Third-Party Carriers Disguising Long-Distance as VoIP, Executive Says
Paetec doesn’t pay interstate rates for its VoIP traffic, but the company is sometimes duped by third-party carriers that disguise long-distance calls as Internet Protocol traffic, company executives said Tuesday. It wants to stop the third-party carriers in their arbitrage, but stands by its decision to pay only local rates for VoIP. “That’s based on our understanding of current FCC rules on how the number is treated,” said Paetec Director of Carrier Access Tami Spocogee at an FCC panel on how to address lost calls in the rural U.S. She spoke after Toledo Telephone Chief Operating Officer Dale Merten showed a slide demonstrating that a call from Washington, D.C., and connected in rural Washington state was reclassified as a local call.
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The reclassification was an example of “arbitrage” that’s led to the “crisis” of dropped calls in rural America, Merten said. He didn’t name the company that had reclassified the call. Spocogee said her company would certainly comply with new FCC rules if the commission, as expected, subjects VoIP to interstate rates under a pending order. In the meantime, Paetec “is happy” to work with rural carriers to make sure calls are being completed, she said.
Rural telcos said millions of calls are lost because economics and new technologies are combining to provide opportunities and incentives to use shoddy equipment to shave costs. The rural telcos and their advocates are pushing the FCC to require network audits and enforceable connection standards. “It’s a ubiquitous problem across all our geographies,” said ANPI/Zone Telecom CEO Dave Lewis. “It’s endemic."
About 10,000 customer complaints have poured in over the last 18 months, but rural companies say that’s merely the tip of the iceberg. While some rural company panelists said some of the proposals in the FCC’s pending universal service and intercarrier compensation order may help, they worry about loopholes. For instance, the order subjects VoIP traffic to interstate rates from day one. Merten said it’s not clear whether nomadic VoIP would be subject, too. If nomadic VoIP is exempt, then there’s still plenty of room for arbitrage, he said.
Interexchange carriers are being victimized, too, AT&T’s Kim Meola said. In 2006, the telco abandoned all but one of its least-cost routing contractors, because so many calls to rural areas were being lost, she said: Since then, the company has audited its networks and set stringent requirements of its least-cost contractor. That has meant tens of millions of dollars in increased costs, which has in turn meant raising its wholesale rates, Meola said. “I heard somebody say, ‘We can’t compete,'” she said. “I've been dealing with that pressure for five years."
AT&T has also been scammed by other carriers that offer unlimited wireless minutes and then create so-called “SIM boxes” on AT&T’s network, which has allowed the other carriers to route six or seven calls over single lines, but clogged the network, Meola said. Despite the problems, the big interexchange carrier representatives at Tuesday’s discussions were lukewarm to the idea of expanding regulations. Sprint Nextel believes least-cost routing “helps carriers maximize efficiencies and helps successfully connect millions of calls every month,” said Manager Rick Ratliff. “The industry is actively addressing the issue."
No one blames the nation’s biggest carriers, TDS Telecom Vice President Drew Peterson said after Tuesday’s discussion. “The problem is not Verizon, AT&T and Sprint,” he said, gesturing to the panel. “The problem is those guys who aren’t on the panel.” Even if Verizon and others adopt and follow “best practices,” there’s simply too much money to be made in ignoring the best practices, Peterson said.
Rural company officials Tuesday said the matter was a crisis and couldn’t wait. They told stories from their hometowns -- a fishing village in Washington state that has lost 60 percent of its tourist trade because hotels’ and tour boats’ phones aren’t ringing, a long-haul trucking firm that has seen business collapse nearly to zero, lawsuits against carriers in Minnesota -- and said it’s only going to get worse unless the FCC acts quickly. “If we allow those things to play out over time, there’s going to be a lot of damage that’s done over time,” said Onvoy Voice Service President Fritz Hendricks.
The stakes are higher than lost business, said Ron Hines, assistant general manager of Grand River Mutual Telephone Company in Missouri, who rose to speak during Q-and-A. With so many calls falling apart, how do we know that emergency calls aren’t going with them, he said. “If there’s one death that’s caused by this issue, it’s not worth the billions that are going to be saved,” Hinds said. “I myself favor a light regulatory environment, but there’s just too many players, this has just gone on too long and it’s time to stop it.”