Telcos Dodge Suit Claiming They Overcharged For Wiretaps, But At Least They'll Have To Pay Their Own Legal Costs

from the not-so-hard-justice dept

AT&T and Verizon's ultra-close relationship with government surveillance efforts have been profitable in innumerable ways. Obviously being a loyal patriot means you'll have a better chance of grabbing multi-billion dollar military and government communications contracts. Carriers also pass on most of the costs of outfitting their network for easier surveillance (like those live fiber splits AT&T whistleblower Mark Klein exposed) directly to you, the consumer. Lastly as we've discussed more than a few times whenever pricing sheets leak, they make a pretty penny on law enforcement wiretap requests. Maybe a bit too pretty.

Back in 2009, former New York Deputy Attorney General John Prather filed a lawsuit on behalf of the U.S. government, accusing Verizon, AT&T, Sprint and Qwest (now CenturyLink) of overcharging federal, state and city governments for services under CALEA. Prather, who helped lead the NY AG's Organized Crime Task Force from 2002 to 2008 as part of thirty years as a prosecutor, was intimately familiar with wiretap procedure and spent years in charge of invoices for wiretap provisioning. Prather claimed telcos had aggressively been price gouging law enforcement for some time, jacking up prices year over year without any sensible explanation why some wiretaps should cost in some cases $50,000 to $100,000 each.

Prather claims he filed a complaint with the FCC in 2004, who did nothing about it. Prather's lawsuit was dismissed a few months back (pdf) after the court claimed his insights were conjecture in that he didn't provide enough first hand evidence of fraud. That degree of proof was required because, according to telco lawyers, Prather technically couldn't file a whistle blower lawsuit under the False Claim Act and claim he himself was the "original source of the information" -- because he filed the original complaint while working for the government.

As a tiny win however, the court this week stated that phone company lawyers couldn't prove that Prather was filing the lawsuit simply to harass the phone companies, and as such they're be required to at least pay their own legal costs related to the case:

"Furthermore, the phone companies "fail to show that Relator's action was 'clearly vexatious' or 'brought primarily for purposes of harassment' as there is no evidence that relator pursued this litigation merely to annoy or embarrass defendants," the ruling states. "Conversely, Relator asserts that he brought this action 'in an attempt to bring to light the fraud of the telecommunications carriers, and to help insure that the Law Enforcement Agencies would not be hindered in their investigation of crime.'"

Understand that Verizon and AT&T have a long and proud history of taking all manner of subsidies, tax breaks or other incentives for services never delivered, and when they do deliver, over-charging like any good unaccountable government contractor. The combination of excellent lawyers, an apathetic government afraid of taking on larger companies and the fact that phone companies are simply damn good at it -- has historically allowed them to get away with pretty much whatever they've wanted. Actually requiring the phone companies to pay their own lawyers may not not sound like much, but when AT&T and Verizon lawyers are involved, it's dramatically more than you'll usually see in cases like this.

Filed Under: john prather, telco, whistleblowing, wiretap
Companies: at&t, centurylink, qwest, sprint, verizon

The One Telco Exec Who Resisted The NSA Has Been Released From 4+ Years In Jail

from the tell-it-like-it-is dept

If you were around during the reign of Joe Nacchio at Qwest, you already should be aware that he was not particularly well-liked. He was brash and obnoxious and often rubbed people the wrong way. There's a famous story, for example, of him calling up an executive at US West, a company that Qwest bought, which had a building directly across the street from Qwest's headquarters. Moments after the buyout closed, Nacchio got the exec on the phone and supposedly told him he had 15 minutes to change the sign on the building from US West to Qwest. Qwest collapsed in a somewhat spectacular manner not long after that, with some comparing it to the Enron collapse -- a lot of hype and stock pumping built on very little substance. A few years later, Nacchio was famously convicted of insider trading -- and certainly many people who had witnessed his earlier antics reveled in that result.

However, it was only later that it started to come out that Nacchio was alone among all of the major telco execs to tell the NSA to get lost when they came calling, demanding the ability to basically tap Qwest's entire network. For years, Nacchio has insisted that the entire lawsuit against him was retaliation for his refusal. When he first made those claims, it sounded far fetched and ridiculous. However, in the intervening years, as more and more details of the NSA's activities have become clear, Nacchio's initial arguments seem a hell of a lot more plausible.

It turns out that Nacchio was just released from prison after his 54 month sentence was completed. The WSJ has an odd but entertaining (and unfortunately paywalled -- though, you can get around it if you Google the title) article about his life in prison, where he apparently came out much healthier than he went in (lots of exercise) and is now best buddies with some former drug dealers who had his back in prison. One of whom, who goes by the name Spoonie, calls Nacchio "Joe-ski-luv" and says that they're best friends. "If he ever needs a lung or a bone, I'm there." Right.

But, more interesting is the tidbit further down about the NSA stuff:

Mr. Nacchio said he still believes his insider-trading prosecution was government retaliation for rebuffing requests in 2001 from the National Security Agency to access his customers' phone records. His plans to use that belief as a defense at trial never materialized; some of the evidence he wanted to use was deemed classified and barred from being introduced.

To Mr. Nacchio, the revelations of former NSA contractor Edward Snowden, who leaked documents saying the agency monitors the email and phone records of Americans, have justified his own stance. He contended the NSA's request was illegal.

"I feel vindicated," he said. "I never broke the law, and I never will."

An NSA spokeswoman declined to comment.

I would imagine that Nacchio could add quite a bit of useful information to the ongoing debate. And, in fact, it appears he intends to do so, with plans to write a book about "Americans' loss of liberty based on his experiences with the NSA and other government agencies." I look forward to reading it.

Filed Under: insider trading, jail, joe nacchio, joseph nacchio, nsa, nsa surveillance
Companies: qwest

Qwest, CenturyLink Merge, Create Even Bigger Marginally-Relevant USF Money Pit

from the bigger-does-not-mean-better dept

Qwest was founded in 1996 by Philip Anschutz, who at the time owned the Southern Pacific Railroad and used the opportunity to deploy fiber lines along railroad tracks. It seems like only yesterday that Qwest paid $45 billion to acquire US West in 2000, one of seven baby bells created by the antitrust breakup of AT&T in 1983. Since then, Qwest has stumbled through accounting scandals and watched its stock plummet as the carrier struggled with traditional voice defections without a wireless division to buoy revenues. Meanwhile, it almost was yesterday that CenturyTel merged with Embarq to create "CenturyLink." This morning Qwest and CenturyLink announced they in turn would be merging in a deal worth $22.4 billion (including $11.8 billion in Qwest debt).

At first glimpse it's not entirely clear what the point of the merger is, unless the two companies were simply interested in losing landline and last-generation DSL customers to cable competitors even faster. Neither company has exactly been lighting it up on the network upgrade front -- and Qwest has spent most of the last few years trying to trim debt for an acquisition instead of investing back into the network. The result is a company with aging last-mile infrastructure who (in the markets where it actually sees competition) pits slower DSL against faster alternatives like cable DOCSIS 3.0 technology or community fiber (which they have spent millions suing and fighting in Utah and Washington State).

Creating a larger company doesn't magically spawn a wireless division, and the company is still going to need substantially more cash to upgrade all of that outdated copper if they want to stay relevant. They may be thinking that by merging they can create a "too big to fail" super-rural telco with a better shot of getting USF and stimulus funds. As we've long noted, the USF is a very, very broken program that funnels money to carriers with historically little to no oversight into how that money is spent (and $25 billion has been dumped into e-Rate alone since 1998). Qwest recently applied for $350 million in federal stimulus funds, and lobbyists have been pushing the FCC to expand the USF to cover residential broadband and give more of that money to bigger carriers.

So the result will be a new, massive phone company primarily serving uncompetitive, rural markets using outdated last mile connections, with consumers helped through this transition via a support infrastructure that just grew incredibly fast. All of this will be propped up by the historically-broken (but soon to be supposedly "reformed") USF system and taxpayer subsidy, guided by Qwest lobbyists and an FCC with no real interest in improving competition in the sector. Surely this will turn out well for everybody involved, right?

Filed Under: usf
Companies: embarq, qwest

News.com Prevents Falsely Accused Grandmother Of Getting Kicked Off The Internet By The MPAA

from the but-who-will-protect-anyone-else? dept

One of the problems we've had with the whole "three strikes" concept that would kick people off the internet due to accusations, not convictions, of file sharing, is the fact that we hear all the time about innocent users accused of file sharing. Greg Sandoval, over at News.com recently came across a grandmother who was falsely accused multiple times of file sharing, and her ISP, Qwest, was threatening to kick her off the internet. We had not heard that Qwest had signed on with a "three strikes" program, so it's a bit of news that it's one of the companies who will accept bogus accusations. Not only that, but Qwest even told her that no other provider would grant her service because Qwest would let those other service providers "know her name and what she did." Thanks, Qwest!

The problem, of course, was that Cathi Paradiso didn't share any of the movies or TV shows she was accused of sharing, and she works from home as a recruiter -- so losing her internet access would be devastating. But the only way she got Qwest to back down was because Sandoval and News.com became interested in the story and convinced Qwest to look deeper. But if Paradiso hadn't been able to draw attention to herself from the press, she would have had no recourse. There was no one she could appeal to, and no official process to respond to the bogus claims of Hollywood. She got lucky that News.com was willing to pick up her story and contact Qwest, but what about anyone else threatened with bogus notices? Meanwhile, BayTSP, the company whose "evidence" has been shown to be flimsy and easily falsified in the past, stands by accusing her of file sharing, saying it was her own fault for having an open WiFi network, suggesting there's something inherently wrong with sharing your WiFi. Yes, the company stands by its false accusation. Nice company.

Filed Under: due process, false accusation, file sharing, three strikes
Companies: baytsp, qwest

Soon, 200kbps Might No Longer Be Considered Broadband

from the 14.4k-seems-like-broadband-when-you're-used-to-2.4 dept

While we wait for the details of President-Elect Obama's "broadband stimulus" package to emerge, one aspect of such a plan hasn't gotten a lot of attention: just exactly what the government will consider to be a broadband connection. For a long time, the FCC considered anything that delivered over 200kbps downstream to be broadband, though last year, it raised the minimum cutoff to 768kbps. It's not a coincidence that's the minimum speed offered by many cable modem or DSL providers, making it seem as if the government standards were shoehorned to fit the market, rather than designed to encourage any growth or higher levels of service. So a key part of any broadband plan will be where the administration sets the bar for what's considered broadband, and what will be eligible for the government benefits. For what it's worth, Qwest has said broadband should be considered to be a minimum of 7Mbps, corresponding to service it's currently rolling out. It doesn't seem likely that the government would make the leap from 768kbps to 7Mbps in one fell swoop, but only by setting the minimum at a reasonable level -- and holding incumbent telcos to their commitments -- will broadband policy stand a chance of being effective.

Filed Under: broadband, definition
Companies: qwest

Exploiting Telco Regulations For Free Calls And For Profit (Lots And Lots Of Profit)

from the so-easy,-it's-almost-criminal... dept

Earlier this year, we wrote about how suddenly a bunch of "free" calling services were popping up that all seemed to use phone numbers in Iowa. This included a service that would let you call an Iowa number and from there call anywhere in the world for free as well as a variety of "free conference calling" services. All of these systems were actually exploiting some legacy telco regulations, that were officially designed to help rural telcos get extra money to build out more rural service. Basically, the government allowed rural telcos to charge high termination fees to other telcos when calls from their lines terminated on one of the rural telco's lines. So, if you had AT&T and called your cousin in Iowa who had some small rural telco, AT&T would actually have to pay that telco some charge per minute, with the idea being that the telcos would use that money to invest in infrastructure. Of course, the infrastructure they invested in wasn't exactly building more lines to wire up others in the town, but in VoIP systems so they could reroute calls in to anywhere else, and then team up with various online sites to get as many calls as possible routed through those systems. Then they could just sit back and collect the millions of dollars rolling in from telcos. Broadband Reports points us to an article at the Wall Street Journal going into more details about how this happened -- and how the FCC is now scrambling a bit to see if there's a way they can stop it. In the meantime, the WSJ piece notes that while the telcos have been told by the FCC that they have to keep connecting these calls, they've simply stopped paying any of the termination fees as they await the results of the various lawsuits. Of course, all that's done for now is made the various free conference call services switch to other rural telcos in other states. Eventually, though, they'll run out of other states to go to (or the regulators will finally realize how their regulations are being exploited) and the little regulatory exploit will go away.

Filed Under: arbitrage, free conference calls, iowa, telcos, termination fees
Companies: at&t, fcc, freeconference.com, qwest, sprint, verizon