The U.S. Court of Appeals for the D.C. Circuit has affirmed in part and vacated in part the Commission’s 2006 decision classifying IP-transport prepaid telephone calling cards and menu-driven calling cards as "telecommunications services." The decision may be found here.

"IP-transport cards" use internet protocol technology to transport part or all of a phone call. Because part of the call utilizes IP technology, AT&T argued to the FCC that IP-transport cards constitute an "information service", as opposed to a "telecommunications service" — this despite the fact that the Commission had previously ruled that similar so-called "IP-in-the-Middle" calls were NOT information services.

"Menu driven cards" use a menu-driven interface through which users can either make a call or access several types of information. AT&T had argued to the FCC that the offering of information (such as weather or news) through either a menu or an operator qualified it is an "information service."

There was no dispute about the correctness of the FCC’s classification of both types of card as "telecommunications services". But since that classification meant that issuers of the cards are subject to access charges, Universal Service Fund contributions and other obligations, the date on which the classification took effect was a matter of some consequence.

In its 2006 decision, the Commission determined that the "telecommunications services" classification would be retroactive for IP-transport card but prospective only for menu-driven cards. In other words, all IP-transport cards – including those which had been issued prior to the FCC’s 2006 decision – were to be treated under the newly-announced classification. Menu driven cards, on the other hand, would be subject to the new classification only if the cards were issued after the FCC’s decision.

Two parties sought review of the decision. One party, iBasis, Inc., argued that the new classification should not have been made retroactive with respect to IP-transport cards. The Court rejected that claim.

The other party, Qwest Services Corporation, argued that the new classification with respect to menu-driven cards SHOULD have been made retroactive. The Court agreed that the FCC had not offered any sustainable justification for that aspect of its decision. Accordingly, the Court has vacated the order "to the extent that it foreclosed application of its substantive ruling in the calculation of access charges before the Order’s issuance."