AT&T and Qwest sue over too-big phone bills

Services offering free international phone calls - via rural Iowa - have generated millions of dollars for a handful of tiny Iowa telephone companies and created a legal brawl with two of the world's telecommunications giants. AT&T and Qwest have filed lawsuits charging that at least seven Iowa-based telcos have fraudulently billed them for handling calls from across the nation that have been funneled to 712 area code numbers.

The two telecom giants' complaints largely revolve around a practice by local telephone companies of billing long-distance carriers for calls they connect to end users. An AT&T spokesman said that while the national average for this service is about one-half cent per minute, some of the defendants have charged it as much as 13 cents per minute.

An attorney representing the Iowa companies said that rural telcos typically charge more like 4 cents to 5 cents per minute. Iowa has some of the nation's highest fees, called access charges, in part due to its low population density and the high cost of switches used by the state's 150-plus independent telephone companies.

Those access charges created little stir with the long-distance carriers until late summer of 2006. Then AT&T's bill from the Superior Telephone Cooperative, which serves about 175 customers in Dickinson County, went from $2,000 per month to more than $2 million. AT&T said that happened because Superior was receiving tens of thousands of phone calls. Qwest said its bill from customer-owned Superior shot up to $500,000. Between June and November, Qwest saw its long-distance usage to Superior lines increase 42,000 percent.

AT&T said that the access charge is supposed to be paid to local providers who terminate calls, or connect them to the end user. However, in this case Superior allegedly was immediately rerouting the calls to overseas destinations such as China or Russia. "They're collecting charges in Iowa as if it's ending there, and it isn't," the AT&T spokesman said. (info from the Des Moines Register)