A federal judge has given preliminary approval for Sprint Nextel to pay nearly $30 million to settle a class-action lawsuit alleging it overcharged in passing along a federally mandated phone service subsidy. Under the settlement, qualified business and residential customers would receive prepaid telephone calling cards worth a total of $25 million, while attorneys would receive $4.99 million for fees and costs.
AT&T (formerly known as SBC and Cingular and AT&T) is Sprint's co-defendant in the case, and is not included in the settlement and will continue to face litigation. The antitrust case consolidated dozens of class-action lawsuits filed across the country in Kansas City, Kan., federal court. The suits claimed Sprint and AT&T conspired with their chief competitor at the time, MCI, to charge customers more than the regulated fee for the Universal Service Fund. The program subsidizes the cost of running phone service to rural areas, low-income customers and public facilities, such as schools, libraries and rural hospitals.
Carriers are required to contribute to the fund a percentage of their gross revenue from interstate and international calls. The FCC sets the contribution rate. Sprint described the fee on its bills as "Federal Universal Service Fee" or "Carrier Universal Service Charge," while AT&T called it a "Universal Connectivity Charge." While the settlement ends litigation for Sprint, the case will continue against AT&T, which faces greater exposure than Sprint because of its larger market share.
The settlement covers long-distance customers who paid into the Universal Service Fund between Aug. 1, 2001, and March 31, 2003. Because of liability rules in antitrust actions, the settlement covers not only Sprint long-distance business and residential customers but also MCI long-distance business customers, AT&T long-distance business customers and AT&T long-distance residential customers in California. Sprint and MCI customers also will be eligible to participate in any settlements affecting AT&T.
The settlement comes days after a $57 million settlement ending another class-action lawsuit against Sprint claiming the company targeted older workers during layoffs a few years ago. Sprint also said in a regulatory filing a month ago that it has agreed to settle a third class-action lawsuit claiming the company shortchanged investors when it combined its landline and wireless stocks in 2004. (info from The Associated Press)