By PETER HUSSMANN
Long distance telephone carriers were hailing the Iowa Utilities Board's decision on Friday that found that "traffic pumping" operations at several rural Iowa telephone companies amounted to unreasonable practices that violated tariffs and ordered the companies to issue refunds that could reach into the hundreds of thousands of dollars.
"This is a seminal decision which other states, the courts and the FCC will follow to eliminate this form of regulatory arbitrage throughout the nation," said Qwest Senior Vice President, Public Policy and Government Relations Steve Davis.
Qwest, along with long distance carriers AT&T and Sprint, filed a complaint with the IUB over traffic pumping allegations against eight Iowa telephone companies, including the Reasnor Telephone Company in Jasper County.
The long distance carriers alleged that the local telephone exchanges would enter into arrangements with companies that offer free calling services, such as conference calling, chat lines and adult content. The Iowa telephone companies, which provided the free calling services with local numbers, charged callers' long distance carriers for completing the calls to access the free services.
Companies that serve rural areas are allowed under tariff agreements to charge long distance carriers higher rates to offset the cost of providing local services, which is more costly than in larger population centers. The long distance carriers claimed these free services pumped millions of minutes to the local numbers that companies such as Qwest and Sprint are charged to complete. The additional revenues generated, the carriers claimed, were then split between the local telephone exchanges and the free service providers. The practice has increased the costs of operations for long distance carriers, which are ultimately passed on to consumers.
IUB spokesman Rob Hillesland said today that the state regulatory board came to a "verbal" decision on Friday that directs the office's general counsel to draft an order that finds "the conferencing companies were not end users for purposes of the respondents' exchange access tariffs, and therefore access charges did not apply to these calls and should not have been charged to the interexchange carriers."
Hillesland said the board also ordered the rural telephone companies involved in the action to "refund the illegally-collected access charges." The total amount to be refunded has not yet been calculated and may require additional investigation, he said.
A formal order in the matter could take weeks to complete.
Davis hailed the decision.
"Qwest is very pleased with (the) decision," he said. "We agree with the Iowa Utilities Board, as well as the Iowa Office of Consumer Advocate, that these telephone companies and their free calling partners have engaged in unreasonable practices that harmed and mislead consumers, regulators and companies like Qwest."
In addition to the Reasnor Telephone Company, respondents in the action before the Iowa Utilities Board decided Friday include Superior Telephone Cooperative; The Farmers Telephone Company of Riceville, Iowa; The Farmers & Merchants Mutual Telephone Company of Wayland, Iowa; Interstate 35 Telephone Company, d/b/a Interstate Communications Company; Dixon Telephone Company; Great Lakes Communications Corp.; and Aventure Communication Technology.
What the Utilities Board's ruling means for other traffic pumping cases already circulating in the Iowa court system is unknown. Last month, long distance carrier Verizon sued the Sully Telephone Company over allegations of traffic pumping. The Newton Independent story on the case can be read here.
And last week, the Searsboro Telephone Company and Lynnville Telephone Company filed suit against Qwest Communications for failing to pay $750,000 in fees generated to connect interstate long distance calls to the Jasper County telephone exchanges. The Searsboro and Lynnville case was originally filed in Washington, D.C., but was moved to the Iowa federal court system on Aug. 10 after jurisdictional concerns were raised. Qwest has yet to file a response to the petition in the Iowa federal courts.