Iowa telcos seek FCC pressure on incumbents

A group of Iowa telcos and their conference calling partners are in Washington this week, hoping to convince the Federal Communications Commission to pressure large incumbents such as AT&T, Embarq, Qwest and Verizon to stop blocking calls and start paying about $20 million in back access charges.

Accompanied by attorney Jonathan E. Canis of Kelley Drye & Warren LLP, the companies are arguing that the current case of call blocking/access fee withholding is just like three previous instances when the FCC found AT&T erred when it decided on its own not to pay the fees associated with completing long-distance calls. And, they say, without pressure from the FCC, none of the incumbents has any incentive to even negotiate those fees or consider a compromise.

“AT&T is allowing customer to call, charging customer to call that network and keeping all of the money,” said David Erickson, president of Free Conference Call Holdings Corp., which offers both no-cost and paid conference calling services. “What they have done here is gone from a situation where they had revenue and some costs, then they complained about the costs and illegally stopped paying the costs and increased their profit in the process. It’s better than business as usual. We are looking to motivate someone to get them to the table.”

AT&T and other incumbents maintain what the Iowa local carriers and their conference calling customers are doing is a scam that capitalizes on the higher access rates paid to rural local exchange carriers to help subsidize rural telephone service. The calls in question are being placed to local phone numbers in Iowa, but actually routed through voice gateways within the Iowa telcos to places all over the world. The Iowa local service providers are paying the conference calling companies what both sides call a marketing fee per call, and then counting on making their money from termination fees paid by the incumbent long-distance companies.

In an April 4 letter to the FCC, James Cicconi, senior executive vice president for external and legislative affairs at AT&T, called this “traffic pumping” and warned that other rural LECs may take up this practice, driving up the cost of long-distance service nationwide.

The Iowa group met Wednesday with staff members of FCC Chairman Kevin Martin, and Commissioners Michael Copps and Robert McDowell. Today, they are meeting with the staff of Commissioners Jonathan Adelstein and Susan Tate.

“Everyone has said they’re glad we are here, that they have heard from AT&T and some of the others, and are glad we are here to tell our side of the story,” said attorney Canis. “We gave them the background and what we emphasized is that we are here because there is a blocking crisis going on. But at bottom, this is a dispute over access charges. It goes back to November when the Bells and big IXCs started a no-pay campaign. The third time in the last decade that they have done this.”

In the other two instances, involving access payments to CLECs and reciprocal compensation, the challengers won the day and AT&T was forced to pay the access charges, he maintains.

“The commission has rejected AT&T’s arguments on this three times already,” Canis said. “We have five or half a dozen cases over the last seven to eight years where FCC has found that refusal to pay access charges was in violation of 201b and 203c sections of the Communications Act. These rulings were against AT&T. I can give a list of precedent as long as your arm that ‘thou shalt not block’ – you cannot block calls to resolve the dispute.”

Canis believes the FCC has already exerted pressure on the incumbents, as they have stopped wholesale blocking of calls to the Iowa numbers, although some calls continue to be blocked.

“We confirmed – several numbers are still being blocked by Verizon, some additional numbers are being blocked by Qwest and possibly Embarq,” Canis said.

In a separate letter to the FCC earlier this week, Embarq denied blocking calls, and said that as a reseller of long-distance services that neither owns nor operates connecting facilities to the Iowa LECs, is not able to block calls.

The main point the companies are making at the FCC, however, is that simply ending the blocking of calls is not enough at this point. The companies want the back access charges paid and some compensation for what they call lost business.

FreeConferenceCalls.com has seen its call volume drop by 100,000 calls or 2 million minutes, Erickson said. In the open letter to the FCC, the company listed non-profit groups whose calls were blocked, including the Kidney Cancer Association and the California Hunger Action Coalition. About 20,000 nonprofit groups use his service, Erickson said, along with schools and government units, corporations, military families and others who are part of the 400,000 registrations with the calling service.

“If you are using it as a business tool, you suffered embarrassment, missed opportunities, maybe missed sales and revenue,” he said. “We know some of our customers went to [other service providers]. We have been frustrated by the loss of our level of service and also our integrity.”

FreeConferenceCall.com had used free calls as a loss leader to draw companies into its paid conference calling, which includes a regular 800-number service for six cents a minute per person, and an unlimited toll-calling service for $99 a month, as well as a data conference service.
Now the company has monetized the free calls through the marketing fees it gets from the local service providers, Erickson said.

Josh Nelson, CEO of Great Lakes Communications, a CLEC since 2005 in Iowa, said his company is owed about $2 million total in access fees and can’t sustain a long legal battle.

“They talk about their costs – we also have fixed costs that we have to continue to pay including new switches that benefit the community,” he said. “If they drag this out for years and years of attorney fees and availability to defend ourselves, it will be hard to exist.”

Canis said his clients are willing to negotiate, but have been rebuffed by the incumbents.

“We offered to settle this stuff and we put some specific proposals on the table,” he said. “We reached out to carriers we are not in litigation with yet to see if we can reach a business-to-business solution. But there is no incentive for the Bells to do that. All of the pressure is on us. That is why we are asking the FCC to get involved and exert some pressure on them.”