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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 ) AT&T CORP., ) CORRECTED AS OF MARCH 31, 1999 ) Complainant, ) ) v. ) File No. EAD-99-001 ) BELLSOUTH CORPORATION, ) and its carrier subsidiaries and affiliates, ) including (but not limited to) ) BELLSOUTH LONG DISTANCE, INC., ) and BELLSOUTH ) TELECOMMUNICATIONS, INC. ) ) Defendant. ) ) MEMORANDUM OPINION AND ORDER Adopted: March 30, 1999 Released: March 30, 1999 By the Chief, Common Carrier Bureau: I. Introduction 1. In this complaint proceeding, AT&T Corp. asserts that, by marketing and selling the BellSouth Prepaid Phone Card (the Card), BellSouth Long Distance (BSLD) has violated the Communications Act of 1934, as amended, (the Act) and the Commission's order in AT&T Corp. v. Ameritech Corp. (Qwest). Under the terms of the Card offering, all carrier services -- local, intraLATA toll and interLATA exchange -- are carried by U.S. South, a resale-based interexchange carrier. AT&T argues that, although no BellSouth entity carries the long-distance traffic, the Card nevertheless constitutes an impermissible provision of in-region, interLATA service in violation of section 271 of the Act. For the reasons set out below, we conclude that the BellSouth Prepaid Phone Card does not enable BellSouth "to obtain competitive advantages, thereby reducing its incentive to cooperate in opening its local market to competition." BellSouth's association with the Card therefore does not constitute the provision of in-region, interLATA service. Accordingly, we deny AT&T's complaint. 2. As the Commission discussed at length in its recent Qwest order, until 1996, the business operations of the Bell operating companies (BOCs), like BellSouth Telecommunications, were governed by the terms of the Modified Final Judgment (MFJ), which arose from the United States' antitrust suit against AT&T. In the Telecommunications Act of 1996, Congress enacted a series of reforms designed to bring the benefits of competition to all telecommunications markets. These reforms included the requirements of sections 251 and 252, which, among other things, placed interconnection, unbundling and resale obligations on the BOCs as a means of opening their local service markets to competition. Congress enacted section 271, in part, to create an incentive for the BOCs to comply with these new obligations. The statute creates this incentive by conditioning BOC entry into the in-region, long-distance market on compliance with a checklist of local market-opening criteria and other requirements. Thus, until the Commission determines that a BOC has fully complied with this checklist, section 271 prohibits the BOC from "provid[ing] interLATA services" originating in its home region. To date, BellSouth Telecommunications has not demonstrated that it has complied with each of the statutory requirements necessary for approval to provide that service under section 271. 3. In Qwest, the Commission critically examined the meaning of section 271's statutory limitation on a BOC's entry into the long-distance market in a novel factual context. There, the two defendant BOCs, U S WEST and Ameritech, had initiated combined service offerings that bundled each BOC's local and intraLATA toll services with long-distance service transmitted by Qwest Communications Corp. The BOCs also were responsible for marketing, and providing customer service support for, those bundled offerings. Addressing a challenge that the combined offerings violated the Act, the Commission concluded that, "in order to determine whether a BOC is providing interLATA service within the meaning of section 271," it is necessary to "assess whether [the] BOC's involvement in the long-distance market enables it to obtain competitive advantages, thereby reducing its incentive to cooperate in opening its local market to competition." In making that fundamental determination on the specific facts presented in that case, the Commission balanced several factors and examined the totality of the BOC's involvement in the allegedly prohibited conduct. Below, we similarly analyze AT&T's challenge to BellSouth's prepaid card. II. Facts and Procedural History A. Procedural History 4. In December 1998, after BellSouth had launched the Card, AT&T contacted the Commission to initiate this complaint under the newly adopted Accelerated Docket procedures of the Common Carrier Bureau (the Bureau). During the supervised settlement discussions required before a complaint will be accepted onto the Accelerated Docket, BellSouth agreed to modify its marketing for the Card. AT&T did not believe, however, that BellSouth's changes brought the Card into compliance with section 271. After the parties had exhausted all reasonable opportunities for settlement and it appeared that the matter was otherwise appropriate for adjudication under the Accelerated Docket procedures, the parties were informed that AT&T's complaint, if filed, would be accepted onto the Docket. 5. On January 29, 1999, AT&T filed its complaint pursuant to section 208 of the Act, and in conformance with the Accelerated Docket procedures, naming as defendants BSLD, BellSouth Telecommunications, and BellSouth Corp. During the course of this proceeding, BellSouth Corp. was dismissed as a defendant on the parties' joint stipulation. Subsequently, BellSouth Telecommunications also was dismissed as a defendant. On March 10, 1999, as contemplated under the Accelerated Docket rules, the parties participated in a minitrial, during which they examined a fact witness, presented oral arguments, discussed supporting factual material, and responded to questions from the Bureau. As contemplated by the rules for the Accelerated Docket, we issue our order resolving this matter within sixty days of the date AT&T filed its complaint. B. Issuance and Marketing of The Card 6. On December 3, 1998, BellSouth publicly introduced its Prepaid Phone Card and offered the Card for sale on its web site, through a toll free number, and in BellSouth Mobility and BellSouth Mobility PCS stores. Both nationally and in BellSouth's region, the Card is available in retail outlets like convenience stores and service stations that are unaffiliated with BellSouth. BellSouth offers the Card to these unaffiliated retail outlets using a standard purchase order form, under which a retailer may purchase as many or as few Cards as it desires. Retailers carrying the Card are neither under a volume obligation nor under any ongoing obligation to purchase additional Cards in the future. 7. Similar to other prepaid calling cards, the BellSouth Card enables the purchaser to make local, long-distance, and international calls. The Card currently is available with face values of $10, $20 and $30. The amount of telecommunications service to which any given dollar amount entitles the Card holder varies depending on whether the user places local, domestic long-distance or international calls. The face of the Card prominently carries the BellSouth brand. The back of the Card identifies U.S. South Communications as the provider of "[a]ll carrier services" for the Card. Both the BellSouth Long Distance web site and the Card's marketing materials advertise the Card with the slogan "Access to Local, Long Distance and International Calling." To place a call, the Card's purchaser dials an 800 number and reaches an automated platform that states, "Thank you for using the BellSouth Prepaid Phone Card. All carrier services provided by U.S. South Communications." After reaching the platform, the caller is prompted to enter the Card's unique access code and then to dial the number the caller wishes to reach. U.S. South tracks the Card's usage and announces the amount of unused time remaining on the Card before connecting the caller to the dialed number. Unlike some prepaid phone cards, the BellSouth Card cannot be "recharged" by purchasing additional time for it. Once the Card is depleted, it can no longer be used. 8. The Card is the product of two written agreements between BellSouth and U.S. South, entered in August of 1998. The first of these agreements is a "sales agency agreement," in which U.S. South appoints BellSouth to be the agent for the sale and distribution of the Card. Under this agreement, BellSouth receives a commission amounting to a substantial portion of each Card's face value. The agreement entitles BellSouth to receive the full commission rate even for those Cards that U.S. South sells directly to other parties without BellSouth's involvement. BellSouth began earning commissions under the sales agency agreement in September 1998. 9. The sales agency agreement obligates U.S. South to provide full-time call assistance and customer care that is branded "BellSouth Prepaid Calling Center." It also requires U.S. South to maintain customer care standards acceptable to BellSouth, and to undertake any improvements reasonably requested by BellSouth. 10. The sales agency agreement contemplates a variety of ways in which the contracting parties' relationship may change. For example, it provides that either party may terminate the agreement without cause upon 30 days' notice. In the event that either party avails itself of this option, U.S. South agrees not to "solicit any customers solicited by [BellSouth] pursuant to" the sales agency agreement. The agreement further provides that, upon its termination, BellSouth can assume all responsibilities for those retailers that have contracts with U.S. South to distribute the Card. Finally, the sales agency agreement provides that, if BellSouth obtains authority under section 271 to offer in-region interLATA service, U.S. South will negotiate in good faith to purchase from BellSouth "dedicated long distance service" for use in connection with the Card. Alternatively, the agreement states that, if BellSouth obtains section 271 authority and wishes to offer carrier services, BellSouth will negotiate in good faith with U.S. South "for wholesale platform services, customer service and other related services." 11. Contemporaneously with the sales agency agreement, BellSouth and U.S. South entered a second agreement, the "prepaid phone card processing agreement," which limits each party's ability to use the other's name or trademark, and gives BellSouth the right to conduct quality control reviews of the services provided by U.S. South. As part of its retail marketing effort for the Card, BellSouth also has entered "sub-agency agreements" with two independent brokers. One of those agreements, with Top Sales Company, Inc., provides that the broker will receive a commission based on the value of the Cards that the broker is actually responsible for selling. III. Discussion 12. AT&T's claim in this proceeding is simple: by issuing the Card, BellSouth is "providing" in-region, interLATA service in violation of section 271, as the Commission interpreted the statute in the Qwest order. Section 271(a) states that "[n]either a Bell operating company, nor any affiliate of a Bell operating company, may provide inter-LATA services except as provided in this section." The issue before us, then, is whether a company offering a prepaid calling card, but not the underlying transmission service, is "providing" an interLATA service within the meaning -- and in violation -- of section 271. 13. In Qwest, the Commission examined the language, history and purpose of the statute in order "to determine a reasonable meaning" of the undefined term, "provide," in section 271. This analysis led the Commission to conclude that "the term `provide' must encompass activities that, if otherwise permitted, would undermine Congress' method of promoting both local and long-distance competition by prohibiting BOCs from full participation in the long-distance market until they have open[ed] their local markets to competition pursuant to section 271's competitive checklist." Thus, under the standard articulated by the Commission, the fundamental question is "whether a BOC's involvement in the long-distance market enables it to obtain competitive advantages, thereby reducing its incentive to cooperate in opening its local market to competition." 14. To answer this fundamental question within the specific factual context presented in Qwest, the Commission found it instructive to balance the following, non-exclusive factors: "whether the BOC obtains material benefits (other than access charges) uniquely associated with the ability to include a long- distance component in" the challenged offering; "whether the BOC is effectively holding itself out as a provider of long distance service;" and "whether the BOC is performing activities and functions that are typically performed by those who are legally or contractually responsible for providing interLATA service to the public." 15. We agree with the parties that the standard articulated in Qwest -- "whether a BOC's involvement in the long-distance market enables it to obtain competitive advantages, thereby reducing its incentive to cooperate in opening its local market to competition" -- applies to the present dispute. Here, as in Qwest, the challenged offering does not include a BOC's actual transmission of in-region, long-distance service, for which there is a clear statutory prohibition. It is therefore again necessary to look at the totality of BellSouth's involvement in the long-distance market through the Card offering and to examine the incentives that such involvement may create for the various BellSouth entities. 16. Much of our analysis in this action turns on the fundamental distinction between the combined offerings at issue in Qwest, and the combined offering here. Specifically, in Qwest, the offerings included presubscribed local and intra-LATA toll service from the BOC, combined with presubscribed long-distance service transmitted by Qwest. The Commission concluded that this combination permitted the BOCs to accumulate an entrenched base of full-service customers before the BOCs received section 271 authority. It thereby undermined the incentives for the BOCs that Congress created in section 271. The offering here does not involve any presubscribed relationship. Instead, the Card creates a very limited customer relationship and extends only to a limited segment of the market. Indeed, unlike the full bundle of presubscribed services at issue in Qwest, a calling card product which combines access to both local and long-distance service was upheld, with certain modifications, by the MFJ court as early as 1988. As Judge Greene observed in approving the BOC calling cards that provided access to local and long-distance service charged to the customer's local service bill ("post-paid calling card"), these cards are convenience products not substitutes for presubscribed service: "[c]alling cards are today ubiquitous billing mechanisms. They provide a convenient method for calls made away from the customer's usual telephone, an increasingly common occurrence." 17. In this regard, the prepaid calling Card is akin to a ready currency -- a 20 dollar bill -- for away-from-home purchases of telecommunications services and represents only a fraction of the telecommunications marketplace. On the other hand, the carrot that Congress held out to the BOCs in section 271 -- entry into the in-region, interLATA market -- is most directly and significantly at issue in the context of presubscribed service. Accordingly, although there may be calling card offerings that would constitute the provision of in-region interLATA service, the circumstances presented here, as described more fully below, do not. A. Material Benefits 18. Our analysis begins with the first issue that the Commission examined in Qwest: whether BellSouth obtains a material benefit uniquely associated with its ability to include an in- region, interLATA component in the services available through the Card. In Qwest, the Commission stated that "one of the most significant factors" supporting its conclusion that the defendant BOCs had violated section 271 was their ability to "become a comprehensive `one-stop shopping' source for local and long-distance services when [they] have not adequately opened their local markets and thus have not enabled new entrants to also compete in the combined services market." The Commission concluded that the inclusion of long-distance service in the challenged combined offerings gave the BOCs the opportunity effectively to become the sole provider of a "one-stop shopping" package. This ability, and the dramatically increased marketing and customer retention opportunities that it conferred, was, the Commission found, "uniquely associated with being able to participate in the long-distance market, prior to demonstrating compliance with section 271." Stated differently, it was the material benefit that arose from the BOCs' ability to provide a unique, combined service that contributed to the Commission finding, in Qwest, that the challenged combined offerings amounted to the "provision" of interLATA service. 19. In this case, for the several reasons discussed below, we see no similar benefit that accrues to BellSouth from the Card's inclusion of long-distance service. First, the general market for prepaid calling card offerings is and has been open to many different entities for some time. Indeed, notwithstanding the relative dearth of substantial competition for local exchange service, it seems that a variety of entities can effectively -- and, we presume, profitably -- issue prepaid cards similar to BellSouth's. Given this market backdrop, we fail to see how BellSouth can enjoy a unique advantage from the inclusion of a long-distance component in the Card's services. The Card's capability to offer interLATA service from within the BellSouth region allows the Card to compete, in that region, with the myriad of other prepaid calling cards in the market. It does not, however, confer on BellSouth the unique advantage, about which the Commission was concerned in Qwest, of being able to offer a service which included both local and long-distance calling in a manner that was not available to non-BOC competitors in the market. 20. Additionally, in Qwest, unlike here, the challenged offering permitted the BOC to gain an ongoing advantage in the market for combined (i.e., local and long-distance) telecommunications service. The Commission found that the one-stop shopping capability that the offerings presented allowed the defendant BOCs, before receiving section 271 authority, to "strengthen[] their position in the telecommunications marketplace" by "build[ing] an entrenched full service base before the three major interexchange carriers could leverage their customer relationship to sell local" service. The Commission also found that the combined offerings likely would afford the defendant BOCs a significant "jumpstart" when they ultimately received 271 authority because they would be "well poised to substitute the long-distance service offered by their section 272 affiliate" for the service initially offered by Qwest. Finally, the Commission noted that the defendant BOCs in Qwest derived "material financial benefits from each sale of" the combined offerings because, inter alia, of the opportunities for enhanced sales of local offerings. 21. Because of the limited relationship between BellSouth and the users of the Card, under the particular circumstances presented here, the Card offers BellSouth none of these material benefits that the Commission found compelling in Qwest. As BellSouth argues, the Card does not allow any BellSouth entity to capture and hold customers pending a grant of 271 authority. To the contrary, the Card creates a customer relationship that is limited by the dollar value of the Card purchased. Once a customer has consumed a Card's service allotment of $30 or less, he must purchase another BellSouth Prepaid Phone Card for the relationship with BellSouth to continue. Indeed, we find it significant that the Card is disposable and not, for example, available for purchase through the customer's local service bill, or any other vehicle that would permit charges to accrue based on the continuing relationship between BellSouth and its local subscribers. Rather, to continue the relationship with BellSouth, a Card user must affirmatively purchase a new card once he has exhausted the limited and relatively nominal value of the Card. As AT&T concedes, there is no evidence that, having once purchased BellSouth's Card, a particular customer is any more likely to purchase another one than he is to purchase some other prepaid calling card. 22. The circumstances here are starkly different from the situation in Qwest, where the customer base about which the Commission was concerned consisted of the presubscribed, residential and business telecommunications market. That type of relationship is a continuing one without any fixed termination point. Rather, to end the relationship, a customer must take the affirmative step of choosing another carrier. It is doubtless a relationship that is qualitatively different from the limited one with Card purchasers. Accordingly, we disagree with AT&T that the sales agency agreement with U.S. South, which permits BellSouth to terminate the agreement while retaining control over the Card, raises the kind of "jumpstart" concerns at issue in Qwest. Although the contract affords BellSouth the ability to take over the transmission services from U.S. South when BellSouth receives section 271 authority, the Card does not present BellSouth with the opportunity, found troublesome in Qwest, to build a cache of entrenched customers with which it can "pre-position" itself for entry into the combined services market and "jumpstart" its business once it obtains section 271 authority. 23. In fact, under the circumstances of its Card offering, BellSouth gains little meaningful customer information about the purchasers and users of the Cards. To place calls with a Card, the customer need only purchase it from the sales outlet of her choice, dial the Card's service platform and enter the Card's unique access code. During this process, BellSouth typically does not obtain information which might benefit its long-distance opportunities after it receives section 271 authority. Thus, the Card generally does not permit BellSouth to gather information such as the customer's identity and address; nor does it permit BellSouth to learn which carriers may provide the customer's local or other (particularly presubscribed) long-distance service. Consequently, in this circumstance there is no direct association between Card customers and BellSouth's local service. BellSouth cannot even identify which of its local exchange subscribers may be using the Card. 24. This is entirely different from the circumstances in Qwest. Among other things, the Commission concluded that the combined-service offerings at issue there likely would permit the BOCs to increase the sales of their high-margin "vertical services" like Call Waiting and Caller ID, and they would allow the carriers to win back or keep (and obtain ongoing revenues from) intraLATA toll customers who might have been lost to competitors. In contrast, the BOC here cannot use the Card as a means to target certain customers for either retention or winback. Nor does the Card present opportunities to target Card purchasers as sales prospects for vertical services, or any other profitable products or services. 25. Indeed, the Card does not capitalize on, or directly utilize, the company's local market customer base. In Qwest, the Commission was concerned that the BOCs served as the exclusive marketing and sales agents of the combined offerings because it permitted them to use their local-market dominance in support of their offering in a manner that other carriers seeking to offer a similar combined service could not do. Thus, the BOCs could market the challenged offerings through inserts in the millions of bills that they mailed to their local subscribers on a monthly basis. Similarly, by virtue of their position in the local market, the defendant BOCs had extensive customer name and address databases that permitted them to undertake more focused marketing campaigns, including telemarketing the combined services. In Qwest, the BOCs also provided the first point of contact for customer service inquiries regarding the combined offerings. 26. In the instant case, it appears that, apart from the BellSouth name, BellSouth Telecommunications' local market position is not used to market or sell the Card. U.S. South is the exclusive provider of the Card's transmission services. BellSouth lends its name to the Card as a means of increasing the Card's visibility. It does not, however, market the Card directly to BellSouth Telecommunication's local service customers through local service marketing channels. Thus, BellSouth does not make the Card available for purchase through, or offer billing for Card services in, its local service bills. If the Card offering had been structured in this way, it might well have caused us to conclude that, before receiving in-region long-distance authority, the BOC was obtaining material benefits uniquely associated with the ability to include a long-distance component in the combined service offering and thus was in violation of section 271. In this case, however, BellSouth offers the Card for sale through a toll-free number, through its web site and through the BellSouth Mobility stores. Moreover, unlike the BOCs in Qwest, BellSouth does not provide customer service for the Card. Instead, U.S. South provides this service, albeit under the BellSouth brand. Thus, none of these marketing channels takes advantage of BellSouth's local market dominance in the way that the BOCs did in Qwest. 27. Another core distinction between the material advantages in Qwest and the facts of this case arises from the unique and limited portion of the telecommunications market in which the Card operates. As we note above, the combined offerings at issue in Qwest afforded the defendant BOCs substantial competitive advantages in the broad market composed of the BOCs' local exchange customers -- a group which, because of the vestiges of the local monopoly, amounted to the great majority of all local subscribers within the BOCs' regions. Here, the Card serves a much smaller segment of the telecommunications market: those individuals who, in addition to subscribing to a local exchange carrier and primary interexchange carrier, wish to make calls with a prepaid calling card. Because the circumstances of BellSouth's Card offering are limited to this discrete market segment, we believe that none of the material benefits about which the Commission was concerned in Qwest, accrue to BellSouth here. This is not to say that there is no prepaid calling card that could afford material benefits that would run afoul of section 271. For example, it might well distort the market-opening incentives that Congress put in place through section 271 if a prepaid card's per-minute rate were so low that it became an attractive substitute for presubscribed service and permitted the issuing BOC to make substantial inroads into the presubscribed long-distance market. Such a card likely would raise serious concerns under section 271. Additionally, if a BOC were to market a prepaid card in a manner that entrenched its local market share or effectively pre-positioned itself in the long-distance market, that might also result in a finding that the combined service violated section 271. 28. We disagree with AT&T's argument that to permit issuance of the Card here will engraft a de minimis exception to section 271. It is true that section 271 contains no de minimis exception. It states merely that neither a BOC nor its affiliates may "provide" in-region, interLATA service without Commission approval. The statute would not, for example, permit a BOC to provide presubscribed interLATA transmission service on an ongoing basis to a small number of in-region subscribers. This very likely would amount to the "provision" of service in violation of the statute's injunction. 29. This proceeding, however, presents the threshold question of whether BellSouth's association with the Card, when another carrier actually transmits the calls, nevertheless amounts to a prohibited "provision" by BellSouth of interLATA service. For the reasons stated above, we find none of the benefits identified in Qwest to be equally troubling here. We recognize that, unlike in Qwest, some portion of the commission that BellSouth receives from the original sale of the Card is attributable to interLATA calling. However, the financial benefit (or any other kind of benefit) that BellSouth receives from the Card's inclusion of an interLATA component is, under Qwest, merely one of the factors that we examine in determining whether such "provision" exists. We do not believe this limited benefit from the Card, particularly when contrasted with all of those identified in Qwest, operates effectively to reduce the substantial incentives that BellSouth Telecommunications has to open its local markets to competition. B. Holding Out as Provider of Long-distance Services 30. The second inquiry of our analysis concerns whether BellSouth is holding itself out to the public as the provider of long-distance services. In Qwest, the Commission noted that the defendants had "taken several specific steps to brand [the challenged programs] as their exclusive combined service offerings." In this case, we conclude that, through the Card, BellSouth does not hold itself out as providing long-distance service in the same manner that the BOCs did in Qwest. To be sure, as AT&T points out, BellSouth's brand is prominently associated with the Card. Indeed, it is the only corporate name that appears on the Card's face; U.S. South's name is relegated to the back of the Card along with the dialing instructions. Additionally, the Card's customer service center, although staffed by U.S. South employees, is branded as the BellSouth Prepaid Phone Center. We disagree with AT&T, however, that because of the prominence of BellSouth brand on the Card, it creates "the public perception that 'BellSouth' is providing in- region, interLATA services, which greatly strengthens [BellSouth's] ultimate position if and when they obtain Section 271 relief." In contrast to Qwest, the close association of BellSouth's name with the Card does not conclusively determine whether the Card allows BellSouth to hold itself out as providing long-distance service. The distinction in this case arises from the nature of the Card's services and the market in which they appear. Indeed, through the brand, BellSouth holds itself out, not as the provider of long-distance service as the BOCs in Qwest, but rather in a much more limited role -- merely as the issuer of a prepaid phone card, which in turn affords customers access to long-distance service when away from home. 31. In addition to the prepaid card challenged here, BellSouth issues a "post-paid" calling card that permits its local exchange customers to select a long distance carrier when making a call. These cards permit a customer to access the long-distance carrier and bill the charges through BellSouth's bill. The carrier which carries the call is identified on the bill. BellSouth's post-paid card displays the BellSouth tradename at least as prominently as does BellSouth's prepaid card. AT&T does not, however, claim that the post-paid card violates section 271 and that, by issuing the post-paid card, BellSouth has improperly held itself out as providing interLATA service. Under the current facts, we do not perceive any significant difference between the holding out accomplished by BellSouth's Prepaid Card and that accomplished by BellSouth's post-paid calling card. 32. AT&T argues that the difference between the post-paid calling card and the prepaid card is that the latter runs afoul of equal access concerns. Although AT&T expressly does not allege that the Card constitutes a violation of section 251, it nevertheless argues that equal access concerns underlay the Commission's analysis of section 271 in Qwest. We agree that, to the extent a BOC were to hold itself out as the sole provider of a calling card's long- distance service and not clarify to customers that they could choose their long-distance carrier, such an offering could violate equal access in a way that could also raise a challenge under section 271. This is so because the end-user customer would likely believe erroneously that the BOC was transmitting the long-distance service -- which section 271 prohibits prior to the BOC demonstrating that its local market is open to competition. That scenario, however, is not what is presented here. Like the post-paid cards found lawful since 1988, the BellSouth's prepaid Card plainly identifies and describes on the back of the Card that U.S. South will provide "all carrier transmission services." While the end-user customer of the prepaid Card cannot use the card to circumvent U.S. South by dialing another carrier's access code, as they can with post-paid calling cards, we do not see this difference as significant in the "holding out" analysis. Rather, we agree with BellSouth that, with prepaid cards, the customer makes the choice at the point of purchase as to which carrier will carry its traffic, whereas with its post-paid card, the choice is made at the time the call is placed. Under either scenario, however, consistent with equal access concerns, the BellSouth calling card customer has the clear choice of carriers. 33. Our conclusion that the Card is not holding BellSouth out as providing in-region, long-distance service draws additional support from the fact that the Card serves a segment of the overall telecommunications market that is replete with similar, prepaid offerings. As BellSouth points out, many of the issuers of these prepaid cards are companies that clearly are not telecommunications providers. For example, Exxon and WalMart both lend their names to cards similar to the one here, as does Top Flite, a manufacturer of golf equipment. These companies, which have no prior role in offering long-distance telecommunications, can not be said to be holding themselves out as providing such service through their prepaid calling cards. Rather, it appears that the issuers of such prepaid cards likely view the cards merely as a revenue source and an additional vehicle for building brand recognition. BellSouth and the other card issuers lend their names to a prepaid calling card. Without more, however, this does not mean that BellSouth is holding itself out as providing long-distance service. In many ways, we view prepaid calling cards as simply a form of currency. Regardless of the corporate logo appearing on a particular card, it entitles the holder to a fixed amount of telecommunications service from the carrier that supports the card. We do not believe, however, that a prepaid calling card necessarily amounts to a presumption that Exxon or Top Flite, or in this case a BellSouth affiliate, is actually transmitting the calls placed using the card. 34. In this regard, the facts of this case differ significantly from those in Qwest. In that case, the challenged combined offerings served a portion of the market -- indeed a substantial portion of the market -- in which consumers of telecommunications services form their primary relationship with a carrier. The presubscribed portion of the market is not one in which non- carriers regularly display their names in the way that Exxon and similar card issuers display their names in the prepaid calling card market. Rather, it is a portion of the market in which only carriers -- whether local or long-distance -- operate. Therefore, the combined offerings in Qwest made it appear that the BOCs were functioning as long-distance carriers: they allowed the BOCs to hold themselves out as providers of long-distance service. Here, in a market segment in which non-carriers routinely associate their names with prepaid cards, we do not find a similar holding out. C. Functions Typically Performed by Resellers 35. Finally, we examine the extent to which, in connection with the Card, BellSouth functions as a traditional reseller. In Qwest, the Commission found that the "only long distance function the defendants do not perform . . . is the actual transmission of calls across LATA boundaries." The Commission examined a variety of the ways in which the defendant BOCs exercised substantial control, both historically and prospectively, over the terms and conditions of the long-distance component of the challenged combined offering. It also noted that the BOCs "serve[d] as the exclusive marketing and sales agents" for the combined offerings. Accordingly, the Commission concluded that the defendants functioned essentially as a reseller would. AT&T asserts that BellSouth similarly functions essentially as a reseller with respect to the Card offering here. 36. We question whether BellSouth's control over the format of the Card offering approaches the substantial control that, in Qwest, the BOCs exercised over the price and format of the combined offerings at issue there. For instance, it does not appear that BellSouth effectively dictated to U.S. South the per-minute price at which it would be required to provide interLATA transmission. The record in Qwest, on the other hand, revealed that such overt price control, in fact, had taken place in the negotiations between the BOCs and Qwest. Additionally, here, U.S. South serves as the customer-service contact, although its employees identify themselves as the BellSouth Prepaid Calling Center. This also distinguishes the instant case from Qwest, where the BOCs were the initial point of contact for all customer inquiries. On the other hand, as AT&T points out, the sales agency agreement permits either party to terminate it, without cause, upon 30 days' notice. AT&T contends that the threat of termination under this clause likely permits BellSouth to exercise significant ongoing control over the terms and conditions of the Card's services. 37. Ultimately, however, we need not determine the precise extent of BellSouth's control over the form of the Card offering because, even assuming some level of control, we do not believe that it raises the type of competitive concerns that were present in Qwest. Our conclusion in this regard rests on the narrow market segment for prepaid calling cards that combine local and long-distance services and the tenuous connection between control in that market segment and control in the market for long distance services overall. In Qwest, a real potential existed for the defendant BOCs to influence substantially the market for long-distance services generally, through their control of the long-distance component of the challenged offerings. Acting much like a reseller of long distance service, the defendant BOCs in Qwest, because of their large customer base, could prematurely affect long distance rates, terms, and conditions without having complied with the market opening provisions of section 271. The potential for this kind of extensive market influence does not exist with BellSouth's Card offering. While BellSouth exerts some level of control over its own Card, this does not have an impact on the long distance market generally. Accordingly, BellSouth's control over the Card does not give it the competitive advantages, and translate to its acting like a reseller, within the meaning of Qwest. D. Overall Balancing Test 38. We conclude that, under the facts of this case, BellSouth's Prepaid Phone Card affords BellSouth no competitive advantage that will effectively reduce its incentive to cooperate in opening its local markets to competition. The Card therefore does not amount to a prohibited "provision" of interLATA service under the standard identified in Qwest. As described above, in reaching this conclusion, we examine the several factors identified in Qwest as likely to affect the competitive advantages that BOCs could enjoy in connection with an offering that includes a long-distance component of service. Thus, we find that BellSouth does not obtain material benefits uniquely associated with the inclusion of a long-distance component in the Card's services. Given the limited relationship between BellSouth and its prepaid card customers, the Card, in its current structure, will not permit BellSouth to accumulate a cache of entrenched customers with which it could jumpstart its long-distance business once its receives section 271 authority. Moreover, the Card does not present BellSouth with the opportunity to gain material financial benefits, and the resultant competitive advantage, through the sale of additional vertical features. Nor does the Card serve as an effective -- or even approximate -- substitute for presubscribed long-distance service in a way that would permit BellSouth to make effective inroads into that broad portion of the market. Rather, the Card functions merely as a form of currency that permits holders to place both local and long-distance calls when they are away from the phone that carries their presubscribed service. 39. We therefore conclude that AT&T has not established that the Card affords BellSouth any competitive advantage that would affect its incentives to open its local markets to competition, as Congress envisioned when it enacted section 271. Accordingly, based on the record developed in this proceeding, BellSouth's involvement with the Card does not amount to the prohibited "provision" of in-region, interLATA service in violation of section 271(a). IV. Conclusion 40. For the reasons discussed above, we find that the BellSouth's association, with and issuance of, the BellSouth Prepaid Phone Card does not amount to the "provision" of in-region, interLATA service in violation of section 271 of the Communications Act of 1934, as amended. V. Ordering Clauses 41. Accordingly, IT IS ORDERED that, pursuant to sections 1, 4(i), 4(j), 208 and 271 of the Act, as amended, 47 U.S.C.  151, 154(i), 154(j), 208 and 271, and pursuant to the authority delegated to the Common Carrier Bureau in sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291, AT&T's formal complaint filed in this proceeding IS DENIED and this proceeding IS TERMINATED. 42. IT IS FURTHER ORDERED that, as the parties were previously informed by staff letter ruling, the motion of BellSouth Telecommunications, Inc., for dismissal as a defendant in this matter IS GRANTED. FEDERAL COMMUNICATIONS COMMISSION Lawrence E. Strickling Chief, Common Carrier Bureau