Iowa phone firms sued

February 24, 2007|By Bloomberg News

DES MOINES, Iowa -- AT&T Inc. and Qwest Communications International Inc. say several Web companies and Iowa telephone carriers have bilked them of millions in a scheme that lets people throughout the United States call other countries for free.

Web sites offering free chat rooms, podcasts and adult content also are involved, instructing consumers to dial Iowa phone numbers that let them access the services, Qwest said in a complaint filed Feb. 20 against 13 companies. That followed a Jan. 29 complaint from AT&T against eight of the companies.

"These are illegal schemes that hurt American consumers by making them pay for other people's phone calls," AT&T spokesman Michael Balmoris said yesterday. Qwest spokesman Tom McMahon declined to comment on the litigation.

Iowa carriers, including Superior Telephone Cooperative and the Farmers Telephone Co., illegally charged AT&T and Qwest millions of dollars in fees for connecting long-distance customers to the Iowa numbers on their networks, the complaints alleged. Both were filed in U.S. District Court in Des Moines.

AT&T and Qwest said the so-called termination fees charged by the defendant carriers for connecting the calls are fraudulent because the phone numbers are rarely, if ever, the final destination for long-distance calls. Rather, they serve as gateways that pump millions of calls to end points outside the local Iowa networks, AT&T said. It filed the complaint through its long-distance division.

The carriers profit from the termination fees, which range from 4 cents to 13 cents per minute, and provide the free-calling services with kickbacks, the complaints alleged.

The free-calling services' Web sites urge consumers to "make as many calls to their Iowa numbers as possible, and to stay on the call for as long as possible," Qwest said in its complaint. In doing so, they help the local Iowa carriers to "substantially inflate" the number of calls routed through their networks, Qwest said.

Superior and Farmers, both closely held, countersued Feb. 5, saying AT&T has "deliberately flouted its legal obligations" by refusing to pay almost $8.9 million in termination fees since October.

The Federal Communications Commission has never found access charges related to international calls to be illegal, said Jonathan Canis, a Washington-based attorney who is representing some Iowa carriers, including Farmers and Superior.

"The law on this is ambiguous, and that's because the FCC, which has exclusive jurisdiction over international traffic and Internet-based traffic, has refused to clarify the regulatory status of this traffic," Canis said.

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