Other Shoe Drops: Qwest Asks FCC If It Needs To Pay Iowa Telco Arbitrage Loophole Fees

from the about-time dept

Mon, May 7th 2007 10:53pm — Mike Masnick

In the ongoing saga of services like FreeConference.com using a loophole in Iowa telco regulations to get millions of dollars from large telcos by routing services through Iowa phone numbers, we've been saying for quite some time that the PR people from those online services and the Iowa telcos have been been playing their hand a bit too confidently. While it's true that the big telcos shouldn't have been able to block calls to the Iowa numbers (and the FCC let them know that), the Iowa telcos should have realized that this whole business model was based on out-of-date telco regulations that allowed them to rip off the big telcos. The fact that they started releasing press releases about how they were protecting the little guy seemed a bit much. Now, Bob writes in to let us know that Qwest has gone to the FCC to see if they can get away without paying the fees, noting that this clearly not what the termination fees were intended for. Given the FCC's chummy relationship with the big telcos, don't be surprised if the FCC agrees. Yes, it's great that these services have popped up, but basing your entire business model on out-of-date regulations seems pretty short-sighted.

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14 Comments

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antimatter3009, 8 May 2007 @ 12:04am

Shortsighted or not...
While I agree with you, they certainly made out well with their business plan. Look at it this way. They didn't do anything illegal, so they should get to keep all the money they've made so far. If the law changes, they shut down and walk away with millions. Not a bad deal for them.
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Anonymous Coward, 8 May 2007 @ 12:32am

Fees
I wonder if I should write a letter to the FCC asking them if should have to pay some of the extra fees my telco charges me. It seems similar in principle to me.
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cryptozoologist, 8 May 2007 @ 5:54am

short sighted business models
"but basing your entire business model on out-of-date regulations seems pretty short-sighted."

yeah, like anyone who bases their business model on out-of-date copyright laws.
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Sanguine Dream, 8 May 2007 @ 6:07am

Let them off without paying fees?
Hell I would honestly not be surprised if the telcos didn't pay the FCC to get some new (and outrageously high) fees put in place just to get that money back out of those companies.
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Bob, 8 May 2007 @ 6:56am

Before everyone “beats up” on the local Iowa Companies, it must be pointed out that they are merely following a tariff agreed to by AT&T and all the other LD carriers in 1996.
The problem AT&T now faces, is that in 1996 no one offered unlimited LD calling for a flat rate.
In 1996 ATT and the others did not object to high connection charges, since the LD carriers just passed the cost along, in the “per minute” fee they charged all callers.

Jump ahead to 2006/2007 and ATT and most carriers are offering unlimited long distance calling for a flat rate.
Suddenly those connection rates ATT and the others agreed upon, don’t look good.
Like spoiled little children, ATT and the others don’t want to connect calls to the Iowa companies or pay the connection fee.

I’m sure ATT thinks they can beat the local guys in Iowa.
“We’ll crush Farmers Telephone and Superior Telephone and Great Lakes Telephone before we pay them a dime! Don’t they know we’re the all powerful ATT/Verizon/Qwest. We own Washington! We own the FCC”

Just remember, the annual revenue of one of the local Iowa carriers, was about $2-million last year. The chairman of ATT just got retirement package worth 80X that much. In fact, ATT projects a profit for 2007 of $10-Billion.

If they truly wanted to deal with this mess, the major LD’s would put a clause in their contracts, limiting the amount of unlimited minutes. (Vonage and all the other Voip carriers long ago saw the problems with high connection fees and took action)

Hey ATT/Qwest/Verizon: “Time to pay your bar tab!” And then maybe negotiate future lower rates with the guys from Iowa who beat you!
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Jim, 8 May 2007 @ 7:04am

Qwest is taking a big gamble going for broke with a "yes/no" ruling from the FCC.
If the local telcos win, there will be no stopping the brush fire of free services.
And even if they win, they are only contesting calls that were made to Iowa and were re-directed elsewhere.
They don't contest calls that "terminated and remained" in Iowa.
If QWEST does not win, the Federal Appeals Court has a 98% record of upholding FCC decisions.
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Phil, 8 May 2007 @ 7:36am

REA
The Rural Electric Administration created in 1935 for the purpose of bringing electricity to rural areas of the US. It's still around and being used by the large Telcos as a source of funding for projects like providing Cell service in the Philippines. I'll hazard a wild guess that when congress created the REA they had Appalachia and not the Philippines in mind.

Realistically the job of the REA was done in (I'm guessing) about the 70s or so. So for the last 20+ years the REA has been a way for companies to base their "business model on out-of-date regulations".
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Bob, 8 May 2007 @ 9:12am

Don't bame the local telcos for the supposed "out-of-date" regulations. A tariff, is a tariff, is a tariff, is a tariff.
And until ATT and the others started to sell unlimited long distance, no one seemed to mind.
Its nice to see that ATT to many apologists to carry their water.
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Matt Bennett, 8 May 2007 @ 11:18am

Well, come on, it's fraud, really, or something very close. Just because the FCC is chummy with the telcos doesn't mean this whole affair still ain't bullcrap.
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Bob, 8 May 2007 @ 12:14pm

The FCC friendly with the Iowa telcos?
Surely you jest!

After the giant telcos stopped sending calls to Iowa, blocking entire exchanges from getting any calls, it took two (2) months for the FCC to step in and say "oh, by the way, blocking calls is illegal"

And the FCC acted only after the Iowa telcos hired a high priced attorney, and got their Congressional Delegation involved.

The Iowa telcos are abiding e-x-a-c-t-l-y- by rules....rules that ATT and the others embraced as "fair and balanced" in 1996.

God Bless the Iowa Telco's
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telco, 8 May 2007 @ 7:25pm

misinformed
Most of the issues here are the people are very misinformed and don’t know how the system works. People just spit stuff out from what they hear from reporters and don’t know the facts. AT&T , Qwest, Sprint and Verizon all host chat lines. They have to allow this as you cannot block them because you would open yourself to litigation because of first amendment rights. These companies telephone companies have nothing to do with Universal service. They collect a rate per minute and nothing more. They have legal tariffs, all approved by the FCC and AT&T.
AT&T host chat, they host conferencing and collect access just like these Telco’s. AT&T owns a company called Teleport. A CLEC they purchased for 12 billion in 99. They now use if for conferencing. Sprints call center is hosed by a CLEC for the assess fee’s. MCI, well after the Canada routing traffic, do I need to say any more?

FCC needs to fix the system and punish the bells for their self help.
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Bob, 9 May 2007 @ 4:40am

WRONG!
ATT got OUT or the chat line business in 2002. Verizon only operates chatlines in Boston. The have shuttered services everywhere else. Sprint was NEVER in the chatline business.
I think you confuse "chat lines" with conference services.
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telco, 9 May 2007 @ 5:55am

Re: WRONG!
BOB,
AT&T still host chat services, so does Sprint, Verizon and Qwest. They do it, they know they do it and they cannot stop it as it is a violation of the first amendment. Check out livelinks.com. talk121.com Many of the numbers are bells. You cannot dispute the truth. It is in the numbers.
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Bob, 9 May 2007 @ 12:29pm

Stop the Madness
Dude:
The telcos have NOTHING to do with the chat services. The chat services, just like any person, or company, signed up for local phone service.
In these instances, instead of running a factory, or a resturant, the company is running a chat line.
The phone companies, are not connected to them at all. Unless you count the recip comp money they earn, (but then again, they earn that on all inbound minutes from other carriers)
LiveLinks is currently being sued in Georgia in a rape case.
The local telco is not the defendant. The chatline is the defendant.
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