AT&T Takes Aim at Google

Are Intercarrier Compensation Inequities the Cause?

When AT&T complained to the Federal Communications Commission last month that Google Voice was blocking calls to certain rural numbers which Common Carriers are required to complete, a number of different issues were at play: whether Google Voice is an "information service", exempt from regulation, or a regulated "telecommunications service"; whether telecommunications services should be less regulated; whether information services should be more regulated; and even net neutrality. But at the heart of the issue is really intercarrier compensation and its need for reform.

The issue started with "traffic pumping", a practice whereby rural local exchange carriers (LECs) recruit customers with extremely high inbound traffic (think call centers and chat lines). Each time a caller connects to those call centers or chat lines, the caller’s phone company must pay terminating access charges of as much as $0.05 per minute to the rural carrier. The rural LECs, in turn, were found to be sharing their windfall with the call center or chat line they had recruited, making a lucrative situation for both parties.

While traffic pumping is certainly an ethical violation, it is not illegal. But it does generate millions of dollars in access revenue. Service providers like AT&T and Verizon fought to be able to block calls to suspected traffic pumpers, but were denied that ability by the FCC. Instead, the FCC’s current recommendation to prevent or reduce traffic pumping is to ban service providers from sharing access charges with their customers, removing the incentive for companies with large amounts of lengthy inbound calls to sign-up with the rural LEC in the first place.

So when Google Voice admitted to blocking calls to certain rural numbers, AT&T cried foul, arguing that it is at a disadvantage if it continues to be required to abide by regulations that other service providers are not bound to obey. Google, on the other hand, argues that it is an application provider rather than a service provider, and therefore is exempt from the regulations written for telecommunications services. In fact, Google Voice requires another phone service (like landline, wireless, or VoIP) in order for it to work.

But if regulators reform the out-dated intercarrier compensation rules, this dispute, and many others, is solved. Without the inflated terminating access charges paid to the rural carriers, traffic pumping stops, and AT&T and Google Voice would no longer want to block those calls.

But overhauling intercarrier compensation is a daunting task, and with no solution having a clear ability to appease everyone, the FCC has been slow to act. There are, after all, hundreds of rural LECs that rely on high access rates to stay in business, and are not taking advantage of the regulations by engaging in activities like traffic pumping. But as technology continues to forge ahead, a regulatory framework devised 25 years ago falls further and further behind. Reforming the intercarrier compensation rules has the potential to resolve some of the industry’s most pressing issues if a comprehensive solution can be developed.