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Google vs AT&T: Net Neutrality, or the end of free conference calls?

Google and AT&T are having a spat over “Net Neutrality”.  Google Voice doesn’t pass calls to certain rural carriers because of the high cost of termination in these jurisdictions.  That includes, I’ve been told, our Calliflower conference service which is hosted at a rural carrier as well.  AT&T is trying to convince the FCC that Google Voice is, in fact, a common carrier, and should have to abide by the same rules as they do.  They’ve labeled this a fight over Net Neutrality, which is a mischaracterization.

Hold that thought.

Last week the Iowa Utilities Board came down hard on so-called free conference calling services that operate out of Iowa.  For those unfamiliar with the model, here’s how it works:

  1. All long distance calls made in the United States operate on an inter-carrier payment scheme, where one carrier collects money from a customer, and then pays another carrier to receive that call.
  2. Free conference call services try to locate their services in places where the recipient carrier charges a higher rate than the average, and then receive a share of the revenue that the recipient carrier earns.

It’s arbitrage, pure and simple.

In the old days, when people actually paid for long distance calls by the minute, these schemes didn’t matter much.  However, in today’s environment, where carriers have marketed their plans as having unlimited nation-wide long distance, arbitrage plays between what the carrier charges the customer for service and the price they pay to deliver the calls can cost the carrier money.  Arbitrage is interfering with the carriers marketing plans, and they don’t like it much.  They’re fighting back.

So what did the IUB — Iowa Utilities Board — say?

  1. That termination fees paid by the long distance carriers were to be refunded.  The fees were improperly collected.
  2. That telephone numbers assigned to some of the free conference service providers had to be unassigned and reclaimed.   They had been illegally granted to the service providers in the first place.

Folks at Sprint who’ve been close to this are painting it as a victory, but that may be premature.  The IUB ruling is quite technical, hinging on whether or not the conference service provider is a customer or a business partner.  The long distance carrier is required to pay termination fees when a call terminates at the local carrier’s customer premises.  A customer subscribes for tariffed service, and has premises in state.  The conference service providers had a business arrangement where they didn’t pay for services – they simply split revenues. Because they paid no fees for collocation, bandwidth or phone service, they were deemed to be partners, not customers, as they shared profits and losses with the LEC instead of subscribing for services.   By that reasoning, the IUB determined that the tariff didn’t apply, and no termination revenues needed to be paid.  Moreover, because the conference service provider paid no fees, and rented no space from the hosting carrier, they were deemed to have no premises in state.  In order to be allocated a number, the rules state that the subscriber must have premises. Therefore it was illegal for the free conference service providers to be even given a telephone number.

The Iowa Utilities Board treated the entire arbitrage scheme in that state as an illegal conspiracy to artificially jack up termination revenues, and shut it down on technicalities in the tariff. They carefully said, however, that charging termination fees for conference calling services wasn’t illegal.  The manner in which it had been done, however, was illegal.

This will have many service providers in Iowa scrambling.  Iowa was one of the most popular locations for free conferencing and other kinds of services for many years.

So back to Google versus AT&T.  This isn’t a fight about Net Neutrality, even though AT&T has characterized it that way.  In actuality, AT&T appears to be trying to drag Google into their fight over rural access charges.  Google may be an (unwilling) ally, as they are facing the same issue – how to avoid paying higher than average termination fees in a business model that gives the customer unlimited long distance for no additional charge.  By trying to characterize Google Voice as a common carrier, they are asking the FCC to force Google to terminate calls on those rural carriers – a move that Google will fight.

Political maneuvering at its finest, no?

And by the way, if anyone cares to know, Calliflower is not located in Iowa.  The Iowa Utilities Board’s decision affects many free conferencing service providers, but it doesn’t affect us.  If your conference call number is in a 712 area code – that’s Iowa – check out Calliflower today for your peace of mind.

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{ 4 comments… add one }

  • Brad Templeton September 29, 2009, 6:48 pm

    The PUC is exactly right, and I'm surprised they went so far as to rule this way. You may call this arbitrage, but it's not free market arbitrage, but abuse of law-mandated non-market prices. Enjoy it while you can, Alec but don't expect it to last, as seems to have been the case in Iowa.

    • Alec October 1, 2009, 11:08 am

      Brad, I'm not sure that the PUC is right, given previous FCC rulings. After all, this wouldn't be an issue if the originating carrier collected revenues that reflected actual usage of the service, instead of indulging in a flat rate "free long distance" pricing model. Nevertheless, it seems clear that the carriers are committed to killing off these models and folks like us are going to have to adapt. Thankfully we have a premium offering also.

  • Christian Von Revent October 1, 2009, 3:17 am

    I agree with your point that ATT is playing a bigger game here than what this rural termination issue would indicate. ATT is trying to get Google drawn into fighting on the Telecom1.0 battlefield. Google on the other hand wants to fight only on their Telecom10.0 turf.

    More detailed comments by me on this at my blog…. "21st Century Telecom – Disruptions in RealTime".


  • Chelsea October 8, 2009, 9:22 pm

    AT&T is so in bed with Yahoo that they BLOCKED Google.

    That’s right, I ordered a Gateway 2Wire from AT&T and by default, the FireWall settings for the router are set to block almost all bit Torrent clients and none other than one: GOOGLE.COM

    I’m really starting to HATE AT&T- and I don’t even like to use that word. The DSL 6.0 they sold me checks out on the speed Tests at a max. of 3.7. I called AT&T to complain an they said that that was an acceptable speed… No, not at all.

    So AT&T, if I downgrade to DSL 3.0 are my exceptionable speeds 750kbps? Don’t bother answering, I’m going back to Cox.

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