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Summary:

Guess who got stuck with a big bill for all those “free” international calls touted by outfits like FuturePhone? None other than AT&T, which has filed a lawsuit in Iowa claiming that “deceitful and unlawful schemes” like FuturePhone’s caused a jump from $2,000 per month to […]

Guess who got stuck with a big bill for all those “free” international calls touted by outfits like FuturePhone? None other than AT&T, which has filed a lawsuit in Iowa claiming that “deceitful and unlawful schemes” like FuturePhone’s caused a jump from $2,000 per month to $2 million per month in the fees billed AT&T by an Iowa rural telco.

Filed in the U.S. District Court for the Southern District of Iowa, Central Division, AT&T’s lawsuit seeks to stop FuturePhone as well as the telcos who provide local infrastructure from continuing with their operations that use regulatory-fee arbitrage and VoIP to provide international calls for only the price of a long-distance call to Iowa. Though the case was just filed on Jan. 29, it has already apparently caused FuturePhone to shutter its service, and has produced nothing but “no comment” replies from the Iowa LECs we contacted who were also named in the suit.

“This is just the latest in a long line of get-rich-quick schemes that bilk others to make a profit,” said an AT&T spokesperson. The lawsuit claims that operations like FuturePhone’s are in violation of several statutes, including Iowa state laws as well as previous FCC decisions.

Some background, for those not familiar with how intricate cross-network billing can get: When a long-distance call is “terminated,” if a long-distance provider like AT&T doesn’t own the local lines where that call is going to, it must pay a fee to the company that does. Even though such termination fees are typically higher in rural areas, since there are usually relatively few customers in the sticks big long-distance providers can easily balance the cost with their other businesses.

In Iowa, higher than average termination fees (as much as 13 cents per minute, according to AT&T) have been lately combined with fiber-based Internet access to provide a pretty good place for a VoIP-based gateway, which can then provide a way to cheaply reach foreign PSTNs. The loophole comes from some method of subtracting the money paid for foreign terminations from the amount gained by terminating calls in Iowa. While the margins are pennies-or-less per call, the lure of avoiding the high cost of international calls apparently caught on quickly, to the tune of hundreds of thousands of minutes a month, according to AT&T.

And when AT&T’s average monthly bill to one such Iowa telco, the Superior Telephone Cooperative, went from $2,000 to $2,000,000, it was time for Ma Bell to call the fine-suited folks at Sidley Austin LLP to try to close the loophole down.

Boiled down, AT&T’s main argument is that because the calls are not actually “terminated” in Iowa — AT&T says Iowa is just a midpoint in what is really an international call — AT&T shouldn’t have to pay the LECs the termination fees. Telco legal sources we talked to said that while the suit’s merit can certainly be contested, what it does immediately is give AT&T a legal reason to stall payments of such monthly bills, which could effectively strong-arm the startups out of business.

In FuturePhone’s case it seemed to have done the trick, since FuturePhone’s website still carries a big red “this service is discontinued” banner, and contact numbers for the company have all apparently been disconnected. The person who answered the phone at Superior Coop referred us to another Iowa LEC, Great Lakes Communications, which was also named in AT&T’s suit. There, we talked by phone to someone who would only identify himself as “Josh,” who said when asked about FuturePhone, “I’m not going to tell you that stuff.”

While some free-call operations (including Free Call Planet, also named in AT&T’s suit) still seem to be operating in Iowa, AT&T did leave room for yet-unnamed firms at both the website and telco level to be added to the suit. The bottom line, for firms seeking to make a buck by using regulatory loopholes: Good luck in court, because the legal equivalent of the Yankees just showed up in Mudville.

  1. Thanks for digging this info and confirming the long held suspicion.

    But it is not clear to me why the margin is “pennies or less”. Since the rate to reach the canonical 30 countries is 2 cents (SkypeOut rate), one would think the margin is a cool dime a minute.

    And these were once considered “disruptors”!

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  2. Aswath, the wholesale rate of termination to a number of countries in less than 1 cent per minutes (Skype have to make money!), which enabled companies like Futurephone to exist. A shame for US consumers that the loophole is going to be closed. Services that work on an arbitrage principle have been successful in the UK, see for e.g. http://www.dialabroad.co.uk/mobileplus.

    Regards,

    John

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  3. Sorry, that link should have been:

    http://www.dialabroad.co.uk/mobile/plus

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  4. Have you talked to any of the defendants? On the surface AT&T’s claim sounds reasonable but telecom regulation is VERY complex. If AT&T says its a scam, it does not make it one. These guys are a free info service. I think they read the rule book and found a legal loop-hole. Check it out.

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  5. A dime a minute Aswath would mean 200 million minutes!!!!!
    I believe this is a carrier/FCC issue and will be sorted out

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  6. John, this means dime is a lower bound, right? So my point still stands? Also, isn’t regulatory arbitrage a sign of poorly implemented social policy? By the way, Reliance India gives me about 10 cents/min via a toll free number. I think that compares favorably with Dialpad’s 5 pence/min.

    Pat, it is more like 20M minutes – just a nit. But I am missing your point. Are you suggesting that AT&T’s claim is unreasonable? It could be.

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  7. David, so far none of the defendants that I have been able to find has commented (or even had a working phone, in FuturePhone’s case). More than ready to hear their side. Aswath, you may be right on the margins, but I don’t simply want to trust AT&T’s allegations of pricing. So until we hear from a FuturePhone or an Iowa telco, we’re all guessing at the margins.

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  8. John Smythe–

    The difference is the complicated regulation that makes the termination fees to rural locales higher than elsewhere. It’s people taking advantage of the rural subsidy.

    If there were no differential pricing with a subsidy for the rural areas, then the arbitrage would be perfectly fine. But this takes advantage of the (perhaps stupid) regulations.

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  9. The idea is that regulators, both nationally and at the local level, want to encourage rural phone service. It costs considerably more to install and service phones per customer when the population density is lower. So, a variety of methods are used, such as the Universal Service Fee.

    One of the methods is call termination fees. Rural providers get paid extra money to terminate calls, in an effort to subsidize their business and encourage rural phone service, and the tax is paid by the big carriers but ultimately by other consumers. Like any subsidy, it causes distortions, but so long as people didn’t figure out how to arbitrage it, it survived and the big carriers could absorb the small cost. (After all, the inherent number of calls that people wish to really terminate in rural areas is limited.)

    Now, with this arbitrage exposing the problems, there are two options:

    1) Reform the subsidies, perhaps dropping them entirely and subsidizing rural service in other ways (if at all)
    2) Prohibit the arbitrage.

    I’d have to prefer 1), because I think that a law prohibiting the arbitrage would interfere with real disruptive uses, ones like dialabroad.co.uk that John Smythe mentions.

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  10. Unless there is something in AT&T’s agreement capping the minutes the LEC can bill AT&T to terminate the calls, this does not seem illegal, but I am not a lawyer. Unethical perhaps, but I’d imagine AT&T might have a difficult time proving their case. More likely it was the threat of legal reprisal that caused FuturePhone to panic and shutter their service. I’d also imagine AT&T could terminate their agreement at any time. It seems to me what Futurephone is doing is really not much different than terminating the call to the PSTN. Once they have the call, it seems they would be free to do with it what they wish, and if that means converting it to SIP and sending it across the pond, so be it. I’d have to imagine they were using SIP and then purchasing wholesale terminations from different geographic providers. I doubt very much they were using Skype to transport their commerical calls. If they can bill AT&T for the termination at $0.13 and route the call to Eastern Europe for, say, $0.08, there is a profit delta of approx $0.05 per minute. Termination rates with SIP providers vary from location to location, and change all the time. They could have had a softswitch and an application performing LCR (Least Cost Routing) to these various international routes. You can even have multiple providers for each international termination, and monitor for QoS on each route.

    The question seems to be if they are in clear violation of their agreement with AT&T. Even if AT&T’s case is week, their lawyering is likely considerably more skillful than FuturePhones, and the costs associated with defending themselves from lawsuit(s) from AT&T would likely drive them out of business anyhow.

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  11. Also, if you think this is a troublesome example of “regulatory arbitrage”, what about the “emissions trading” economies that are being created as a result of US environmental policy.

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  12. How does FuturePhone and other like companies extract the termination fee from Superior Coop and other LECs? Seems to me that the LEC must pass on a portion of the per minute subsidy to FuturePhone, and this is probably not in the spirit of the regulations. So while it can be argued FuturePhone may not have done anything illegal, I can certainly see Superior Coop, Great Lakes, and others having to defend spending their subsidy by paying customers to receive phone calls.

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  13. May be true, but then again may be my own imagination. Since Superior Coop is after all a cooperative and so it can pass on the profit as dividend to its members? Offered more in jest.

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  14. “It seems to me what Futurephone is doing is really not much different than terminating the call to the PSTN.”

    Yes, legally, it’s unclear to me too that there’s a case. It’s quite obviously against the spirit of the regulations, which assume that the number of calls terminating in these out of the way locations will be capped. But illegal? Not necessarily.

    “Also, if you think this is a troublesome example of “regulatory arbitrage”, what about the “emissions trading” economies that are being created as a result of US environmental policy.”

    Well, the NOx and SOx emissions trading systems in the US have led to a incredibly fast reduction in NOx and SOx emissions (faster than the original EPA projections under a traditional command-and-control regulation scheme) at a cheap cost. So I’m not sure how it’s necessarily a troublesome example. The worldwide carbon markets are a result of Kyoto, and have less to do with the US.

    Criticisms of either have mostly to do with the methods of allocation of credits, which indeed does have room for rent-seeking, or in the actual targets set. Though, the credit allocation is no worse than the existing problems of grandfathering old power plants versus the expensive New Source Review that a new plant would take (which currently favors 40-year old dirty plants run by incumbents and discourages incremental upgrades), and the actual targets set is no different from the setting of targets in a command-and-control regulation scheme.

    For information about the wildly successful SOx emissions trading program in the US (the Acid Rain Program), see here.

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  15. Seems to depends whose ox is being gored. As the nation’s largest local carrier, at&t collects billions in access charges from calls terminated on lines its subscribers are already paying rent for (although at less than $.14/min – a consequence of outmoded regulation.

    In fact SBC once sued the old AT&T for disguising LD calls as local to avoid this toll.

    More thoughts on this at http://blog.tomevslin.com/2007/02/attandfuturep.html

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  16. To answer a previous question I think FuturePhone and the LECs were splitting the take. Again, only speculation since I haven’t seen any solid info anywhere and FuturePhone folks are not to be found. Tom, any better info?

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  17. AT&T always cries foul when the rules are not set-up the way they like them. They are the ones who promoted this pay for terminating on a carriers line system. Then they cry foul when someone leverages it against them.

    They also say websites should pay for access to their internet pipes. Even though the consumer already pays a monthly fee. Careful with AT&T they always try to bend the rules for their purposes.

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  18. So, it appears Allfreecalls is named in the text of the lawsuit as well. I wonder if Ireland will extradite?

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  19. Ok – look at FreeConference dot com <- they were sold for $42 MILLION Dollars. They partnered with CLEC’s who gave them back a piece of the CABS and recip comp the Lec’s recieved from the IXC’s and other LEC’s.

    It is called Arbitrage – ATT puts out a flat rate 5 cents per minute to call long distance and averages out its cost to terminate & originate calls across each NPA NXX. In some cases due to the NECA rules and HR 1555 (telecom reform act) they can go upside down – IA stinks in terms of access costs – extremely high. Alot of crap goes on with the IA lec’s – every week new scams come across my desk.

    They haul traffic out of IA to a switch in MN and then run it back to IA and call it interstate traffic. Then they bill the IXC’s for CAB’s fee’s as if it is intrastate, etc.

    The stupider carriers like GC & Q pay the fee’s.

    Future Phone and others ARE NOT breaking the law, they are participating in a loop hole. The countries they terminate to for free are less than a penny for wholesale cost.

    The normal split is 50/50 or 60/40 (60 for the marketer like Future Phone) –

    This goes on in UK & Germany by the way as well.

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  20. Also:

    InterState Access costs:
    for the I/CLEC’s in question:

    .071

    Thus the caller might pay 2.5 to 5 cents (or nothing in an all you can talk plan) per minute to their carrier. Then the call goes out for less than a penny to the international country.

    Cost for overhead: switch & rack space
    (techs) website, etc

    Call comes in: LEC logs the CABs billing of .071 deducts the cost of .01 for the international call – both sides split: .061 or make about 3 cents a piece per MINUTE. Do 1 million minutes per month and you are each getting $30K IF the carriers PAY the cabs billing.

    Most of the big carriers like ATT use their money and legal clout to wear you do and pay out only a fraction of what is owed.

    No one broke the law here – ATT is the 100,000 pound gorilla who beat them down with lawyers. Why ? they want to scare away anyone else who dares to think of trying this. Yes, even if they spend $2 million in legal fee’s.

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  21. FuturePhone y el truco de Iowa…

    Ya se que posteo poco, estoy teniendo una “crisis de identidad” que ya le comenté a Edu y de la cual no he podido salir, pero esta tarde, despues de leer el blog de Alberto, me he dicho … “amos…

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  22. I think if the Court ever rule on AT&T’s side, this will limit emmission trading which is part of the international policy to make our enviornment better. Financial, interest rate abritrage has been doing that legally for years. Besides no disclosing, what Earon did on their energry trade were legal. This subsidy is part of our American public policy to encourage a level playing field and brings telecommunications and TV signals to all parts of the country, instead of creating isolated spots. So I dont think the Superior court will rule this as “illegal”, it is just the law were passed and technology catches up. Look at IRS, there were still tons of loop holes, but life goes on. Even internet purchase are tax free, is that a loop hole and make eCommerce sites illegal? I think the find needle that will break a camel’s back is how good each side’s lawyers are, how they lobbby, how they do the PRs.

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  23. Anon, where can we find some public mention of FreeConference.com’s sale? How do you know it was 42Million?

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  24. http://www.americancapital.com/news/newsreleases/2006/pr20060525.html

    Read thru the filings as they are a public company. I know because I helped in the capacity of consultant on freeconference.com

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  25. I downloaded the complete complaint from the court. You can read it on
    http://herot.typepad.com/cherot/2007/02/theendofthe.html

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  26. Free International Phone Calls…

    A friend of mine pointed me to a company called All Free Calls which offers free (yes its legit) international phone calls to supported country codes. According to TechCrunch,
    The company operates under a legislative loophole that gives rural telco’s…

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  27. Schemes like AllFreeCalls.net WILL NOT and SHOULD NOT survive. They are plain wrong. If the lawsuit does not end the schemes, I hope mobile operators and VoIP providers to start blocking the access numbers of such services. I can’t believe that US consumers are selling their morals so cheaply. At the end, there are so many low cost unlimited plans to those destinations. At the end, think about it – OK, you save one penny per minute, but that minute costs AT&T 7 cents per minute. Then, half of those 7 cents go straight into the pocket of foreign nationals that really don’t care that AT&T will try to compensate from the loss one way or another, i.e. the US consumer will pay for it anyway. It’s plain wrong and it’s time to end it!

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  28. It is not illegal nor wrong under the current telecom tariffs or laws. ATT is by far THE worst company in America for USA consumers.

    ATT is monopolistic and use lawyers like we use toilet paper. Since deregulation in 1984 we have seen ATT regain 80% of the lines in America in less than 23 years.

    ATT’s network is out of date and the USA ranks 18th in the world for broadband speed and penetration.

    Hopefully one day soon ATT will be split up once and forever. Unlikely until we change lobbyist and our political system though.

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  29. “InterState Access costs:
    for the I/CLEC’s in question:
    .071
    Thus the caller might pay 2.5 to 5 cents (or nothing in an all you can talk plan) per minute to their carrier. Then the call goes out for less than a penny to the international country.
    Cost for overhead: switch & rack space
    (techs) website, etc”

    OK so why would not Independent telcos everywhere in the US all be able to offer these “no cost” long distance services on an arbitrage basis completely without publicity. Word of mouth basis. The volume could be low enough and build slowly enough to avoid notice. Technical arrangements could distribute the local termination across the number space available, avoiding termination spikes for any given number.

    Such a service could be, would be only a “friends and family” benefit to the independent’s customers, and contribut only a small amount to the revenues of the company. But these are mostly cooperatives in rural settings, and the benefits of additional cash flow do flow directly to the customers, and are significant to cash strapped cooperative telco capitalization opportunities.

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  30. On the subject of ATT/SBC predatory “business” practices: I come from a community where there is a single local exchange under SBC contro, with approximately 2000 customers.

    By local exchange, I mean that any call to any other exchange, no matter how nearby, is a long distance charge call. The local exchange includes the county’s largest town (the county seat), but all but one of the other towns in the county are served by independent telcos.

    ALL calls from the local exchange to these other communities and to most rural areas of the county are charged long distance fees.

    ATT/SBC gets termination compensation, I believe, for all calls from these other communities into the county seat or to any of the 2000 customers in the “local calling area”. This has been going on since local community leaders made a very bad decision in the 20′s and sold the local system to SBC’s predecessor, Southwestern Bell.

    SBC is making a bloddy mint off of this arrangement, and refuses to sell this exchange to an independent which is far superior in technology and service, and which has the rest of the county and parts of several adjacent counties in a single local exchange! It makes us want to scream, but there is no one to hear…

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  31. Don’t feel sorry for AT&T. There is a natural check and balance here that AT&T doesn’t discuss. As a rural LEC’s revenues increases (from ENTREPRENUERIAL effort), their state regulators will eventually lower their approved tarrifs and their portion of the universal fee.

    Let the free enterprise system work. Better rural LEC support themselves via entrepreneurial effort (like AT&T is attacking) rather than continued subsidies. How else will our rural phones be supported? Next time you travel in the countryside, count the number of telephone poles to some of those farms. Those didn’t magically sprout!

    Also, VoIP calls haven’t even begun to be regulated yet. AT&T is simply using its monopolistic muscle to kill competition. It is the nature of the beast.

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  32. Further, we all pay for the universal phone service access we all enjoy, one way or another; through access fees and taxes. One way or another, the costs must be paid in order for us to pick up the phone and know that our calls to the mountains of Wyoming will be connected. The whole point of giving the rural companies a rate advantage is to help them support the rural environment which is, per capita, much more expensive to support. We will need to continue to support that infrastructure, either from fees the carriers pay, or from funds given to those rural companies by government subsidies. I don’t know about you, but I would much prefer to see the the market cover these than bureaucrats. In this case, the market will be more efficient, and the market will reward the rural innovators. We, the people, created AT&T. Now it is time for AT&T to stop inhibiting market creativity with bullying tactics.

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  33. [...] reported that AllFreeCalls had gone down, and as of today the service is still offline. Gigaom has more details. In summary AT&T were, unsurprisingly, a bit peeved to be picking up the tab for the [...]

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  34. [...] that FuturePhone was using jumped from about $2,000 a month to about $2 million a month — and they’re suing, claiming that it’s fraud, noting that since the calls didn’t really terminate in Iowa, they shouldn’t be billed [...]

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  35. It seems AT&T’s gripe is about paying termination fees.These are the rules they helped advocate and put in place. Not sure why they are strong arming smaller companies that are using some ingenuity in providing much needed service to the customers that need to call international at reasonable rates. For years AT&T milked the public at $1.00 per minute or more for international calls. Payback time I guess! Maybe another option would be to switch from AT&T to cable, Vonange, Sun Rocket and Skype enmasse. Its time Ma Bell needs to be cut down to size once again!

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  36. [...] of the Iowa telecom service providers who have been named as defendants by AT&T in the ongoing Free Calls controversy have filed legal claims of their own, suing AT&T for more than $12 million in total unpaid [...]

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  37. [...] of the Iowa telecom service providers who have been named as defendants by AT&T in the ongoing Free Calls controversy have filed legal claims of their own, suing AT&T for more than $12 million in total unpaid [...]

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  38. Robert Rosenberg Tuesday, February 27, 2007

    How is this different from me calling Company X who then routes my call to an office in some other state over their private network because the extension I dialed is in that other state? Once I reach Company X, where the call is routed is Company X’s responsibility not that of the POTS service that delivered the call there. In this case the call was delivered and terminated in IA. Once it was terminated there it is none of AT&T’s business what is done with it afterwards (ie: Which “Extension” is is internally routed to).

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  39. FreeConference.com did sell to American Capital last May, but “Anon” has the price wrong, as well as other information posted. The price paid was $45M to sellers, plus $2M costs, so they booked the sale at $47M, not $42M.
    I do not believe anyone in the free call biz moves traffic back-and-forth between IA and MN, as suggested, to artificially create IXC traffic. There is no need to do that and it would be more trouble than it’s worth. All interstate traffic is legitimate and actually terminates in IA. The conference bridges are located there, as well as the systems used to “re-originate” international traffic. There is a computer that answers the interstate call (therefore the call TERMINATES), plays a message asking for the international number, and than places a VoIP call to the international number and CONFERENCES the calls together. There is only ONE call on the PSTN and it terminates in IA. The outbound VoIP call is a SEPARATE CALL that is placed by computer and is connected to the POTS call. No funny business at all, as alleged by AT&T and Qwest.
    Fact is that ALL carriers actively participate in “regulatory arbitrage”. Such practices are at the core of least call routing and inter-carrier connectivity. They only gripe when outsiders and entrepreneurs play the same games at their expense. AT&T counts on ripping off customers by enticing then to pay for flat-fee, all-you-can-dial plans and making a killing on the “breakage” (unused minutes) and “float” (money in transit). They get pissed when consumers find a way to actually use all those unlimited cell phone and POTS minutes on free conference calls and entertainment services because it busts their greedy business plans.
    All the mechanisms that underly what is being MIScharacterized as “scams” or “schemes” are totally legitimate filed tarriffs and rates. AT&T and Qwest just don’t like any outsiders eating leftovers at their monopolistic party. They call it “unjust enrichment” when the money doesn’t go directly into their pockets!
    In sum, their lawsuit and regulatory complaints will all fail, but a lot of small companies will get hurt in the process, attempting to fight Goliath for fairness. Consumers are already getting hurt, as non-profit organizations, home-based business and educational institutions find that the free calling services they depend on are forced to limit or shut down services while they fight for their lives.

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  40. Will Tekstar Communications to be sued next? Because it will be a long time before these leeching “free” services are stopped.

    In a recent update email, FreeConferenceCall.com’s Simple Voice Box service is using exchange 641-985-5xxx, which belongs to FARMERS TELEPHONE CO., and the number is located in RICEVILLE, Iowa, population 834. As I have been tracking these “free” services as of late, I recently re-registered for a new free conference call account and was assigned a 712-580-0xxx number, which belongs to SPENCER MUNICIPAL COMMUNICATIONS UTILITY and services Spencer, Iowa, where there’s actually a whopping 11,117 residents. The first number I was assigned last year was with (402-756-9xxx) GLENWOOD TELEPHONE MEMBERSHIP CORP. out of a rate center in Bladen, Nebraska, which is a “village” in Webster County, population 275.

    I’ve seen numbers for these services pop up in rural Michigan and Nevada as well. I do believe that these loopholes should be closed, but even mighty AT&T is going to have to get help from the FCC to make it happen, as there are too many rural states in which to bury these services.

    Some of these loophole leeches are one in the same, too. FreeConferenceCall.com, based out of Long Beach, CA, is actually responsible for all these sites: StartMeeting.com, helloconferencecall.com, juntagratis.com, freephoneconference.com,
    freeconferenceanytime.com, freeconferencecallrecording.com, thepacketcenter.com, freeconferencecallnetwork.com, and many more, I’m sure. David Erickson, founder and CEO, makes millions off these services so don’t expect to see him just go out of business because AT&T files one lawsuit.

    Here’s some of the other potential players:

    ** futurephone.com – Site “labeled” as offline; actual number 712-945-1xxx, VENTURE COMMUNICATION TECHNOLOGY L.L.C, switched out
    of Salix, Iowa, population 389.
    ** fonpods.com – Site offline (just noticed); actual number 712-432-3xxx, GREAT LAKES COMMUNICATION CORP., switched out of Lake Park, Iowa, population 993.
    ** freedigits.com / talkdigits.com – service alive; Assigned a number of 641-321-8xxx, COMMUNICATIONS 1 NETWORK, INC., switched out of Klemme, Iowa, population 558.
    ** allfreecalls.net – “service offline”; actual number of 712-858-8xxx, SUPERIOR TELEPHONE COOPERATIVE, switched out of Superior, Iowa, population 129.
    ** radiohandi.com – Service active; actual number 712-432-7xxx, GREAT LAKES COMMUNICATION CORP., switched out of Lake Park, Iowa, population 993.
    ** freephonecallz.com – Service offline
    ** partylineconnect.com – Service active; actual number 218-486-3xxx, TEKSTAR COMMUNICATIONS, INC, switched out of Hawley,
    Minnesota, population 1,892.
    ** freeconference.com – Service active; actual numbers:
    218-936-6xxx, TEKSTAR COMMUNICATIONS, INC., switched out of Mahnomen, Minnesota, population 1,176
    218-862-6xxx, TEKSTAR COMMUNICATIONS, INC., switched out of Battle Lake, Minnesota, population 778
    641-297-5xxx, INTERSTATE 35 TELEPHONE CO., switched out of Saint Marys, Iowa, population 128
    ** gizmoproject.com – Service active; using area code 775 numbers
    ** ipkall.com – Service active; switches out of Washington state via INTERNATIONAL TELCOM, LTD.
    ** ophone.net – Service active
    ** freecalltheworld.com – Service active but recently “moved” to a provider that probably isn’t being sued; actual number 218-936-6452, TEKSTAR COMMUNICATIONS, INC., switched out of Mahnomen, Minnesota, population 1,176. Old number was 712-338-8849, GREAT LAKES COMMUNICATION CORP, switched out of Milford, Iowa, population 2,441.

    You can believe that there are many more.

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  41. [...] has been taken offline after a flurry of legal action by a very pissed off [...]

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  43. [...] AT&T Gets a $2 million USD phone bill. Well, at least now we know who was fronting FuturePhone some arbitrage. The question is: will this cause the rules to change so that rural carriers don’t get subsidized anymore or will it change the nature of the subsidy? Time will tell. [...]

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  44. [...] empire is finding new ways to fight back — according to FreeConference.com, another rural-ISP free-calling operator, major carriers Cingular, Qwest and Sprint are actively blocking users trying to call [...]

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  45. [...] what, AT&T didn’t like the bill they had to foot for all those calls to Iowa and they sued AllFreeCalls, FuturePhone, and a number [...]

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  46. [...] some of the free-calling concerns who folded their tents at the first sign of legal pressure, FreeConference.com is going to fight for its rights, shown in part by its filing of an antitrust [...]

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  47. [...] some of the free-calling concerns who folded their tents at the first sign of legal pressure, FreeConference.com is going to fight for its rights, shown in part by its filing of an antitrust [...]

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  48. [...] it’s Futurephone! The international free-calling service that was shut down due to legal pressure from AT&T is readying a formal complaint with the FCC, part of what it calls a “very strong legal [...]

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  49. [...] bottom line and that must have drove thousands to the system and site. according to another site, GigaOM, AT&T was “stuck” with a $2 million phone bill for the calls that passed through [...]

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  50. [...] out the February 7th, 2007 entry on Gigaom.com: Guess who got stuck with a big bill for all those “free” international calls touted by outfits [...]

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  51. FCC’s Martin: No Blocking or Degrading…Phone Calls…

    FCC Chairman Kevin Martin has issued a stern warning to telecom carriers that they have no right to block or degrade…phone calls. While the concept of blocking or degrading has been a flashpoint in the net neutrality debate, this go-around……

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  52. [...] was wondering what those free conference calling sites were all about (apparently they’re in Iowa, whodathunkit?) Trackback Saturday, May 5, 2007 [...]

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  53. [...] was wondering what those free conference calling sites were all about (apparently they’re in Iowa, whodathunkit?) Trackback Saturday, May 5, 2007 [...]

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  54. [...] several months later, according to the February 7th, 2007 entry on Gigaom.com: Guess who got stuck with a big bill for all those “free” international calls touted by outfits [...]

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  55. I think it is lame that we need to legislate against stupidity! In this case, AT&Ts Stupidity will probably result in some changes in Telecoms legislation, just because they are the big boys.

    Then again, some guy probably in India is making a lot of money with the willing Assistance of an IA Telco.

    What needs to happen is that the settlement fees should NOT be shared with a third party, rather remain between telcos. Any sharing with end users or customers should be considered abuse.

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  56. Markos, that won’t work either. Then you’ll simply have the LEC’s themselves creating programs like this, without the help of 3rd parties. They’ll create their own “marketing divisions”, and then they won’t have to share anything with anyone.

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  57. ATT is ripping off people but does not want to pay for calls people made to Iowa telecommunication companies. Posts like this are usually made by people affiliated with ATT in one or other way. I know laws and the way telecommunication companies work. There is only one loophole in this situation. ATT is the biggest telecommunication company in the US and has a lot of money and especially power. So in this situation futurephone against ATT is like a normal person against a president. It does not matter who is right but it is known who wins. I hope the truth will be uncovered and won’t be hidden in the court papers this time. Futurephone, keep up fighting for what is truly yours but make no mistake and keep all the communication strictly thru the mail only and ATT will most likely offer you a good compensation just to close out on this one. Once again this is only my opinion as an independent telecommunication expert. I am not affiliated with ATT or futurephone in any way.
    Sincerely,
    Andriy Khyzhnyy
    andreyusa2002@yahoo.com

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  58. Also, if you think this is a troublesome example of “regulatory arbitrage”, what about the “emissions trading” economies that are being created as a result of US environmental policy.

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  59. South Korea Finland and Sweden have 100Mbps fiber optic broadband for less than the standard ADSL rate offered in the Bank of England owned “United States Corporation” founded 1871 in America, of about $29.95 US, yet US taxpayers have already paid a corporate welfare subsidy for Big Telcos to roll out fiber optic cable in the US. They have left the ripped off taxpayer with old copper wire, slow narrower band service, and higher fees for inferior technology. Not ever satisfied, Big Telco campaign$ and lobbie$ now to bill customers with higher INBOUND traffic, higher fees for more bandwidth. Even little public advocate bloggers hosting sites with suddenly popular web page content are forced out of their non-profitable self paid “markets”, after being strong armed by higher inbound traffic fees. The most critical and current topics of discussion are therefore muffled by the very commercial interest forces public advocate web page operators hope to expose or explain. If all US American internet customers had properly been provided the bandwidth, as intended by the federal subsidies and tax breaks given them, they already paid for in tax payer subsidies to Big Telco, and it’s “Ma”, there would be no possible so called “bottle necking” or traffic stricture of bandwith for these predominately text based free speech web pages of any socio-political bent, let alone anyone desiring reasonable speeds for free international VoIP telephony, or even high definition streaming video. Let money not be equivalent to speech any more than it already has become, especially in the last few years. Money should not be speech, nor corporations treated as persons, however more vociferous and possessed of legal rights than a human being.

    Shame on the big telcos. When they were broken up by The US Department of Justice, their wires and any other networks really should have been nationalized. The US tax payer paid to subsidize them at every step of infrastructure building, while also paying their ever increasing call rates. Big Telco’s rates never came down even a penny fraction per minute unless new technologies were developed by third party startup telcos and entrepreneurs which expanded call carrying capacity of copper lines, or broadband circuits which Big Telco, except in 1982′s AT&T “breakup”, always managed to pay enough politicians through Washington and state lobbyists to continually monopolize. It took from 1974 to 1982 to accomplish this semblance of an anti-trust action.

    The Far Future?
    If some day in the globalist future, citizens have become Borg like machine enhanced corporate entities, they could by virtue of parallel processing on the order of a SETI project, Matrix plug their collective hive consciousness into Big Telco’s (or some MegaCOM entity then) network system, supplanting it with their own scary Utopian nightmare society, and taking control until the fleshy part of them is completely excised. It would be ultimate justice for the elite servants of our global invisible master. He waits to collect their “souls” on a little flash memory keychain called Hell. Inventor Ray Kurzweil seems to think the time is not far off.

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  60. [...] the closure of FuturePhone as highlighted in an article on GigaOm this morning, it seems like the end is near for the “free” calling companies. AT&T is going [...]

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  61. There is nothing illegal about what futurephone did and will do again. The IXC’s are playing a pretty risky game with there international busines. If the Iowa court rules they are an ISP, they will be back in business and the carriers will owe them alot of money.

    They hae filed some doc’swith the FCC that have very good arguments.

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  62. There may not be anything illegal…as this is a loophole, but it is more than UNETHICAL & IMMORAL. And surprise, surprise, if it is unethical and immoral it is for all intensive purposes illegal. This will be decided to be nothing more than what it really is, traffic pumping.

    No way an RLEC, ILEC, or whatever entity was routing traffic with a normal billing rate to AT&T, Sprint, etal. of $20K monthly goes to $2.2 million monthly. This is ridiculous & laughable and will be determined by the FCC for what is is, a billing scheme.

    Ask any auditor of the telco’s & they will tell you it is not illegal but they know that it is unethical & immoral and they are willing to go along with all of this because the telco doesn’t balk now when they are presented an exorbitant audit fee.

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  63. Normally I wouldn’t respond to online postings but yours was just calling out for some adjustment.

    “unethical & immoral”

    “intensive purposes ”

    “No way an RLEC, ILEC, or whatever entity was routing traffic with a normal billing rate to AT&T, Sprint, etal. of $20K monthly goes to $2.2 million monthly.”

    Wow.

    First, you should get your money back from whatever law school you think you went to. What specifically makes this service “UNETHICAL & IMMORAL”? Are they killing baby pandas and selling their brains to illegal research facilities in Guam? Are they forcing people into the sex trade in the Virgin Islands? Does PUTTING IT IN ALL CAPS make it true? You have successfully and inadvertently given the perfect *correct* example of “begging the question” with your follow-up, “Surprise, surprise!”

    Second, it’s not “intensive purposes” it’s “intents and purposes”. What the hell are “intensive purposes”??? You aren’t an expert if you don’t even know how to spell phrases you try to use to position yourself as an expert – it just makes you look dumb.

    “Ask any auditor of the telco’s & they will tell you it is not illegal but they know that it is unethical & immoral and they are willing to go along with all of this because the telco doesn’t balk now when they are presented an exorbitant audit fee.”

    Wow, did you hear that on the Drudge Report … or was it Dr. Phil? You’ve certainly got a craft ahead of you, weaving conspiracy and complacency as well as you do. Watch out Savage, another neocon is on the rise! Everyone (me!) says so, so it must be true! Ask *any* auditor!

    Finally, AT&T’s having a large bill isn’t proof of anything other than they got stuck with a larger bill than expected – just like millions of AT&T’s customers. Couldn’t have happened to a nicer company.

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  64. Does this include the majicjack that is currently being marketed?

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  65. [...] Paul Kapustka does a great job in GigaOM of dissecting the apparent fall of “free” international VoIP service provider FuturePhone. [...]

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  66. [...] 在这里看到了这种免费国际长途的运作原理。大概就是说,在美国打长途电话到一些乡村地区,会占用那些当地电话公司的线路,这时像AT&T这样的大公司就需要支付一些线路占用费用。于是那些公司通过voip技术,把转接的国际长途的成本降到非常低,而赚取其与AT&T支付的线路占用费之间的差价。这样,其它州的电话用户越往这些偏僻的地方打长途电话,这些公司就可以从AT&T那里套更多的钱。之前的号码,和上面的三个号码都是Iowa州的,原因是Iowa州的这种termination fee高于通常的13美分,更容易赚到钱。AT&T一个月的支付额甚至可以达到2,000,000美元之多。当然这种套利活动还是引来了官司,包括施压于allfreecalls.net这样的公司,中止提供接入号码等。 [...]

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  67. [...] clearly companies like Erickson’s, which appear to be benefiting from an arbitrage play that boosts costs for carriers that have to terminate calls on higher-cost rural lines, haven’t been morally repugnant [...]

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  68. nothing

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  69. This was a very interesting read. The comments are at least as interesting as the story. I wish there was some follow-up. I’ll have to research this story further to see what has happened since this was published.

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