FreeConference.com, turns around sues AT&T

23 Comments

legal-courts.jpgUnlike 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 lawsuit against AT&T.

The lawsuit, filed last Friday in the U.S. District Court in Washington, D.C., mainly asks the court to immediately order AT&T to stop blocking calls from its wireless subscribers to FreeConference.com’s access numbers. The blocking of calls, which AT&T says is permissible under its terms of service agreements, has caused no small amount of controversy and seems headed for an eventual debate at the FCC.

Recognizing, however, that the deliberative process might take more time than they can afford, FreeConference.com went ahead seeking the injunction, which it claims is necessary due to AT&T’s alleged infractions of antitrust law as well as the Communications Act. As its suit says:

Plaintiff seeks injunctive relief in part because there is no adequate remedy at law to prevent the imminent destruction of FreeConference’s business and reputation on account of AT&T’s unlawful self-help and unilateral refusal to deal with FreeConference’s customers…

Several of the Internet-based free-calling operations, including FuturePhone and FonPods, went offline after becoming the focus of pressure from AT&T lawsuits. FreeConference.com, however, is showing more resiliency, both in comments from CEO Alex Cory on previous posts and on the company’s website, where it has a FAQ page detailing its side of the issue.

Cory was not available Tuesday to comment on the lawsuit. , and AT&T representatives have not yet responded to a request for comments. UPDATE: AT&T spokesperson Michael Balmoris has this to say about the lawsuit:

Their legal claims are baseless and their attempt to portray their fraudulent service as “free” is a sham. There is no such thing as a free lunch, and consumers and business customers are the ones who will be left holding the bag if these types of scams are allowed to continue.

According to FreeConference, AT&T has 60 days to respond to the lawsuit.

UPDATE #2: FreeConference CEO Alex Cory adds this comment:

We offer customers a free conferencing service. The “sham” here is the story from Cingular/AT&T that they are paying excessive termination fees without mentioning that they are receiving long distance revenues for placing these calls. Our customers tell us they are paying Cingular a rate of 10 cents a minute if they stay within their allowed minutes, and
40 cents a minute if they go over. The rural telcos running free conferencing services are collecting about 4 cents per minute on average in publicly filed termination fees. AT&T should not be selectively blocking a call that a customer has paid for and should not be hiding
behind the false story that these are costs for which they don’t collect offsetting revenues.

23 Comments

Alex

The lawsuit has been dropped since it was focused on stopping blocking and blocking ceased in April with a clear statement from the FCC that it would step in. That was followed in June with a notice of a proposed rulemaking that also declared the self help tactics of AT&T and others illegal.

This is not a loophole business model. It is a fundamental part of regulations to ensure that there is universal service. Every single carrier pays every other carrier an exchange fee or a termination fee for using their network. Sprint does exactly the same thing and is collecting millions for a handful of customers in Hawaii. AT&T has done the same thing as an IXC trying to increase volume routed through its system to collect more. And the rural system was set up with AT&T’s blessing years ago because the fees for calling out are equally high and AT&T thought it would make money.

In the threads above, there are untruths. If you look up the average long distance collections per minute, the FCC reports in 2004 something between 6 and 7 cents. This number is going up, influenced by increasing use of cell phones, whose plans start typically at 10 cents per minute with penalties for overages. These penalties are part of a billing plan that counts on you paying for minutes you don’t use.

AT&T, Sprint, Verizon, and Qwest are all arguing that they make nothing here, which is nonsense. The termination fees average around 4 cents and the brand new long distance demand (which would not exist without these services) averages 7 or 8 cents. The big carriers are simply trying to recreate monopolies.

Allowing rural carriers to build businesses to generate minutes is not a scam or a loophole. These revenues support adding wireless networks (which AT&T doesn’t want to happen, since they are racing to gobble up these areas), cable systems, and full phone services. People in Iowa want the same thing everyone else wants, but it is very expensive to provide in low population density areas.

Without these revenues, universal service fund taxes will go up and you will pay anyway but get nothing for your money. Instead of this, you can support letting people buy a service with revenues shared across the supply chain and the market will drive revenues to these areas for investment in local services. It will not drive up your costs as a user (like the USF does).

This is not a fly by night operation by the way. This specific business has been operating since 2000, but these practices have been around for decades. These practices have been challenged by AT&T repeatedly and failed, but AT&T keeps at it because they can flout the law with impunity and make it too expensive for small companies to recover the damages. They use their legal department as a profit center. So does Qwest. The ethics of these companies is pretty clear (see what just happened to the last CEO of Qwest). You use their services because you have little choice. And their hysterical lies about free conferencing services should be seen in that light.

Elizabeth M.

I’m a user of FreeConference.com and when I heard about the issue of blocked calls, I complained to my wireless provider. The wireless company actually called me back this morning, and presented the position that was mentioned above in Update #2, that the termination fees to complete these calls to FreeConference.com are higher than those of a normal long distance call (similar to the way that the termination fees to complete, say, a call to India might be more than to complete a long distance call within the United States).

I don’t think that it’s a valid argument on FreeConference.com’s part to say that even though the termination fees are higher on these calls, because the wireless providers are still making money on these calls, it is acceptable for them to eat the costs. The wireless providers base their pricing on their costs to complete the calls. If the FreeConference.com calls are more expensive for them to complete, then I understand that they may need to reevaluate the costs that they pass on to their customers, or to make the decision that these calls are a cost of doing business for them, and they will have to eat the costs. Either way, it is not unreasonable for the wireless providers to have the opportunity to evaluate how they want to handle it.

However, I do not agree with ATT’s position that FreeConference.com is falsely advertising a free service. As someone else mentioned, the service of conference call hosting is free, but the connection costs have never been presented as free (e.g. people knew that they were paying either long distance on their landline or on their cell phones). So on that point, I think that ATT has it wrong.

I don’t know that I have ever been of the mind to defend Big Business against an up-and-coming service, and it’s certainly awkward in this case when I am a user of FreeConference.com and tell friends and family about the service regularly. But, I think that both sides of this issue need to be presented fairly. The way that it was initially presented to me was that the wireless providers were blocking the calls in order to promote their own conference call offerings. No one mentioned that the termination fees were higher and that it cost the wireless providers more to complete each call. So while the anti-trust issue may be an outcome of the wireless providers’ blocking actions, that is not the full story.

Rachel

This whole situation just makes me so mad! The telcos, regardless of how aggrieved they feel by freeconference and others exploiting a “loophole” (which I confess I don’t completely understand and a pretty thorough Google search hasn’t led me to anything that explains it) — well, they’re just on the wrong side. It’s just crazy, mean-spirited and stupid to block selective numbers. This might be a regulatory issue, and it should be resolved. But don’t, don’t make consumers angry and don’t make us pay the price for your regulatory tantrum.

christian

Hello Sandman,

I read all your remarks and frankly,you sound as though you are quite arrogant. Do you not see that this is even more about what a monopoly can do in this country? If they choose they can stop payment to your clec also. How would you like that? Put you out of business. This has turned into more than just a functioning of a business model. It has become a demonstration of how AT&T, Quest, & Sprint and any other long distance carrier attempts to skirt the laws. My understanding is that the clecs have federally filed tarrifs and there is a clear process to dispute those tarrifs. Their tactic of blocking traffic and withholding payment is cheap and dirty.

Why would you put a remark like that about the Amish people in a blog? You have access to the internet (for now) and are able to read about them. The only reason you wrote that was to be CALLOUS.

I hope your clec starts getting blocked and doesn’t recieve payment for 6 months.

Sandman

Dear Iamforthelittleguy,

You couldn’t be more wrong. There are probably very few readers of this fine blog who are more anti-Bell than I. As a founding member of a ten-year-old CLEC, I’m well aware of the dirty tricks, tactics, and imbalance thriving in this industry.

Perhaps you should re-read my post more clearly. The reality is that this ultimately will not be allowed to continue, and worse, the long-term negative effects on carrier competition will be far reaching beyond the inability of people to make zero-cost conference calls.

Regardless of your position on whether this particular practice should be allowed to continue unfettered, you should be able to take a step back and view it objectively: they are exploiting a loophole, hence “gaming the system”. It is a letter-of-the-law versus a spirit-of-the-law issue.

This particular consortium of “free” providers found a scenario for which the intercarrier compensation agreements didn’t have provisions for, primarily because the technology wasn’t readily or cheaply accessible to provide for these types of services when the agreements were put in place.

The fallout that I speak of is that when the compensation structure is rewritten, the Bells will be able to cite these examples as concrete evidence as to why all competitive carriers are a nuisance and should be granted less connectivity and have more restrictions and regulations in place.

For the Bells, it is a matter of wash, rinse, repeat. They’ve done it before, and they’ll do it again. In the end, this particular “business model” doesn’t help the consumer as it will ultimately be used as a pulpit for more-restricted competition.

-Sandman

Steve

What I find funniest about this is that it represents precisely the situation AT&T wants to get INTO with their internet business — that is, where you (as a non-AT&T direct customer) have to pay AT&T for sending data to AT&T customers.

So on the one front AT&T fights “net neutrality” saying that it’s important that they be able to charge for people accessing their network, but when the tables are turned and rural locations attempt to charge AT&T higher rates for access to THEIR networks, AT&T simply cuts it off.

Iamforthelittleguy

Sandman

ahh another Bell

That is Callous. That is like saying all Americans Speak English.
Explain to everyone how offering a very low-cost service to millions of people is “gaming the system”?
Again do the research and find that the true bad people here are the bells. They change CDR’s, route calls through Canada, and many other things that are Illegal. What they are doing to these companies are illegal actions. Think of it this way, IF they don’t like your business or lets say they start offering TV service somewhere, what is to stop them from blocking the calls to their competitive cable companies? Sounds like unfair business practice to me.

Sandman

Not to sound callous, Christian, but what you are saying is that the Amish and Mennonite community have phones to begin with? If so, couldn’t they call each other? And if they have phones, can’t they then have computers?

Everyone, please pardon my derailing of the thread, but I don’t think that a few people gaming the system and lining their pockets with profits should be painted with a human interest brush.

I’m no fan of AT&T by any measure, but now that the cat is out of the bag, it is time to close the loophole. In the long-run, the few exploiters of the system make it much harder for legitimate competition to get fair and equal access, because mighty Ma Bell can waggle her crooked old finger at these little upstarts and cry how unfair it is to allow access to their networks to begin with.

Leo Wrobel

What is the difference between Mr. Corey setting up shop in Iowa, and Citibank setting up in South Dakota, where there are liberal usury laws. Given a choice however between free conference calls and 32% credit card interest rates, I think I know the lesser of the two evils and which one really needs reform. I guess it’s a great time to be big. See: http://www.phoneplusmag.com/articles/671soap.html
And before people start crying tears for the new at&t, consider the nasty practices at&t has perfected over the years toward any would-be competitor. Visit http://www.tlc-labs.com. Scroll down on the front page of the site to see what happens to the OTHER folks call detail records and revenues – the same kinds of records that measure the access charges at&t resents paying in this case. Guess who often ends up with someone else’s money?… I can’t tell you their name so I’ll just give you their initials………….
A T T.

Draw your own conclusions.

Leo A. Wrobel

Iamforthelittleguy

John or Clay

Which Bell Company do you work for?

The conference companies say that the service is free, not the call. The simple implications that it is “free” is marketing. Such as “free nights and weekends” they are truly not free, you pay your monthly bill for them. “Buy one pair, get one free” you paid for the first pair. All these providers say normal toll charges apply. The consumer is the one being harmed in a case like this and the FCC should stop this today. This is not a loophole, the system has worked this way for many years, and has a set of checks and balances built in for things like this.

Again AT&T Shares revenues today, this very minute. Read this article about AT&T and 900 number revenue sharing. They are far worse than these small companies trying to offer a well meaning service.

http://www.advancedtele.com/900_Numbers_History.htm

christian

These long distance carriers are blocking more than just numbers. I have heard that the long distance carriers (Cingular/AT&T, Quest, and Sprint) are blocking (712)432-3950. If you dial this number from any phone other than a Cingular phone the greeting is “Welcome to the Amish and Mennonite Conference Line.” My friend in the Amish community tells me that this service is used as a form of communication throughout their community. They use it for support, information, and prayer.

Last October the use of the conference line became a necessity as a violent shooting occurred in one of their school houses claiming the lives of five young girls. While the rest of us watched the TV, listened to the radio, searched the internet for information on the shooting, many of the Amish and Mennonite had to huddle around the community phone. This connection to the conference bridge was their only source of what had happened to their community. At this point the conference line became not only a source of information, but began to allow healing and offers of support: healing and support that has continued unabated until now. Cingular, Sprint, and Quest have blocked their access to the conference line and taken away a valuable resource.

The Amish and Mennonite community is a forgiving and gentle community. Long distance companies’ blocking their form of communication is despicable. I am writing this post as a concerned American. If the far reaching hand of these long distance carriers can squash communication with out warning in this community, what is to stop them from squashing another race, religion, or individual?

Paul Kapustka

Phonepods.com is apparently an old site… numbers don’t work anymore.

also: FreeConference CEO Alex Cory has added his comments, we put them in the original post.

Clay Vollers

John has it right. The LEC’s that are providing local numbers to be used in these free calling “businesses” are taking advantage of older termination agreements that are heavily weighted in favor of rural providers. The rural LEC’s are keeping some percentage of the reciprical compensation and passing the rest on to the “free whatever” business. Any LEC that sets up a deal like this understands that they are violating the sprint of the agreement. I’ve seen 10 different versions of free calling/reciprical compensation over the years. In my opinion, none of them are ethical. And, none of them last longer than it takes to modify the compensation regulations (or until their contracts run out and they find that no one will provide them service). As far as reform goes, it appears that AT&T’s position is that the Terms and Conditions of the existing agreements allow them to deny service if there is intensional abuse…this is standard operational proceedure.
If I give you a “drink” of water it doesn’t mean you can suck the well dry providing “free” water to everyone you know, and then bitch because I turned off my faucet. These guys are exploiting loopholes to make themselves rich at everybody else’s expense.

Free "Dumb"

AT&T has no basis for what it says, “free is a sham” HMMM Free nights and weekends ring a bell? Every time one of these guys opens their mouth they put their foot in it. First Cingular says “person to person calls only” guess you can’t use your voicemail. Now this?
This is a classic Monopoly that is trying to push people out of the business and put money in their pocket.
Ask them if they ever hosted 900 services? Who makes the most money from that?

Some folks are wise and some are otherwise.
Tobias Smollett

Paul Kapustka

UPDATE: AT&T has now commented (see post update, above).

John Thacker

What FreeConference is doing is legal, and what AT&T is doing is wrong and illegal. However, FreeConference and the others are taking advantage of regulations in a completely unintended way. Those subsidies are supposed to be for connecting rural residents, not subsidizing calls of people who live outside the rural area. Corporate welfare is corporate welfare, even if the little guy is doing it.

The FCC Commissioners haven’t stepped in yet because no one has filed a formal complaint. There is a proposal currently making its way through the FCC that would reform termination fees by instituting a process of competitive bidding for local phone service in these areas. Companies would bid on the contract in terms of the termination fees that they would accept, and the lowest bidder would win the contract.

It’s an idea that has some chance of settling this dispute about whether the termination charges are excessive, and finding a better way to set the proper charges.

I strongly, strongly, feel that AT&T and the other companies should not be able to block these calls. It’s one of the worst possible things for the phone network, and prevents legitimate arbitrage. But I can’t really support the other companies taking advantage of the regulation and getting corporate welfare, even if it’s legal. Reform is needed.

christian

It has been reported that Sprint is blocking free conference services from cellphones and landlines.

Please put a stop to this unfair practice. It is killing my business. Of course paying $0.25 per minute per caller would kill my business also.

Peter Rad

It’s a shame that the FCC has Martin as a Chairman, otherwise it might have had the stones to tell AT&T (and the other ILECs) to step down. Not even a peep from the FCC. It might be time just to abolish that Agency. It isn’t helping consumers at all.

Adrian Keys

It’s a gamble worth taking as long as FreeConference has the resources to go the long run.

I have seen a similar situation in another country and the smaller guy prevailed…so there is hope.

Steve Morsa

Nice to see someone with the gumption (O.K.; and the money) to take on ATT. Success would of course help all those in this space…with nice benefits accruing to the public.

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