AT&T’s ‘Free Call’ Bill: $2 Million

46 Comments

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.

46 Comments

Tony Cochran

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.

BLH

Does this include the majicjack that is currently being marketed?

Brad

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.

Phil

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.

Clem

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.

Alois Funk

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.

jbrock

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.

Andriy Khyzhnyy

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

Jerid

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.

Markos

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.

mohammed kullab

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Sandman

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.

James Gleason

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.

Robert Rosenberg

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).

Peter

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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