'Free' chat lines cost Qwest
Complaint to FCC alleges Iowa telco engaged in scam
By Jeff Smith
Rocky Mountain News
Friday, May 4, 2007
Some adult chat lines are "free" these days -- but they're
costing Qwest Communications a bundle. The Denver telco has
filed a formal complaint with federal regulators against a rural
Iowa telco that allegedly engaged in a billing scam in concert
with free calling services.
Qwest and AT&T have made similar allegations in federal lawsuits
filed against several other Iowa telcos, but this is believed to
be the first time the issue has been taken to the Federal
Qwest didn't disclose how much money it believes it was
overbilled. Company executives, however, indicated this year
that "inappropriate" traffic on Qwest's network overall had cost
the company $10 million to $15 million in the fourth quarter of
In the FCC complaint, Qwest alleges Farmers and Merchants Mutual
Telephone Co. of Wayland, Iowa, engaged in an "intentional
scheme to collect unreasonably high" call-termination fees by
inflating phone traffic.
Qwest alleges telephone traffic delivered to the Farmers
switching center in southeastern Iowa steadily increased from
40,000 minutes in July 2005 to more than 10 million minutes in
About 50 percent of the traffic went to four telephone numbers
assigned to a free adult chat room called Studio 55 and another
45 percent to numbers assigned to free conference call or online
meeting services, Qwest said.
Rex McGuire, general manager of Farmers and Merchants, didn't
return several phone calls seeking comment. In each instance, a
receptionist went to get McGuire and came back to say he had
stepped out of the office.
The FCC complaint comes as free calling services are
proliferating. Call-termination fees are set based on the
assumption that a rural telco's calling volumes are low and the
cost of service is high. Qwest claims Farmers, because of its
traffic-pumping scheme, is reaping a rate of return "vastly in
excess" of the FCC maximum of 11.65 percent.
Robert Connelly Jr., Qwest deputy general counsel, said Qwest
wants the FCC, which has five months to rule, to reduce the
He said the company also is questioning whether Qwest owes
termination fees on many of the calls at all, which appear to
then be routed to the free calling services' computer servers in
California and Nevada.
Connelly said Qwest picked Farmers as a "typical" case that
could provide a broad precedent for stopping similar schemes.
He said the problem likely has surfaced in Iowa because of the
large number of rural telcos and the presence of an entity that
aggregates long-distance traffic.
smithje@RockyMountainNews.com or 303-954-5155