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[qi:090] Updated: Well the wheels of regulatory justice are certainly spinning a lot faster these days. The Federal Communications Commission has decided to investigate Google’s refusal to connect its Google (s goog) Voice callers to certain numbers in rural areas. The agency has stepped in after AT&T (s t) two weeks ago complained that if Google wanted to provide phone services it needed to act like a phone company — which means connecting calls to all telephone lines. Yesterday, members of Congress also called on the FCC to investigate the search giant.
Apparently, the FCC isn’t buying Google’s line that it’s an Internet application provider rather than a phone company. In a letter issued today, the FCC asks Google several questions seeking to discover:
- Details on how the service works;
- How the money flows from the consumer to Google and then from Google to the back-end bandwidth providers;
- If Google thinks that the invitation-only nature of the service means it doesn’t fall under the rubric of the Communications Act of 1934 that created the FCC;
- What Google tells the users about the service’s limitations;
- Which service providers Google contracts with to deliver the service and how much Google pays them.
Responses are due by Oct. 28. The FCC is operating in a kind of a gray area here given that its role is to control the airwaves and the nation’s telecommunications infrastructure. Its decision to get involved may be driven by political pressure, but I think it’s also because the FCC is willing to extend its mandate beyond traditional telecommunications services, as it recognizes that we need to bridge the gap between our old communications infrastructure and our coming broadband infrastructure.
Update: Google has posted its response to the FCC, noting that:
The reason we restrict calls to certain local phone carriers’ numbers is simple. Not only do they charge exorbitant termination rates for calls, but they also partner with adult sex chat lines and “free” conference calling centers to drive high volumes of traffic. This practice has been called “access stimulation” or “traffic pumping” (clearly by someone with a sense of humor). Google Voice is a free application and we want to keep it that way for all our users — which we could not afford to do if we paid these ludicrously high charges.
Essentially it argues that it doesn’t terminate calls to those lines not because they are rural, but because such lines are also used by sex lines and free conference calls to artificially inflate their revenues by charging callers high termination fees. We explain the concept in posts here and here:
Typically, long-distance or cellular providers pay local telcos a termination fee for each call that is completed. In rural areas where regional telcos have higher-than-usual termination fees, telcos and free-calling concerns have partnered to build businesses where some amount of profit is based on the spread between what the call-completion costs and what they charge the long-distance provider.
While it tries to distract us with images of sex lines, I’m still unclear as to whether Google is objecting to having to pay more to terminate calls because rural areas have higher call termination fees (owing to the lower population density to support the infrastructure buildout,) or if somehow it can prove that it’s being victimized by sex and free conference lines trying to profit off charging Google’s bandwidth providers more to terminate calls to those numbers. The former is just the cost of doing business for a telecommunications provider, and the latter is a loophole that Google rivals like AT&T have been complaining about for years. No wonder Google would rather be an “Internet application” instead of a phone company.