Large telecom carriers complained that free conferencing and similar voice services are a scam that take advantage of a loophole in long-distance price regulations. Small providers of the services complained that the carriers have no right to block their customers' calls.
Late Thursday, the U.S. Federal Communications Commission stepped into the dispute, giving both sides something to cheer about.
The FCC ruled that large carriers cannot resort to the "self-help" measure of blocking calls without its permission. But the agency also said it was suspending the termination fees charged by 39 rural carriers due to "substantial questions raised" about the legality of the long-distance termination fees they collect.
The dispute began early this year, when AT&T Inc., Qwest Communications International Inc. and Sprint Nextel Corp. filed lawsuits against two rural local exchange carriers (LECs) and 10 chat-line service operators in U.S. District Court for the Southern District of Iowa. In March, complained that the three telecom carriers were blocking customers from calling its service.
Conference calling gives its customers free voice conferencing services when they dial a long-distance number provided by the company.
Here's how it works: Under legacy telecom regulations, telecom carriers must pay termination fees when their customers make a long-distance call to a telephone number controlled by a local exchange carrier (LEC). The termination fees vary greatly, from about US$0.01 to $0.13 per minute, with rural LECs generally collecting higher fees.
Conference Calling and similar businesses make money by sending long-distance traffic to LECs with relatively high termination fees and splitting the termination fees with the LECs. Customers calling the service generally have to pay long-distance fees.
Other businesses using the same model include free voice mail services, sex chat lines and services that forward international calls.
AT&T, in an April letter to the FCC, complained that these "traffic-pumping arrangements ... are scams, pure and simple." One rural Iowa LEC changed its termination fees and went from charging AT&T about $2,000 a month to more than $2 million in a single month, wrote James Cicconi, AT&T's senior executive vice president for external and legislative affairs.
"The end result is millions of calls to the advertised phone numbers, millions of dollars in monthly access charge billings, and enormous windfalls both to the ... LEC and the calling service provider, all funded by and their customers, the vast majority of whom never call and want nothing to do with these services," Cicconi wrote.
Alex Cory, CEO of FreeConference parent company Global Conference Partners, said some abuse of termination fees may exist, but his company isn't one of the abusers. FreeConference uses large LECs that generally have termination fees in the $0.03 to $0.04 range, while carriers like AT&T collect close to $0.08 per minute for a long-distance call, he said.
Even with the termination fees LEC partners collect, the long-distance carriers still make money, he said. "Essentially, this is a revenue-sharing business," Cory said. "I continue to be bewildered that the major carriers aren't interested in business models profitable to them."
The major carriers have complained because Conference Calling offers a cheaper service than their own conferencing products, Cory said. "They were looking to shut down competition," he said.
Conference Calling complained to the FCC that AT&T and other carriers were violating the agency's common carrier rules by blocking calls from its customers. FreeConference filed a lawsuit against AT&T in March, but later withdrew it when after it said AT&T stopped blocking its calls. FreeConference continues to have problems with quality of service on telephone networks operated by major carriers, Cory said.
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