), and to load or purchase usage minutes for the handset. The customer can either purchase and/or reload the minutes online, or via prepaid wireless refill cards sold at retail outlets. Prepaid wireless refill cards are also commonly advertised as prepaid wireless cards, prepaid airtime cards and prepaid cell-phone cards. The service links the handset to a specific telephone number and account, where credits are added to, and debits subtracted from, the previously established account balance.
Both types of phone cards, telephone prepaid debit card and prepaid wireless refill card, are sold by third party retailers at locations such as convenience stores, liquor stores, discount stores, supermarkets, department stores, and small markets and shops. They can also be purchased on the Internet, including directly from the carrier or service provider.
IF I AM OFFERING TELEPHONE PREPAID DEBIT CARDS (PREPAID CALLING CARDS), WHAT SHOULD I KNOW?
If you wish to become a telephone prepaid debit card service provider, i.e., to contract with an underlying carrier to run the prepaid phone card "platform", and have control over the rates, connection fees, charges, and other fees, and if you intend to market your business in California, then you must register with the CPUC prior to offering and/or distributing your prepaid phone cards or prepaid phone service. See the registration requirements under Public Utilities Code sections 885 and 886. Pursuant to section 887, you must also conform to the requirements of California Business and Professions Code Section 17538.9 relating to the sale of prepaid phone cards.
Of special interest to providers and retailers is section 17538.9 (3), which states:
"The company shall print legibly on the card or packaging, and the vendor shall make available in a prominent area at the point of sale of the prepaid calling card or prepaid calling services, the following information:
(A) Any surcharges or fees, including monthly fees, per-call access fees, or surcharges for the first minute of use that may be applicable to the use of the prepaid calling card or prepaid calling services within the United States.
(B) Whether there are additional or different prices, rates, or unit values applicable to international usage of the prepaid calling card or prepaid calling services.
(C) The minimum charge per call, such as a three-minute minimum charge, if any.
(D) The charge for calls that do not connect, if any.
(E) The definition of the term "unit," if applicable.
(F) The billing decrement.
(G) The name of the company.
(H) The recharge policy, if any.
(I) The refund policy, if any.
(J) The expiration policy, if any.
(K) The 24-hour customer service toll-free telephone number required in paragraph (4).
If you already have a Certificate of Public Convenience and Necessity (CPCN) or other carrier registration to operate as a telephone company in California, you may need to have the telephone debit card tariff (if applicable) filed properly with the CPUC. This may only require an advice letter being filed with the CPUC.
WHAT SHOULD I DO OR KNOW BEFORE MARKETING OR SELLING TELEPHONE PREPAID DEBIT CARDS (PREPAID CALLING CARDS)?
As a distributor or retail vendor of telephone prepaid debit cards provided by the debit card service provider, and which you typically buy at discount and sell for a profit to end users, you need to be aware of the requirements of California Business and Professions Code Section 17538.9 relating to the sale of prepaid phone cards. Section 17538.9 has subparts that apply to distributors and retail vendors, as well as the company offering the prepaid calling card, all of which are designed to ensure that the card consumer knows what he or she is getting.
As a distributor or retail vendor of telephone prepaid debit cards, you share in the obligation to make sure the terms and conditions of the prepaid phone card service are clearly disclosed to the consumer. You do not need to register with the CPUC.
NEW OBLIGATIONS FOR RETAIL VENDORS, BEGINNING JANUARY 1, 2016
Beginning January 1, 2016, all retailers of prepayment cards will become liable for collection at the point of sale of a Mobile Telephony Surcharge (universal service surcharges and user fees applicable to this service). (See AB 1717, enacted by the California Legislature in 2014.) The Mobile Telephony Surcharge must be remitted to the California Board of Equalization. See https://www.boe.ca.gov/pdf/l412.pdf.
WHO IS REQUIRED TO REGISTER WITH THE CPUC?
Telephone Prepaid Debit Cards (a.k.a. Prepaid Calling Cards): The California Legislature approved CPUC statutes that include language regulating the use of telephone debit cards and service. The providers of telephone prepaid debit card service must register with the CPUC. Public Utilities Code Section 885 states "Any entity offering the services of telephone prepaid debit cards is subject to the registration requirements of Section 1013, commencing January 1, 1999, unless that entity is certificated by the commission to provide telephone service."
Resellers of prepaid telephone debit cards who are NOT subject to the registration requirement include: (1) third-party retailers who sell the debit cards without participating in the setting of rates, terms, conditions, or otherwise in the provision of the service; and (2) entities that only print information on telephone prepaid debit cards.
Offering telephone prepaid debit cards without the proper licensure is illegal and carriers or service providers can be subject to penalties, and the collection of outstanding fees and surcharges owed, plus interest.
Information for telecommunications applicants and registrants is available online at:
Information (ENSURE WEBSITE ADDRESS LINK IS UPDATED)
Prepaid Wireless Services with Assigned Phone Number: Carriers that provide a full-spectrum telephone service (including a telephone number and the ability to receive incoming calls), and facilitate payment through the use of prepaid wireless refill cards, must obtain the appropriate certification from the CPUC (CPCN, wireless registration, or equivalent).
A carrier offering prepaid wireless services with assigned phone number to its customers remains subject to the requirements of the Public Utilities Code, including but not limited to Sections 451, 2890, and 2896, which require that the service offering be just and reasonable, that it be authorized, and that the terms and conditions be sufficiently disclosed to allow informed consumer choice.
Offering prepaid wireless services with assigned phone number without the proper licensure is illegal and carriers or service providers can be subject to penalties, and the collection of outstanding fees and surcharges owed, plus interest.
Click Here for Information regarding Telecommunications Applicants and Registrants in California.
WHO IS REQUIRED TO PAY USER FEES & SURCHARGES TO THE CPUC?
Carriers of prepaid wireless services with assigned phone number are subject to paying user fees and surcharges. After January 1, 2016, carriers will retain this obligation for all direct sales to consumers.
Providers of telephone debit cards are subject to paying user fees only.
Click Here for a current rate chart of user fee and surcharges.