MCI defends call termination practices

MCI said in a response filed this afternoon with Federal Bankruptcy Judge Arthur Gonzalez that its call termination practices comply with legal and regulatory requirements and that accuser AT&T has “publicly confirmed” it engages in the same practices. MCI based its response on an internal analysis as well as a preliminary review conducted by a Washington, D.C.-based law firm hired by the carrier.

Gonzalez on Friday ordered the start of the confirmation hearing that will determine whether MCI emerges from bankruptcy protection delayed to Sept. 8 from the original Aug. 8. The decision was prompted by last week’s allegations made by AT&T, SBC Communications and Verizon Communications that MCI had misidentified and redirected long-distance calls in violation of FCC rules in order to avoid paying access charges.

AT&T alleged MCI, in a scheme dubbed “The Canadian Gateway Project,” routed domestic long-distance calls through a least-cost routing (LCR) carrier, which sent calls to Canadian telco Manitoba Telephone System. Manitoba Tel would then pass the calls along to Bell Canada, which in turn sent them along to AT&T, which then terminated the calls and unwittingly paid the termination fees that should have been paid by MCI.

MCI said in its filing that AT&T’s claims were “cynical and groundless” and intended to delay and derail MCI’s emergence from bankruptcy protection, which was expected this fall. MCI took particular issue with AT&T’s alleged refusal to produce “documents, witnesses or other evidence” to substantiate its claims. This alleged failure indicates that AT&T’s “true motivation is to … generate negative publicity and derail [MCI’s] reorganization efforts,” said the filing.

Previously, MCI defended its use of LCR carriers that often are charged lower termination fees than large telcos. MCI said that about 8% of its traffic is handled by LCRs. MCI said in its filing that it routed traffic to Onvoy Communications which then routed the traffic through Canada. MCI said in a statement it has not routed traffic through Canada directly, “though there would be nothing illegal about such a practice if it did.”

A source familiar with MCI’s filing said the carrier believes AT&T engages in similar practices in Mexico and that the termination fees it charges Bell Canada more than compensate for any access charges it has been forced to pay to terminate MCI-originated calls.

However, a source familiar with AT&T’s agreement with Bell Canada said that it largely is a reciprocal arrangement. “It’s similar to a bucket-of-minutes plan involving millions of minutes that flow between the two carriers. They simply agree to carry each other’s traffic, up to a certain point,” said the source.

AT&T spokeswoman Claudia Jones said AT&T isn’t arguing against LCR, but is questioning how MCI uses the practice. “There are rules,” Jones said. “But MCI isn’t trying to pay less, they don’t want to pay anything. Worse, they’re trying to make their competitors pay for them.”

Jones further said MCI purposely was duplicitous in its methods. “They went through a series of carriers to deceive us. That’s the point of the allegation.”

She confirmed that AT&T routinely uses LCR carriers for calls that are terminated in Mexico to avoid the extremely high termination fees charged by monopoly provider Telmex, but said there is a big difference between this practice and what MCI has been doing. “Our calls actually are terminating in an international location,” Jones said. “MCI’s calls started as domestic calls and could have been terminated as domestic calls.”