Traffic pumping
Encyclopedia
Traffic pumping, also known as access stimulation, is a controversial practice by which some local exchange
telephone carrier
s in rural areas of the United States
inflate the volume of incoming calls to their networks, and profit from the greatly increased intercarrier compensation fees to which they are entitled by the Telecommunications Act of 1996
.
, traffic pumping is the subject of an ongoing legal and regulatory dispute involving AT&T
, Google Voice
, rural phone carriers, and the U.S. Federal Communications Commission
(FCC).
, wireless and long distance carriers (such as AT&T, Sprint
, or Verizon) pay access fees to local exchange carrier
s (LECs) for calls to those carriers' local subscribers. Rural carriers are allowed by the FCC to charge substantially higher access fees (as high as 10-20 cents/minute) than carriers in more urban areas, based on the rationale that they must pay for substantial fixed infrastructure cost
s while handling lower call volume.
In order to increase their incoming call volume, and thereby fees owed, rural carriers partner with certain telephone service providers to route their calls through the rural carrier. These services typically include phone sex and conference call
providers, which expect a high volume of incoming calls. Notably, these service providers do not need to establish a physical, local presence in order to route their calls in this way. Many of these companies are actually located in Los Angeles
, California
. As a consequence of this arrangement, the rural carriers can receive millions of dollars of fees, which they then share with the ostensibly "local" service providers, who are responsible for vastly increasing call volume above typical rural usage.
Many of the rural carriers participating in these schemes are located in Iowa
, South Dakota
and Minnesota
.
In 2007, AT&T estimated that it would spend an additional $250 million to connect such calls, and has warned that it may have to raise its customers' calling plan prices unless regulators address the issue of traffic pumping. However, providers of traffic-pumped conference calls claim that AT&T has refused to provide evidence of these costs, and that it is a ploy by AT&T to leverage its market power to put competing conference calling providers out of business.
AT&T and other long-distance carriers have in some cases attempted to avoid these costs by blocking their customers from calling the phone numbers of traffic-pumping services. However, the FCC has forbidden common carrier
s from this kind of selective blocking, and so the long-distance carriers are essentially obligated to complete these calls.
Based upon an independent study of 50% of long distance calls originating on wireless networks in U.S., calls terminating to carriers meeting a traffic pumping profile were estimated to cost $95 million annually, representing 11% of all long distance costs in the study. Extending to all wireless service providers, the cost is estimated to be more than $190 million annually.
telecommunications service offers a service similar to long-distance telephone calling at no cost, using VoIP to connect users with their calling destinations. In order to avoid paying high connection fees to traffic-pumping carriers, Google Voice has blocked calls to some of these carriers.
AT&T has appealed to the FCC to intervene, charging that Google Voice ought to be required to connect these calls just as plain old telephone service
(POTS) carriers are required to do so. Google has responded that its service, and those of other VoIP providers such as Skype
, is distinct from those of a traditional POTS common carrier
, and that it should not be obligated to complete these calls. Google further charges that AT&T is trying to distract the FCC from concerns regarding network neutrality
, and accuses AT&T of conducting regulatory capitalism
, in which businesses exploit laws and regulations to stifle competition and slow innovation. Finally, Google urges the FCC to revise "outdated carrier compensation rules" to end the practice of traffic pumping.
AT&T has written to the FCC, stating that Google's blocking of calls to traffic pumping numbers gives it a substantial cost advantage over traditional carriers. AT&T further argues that the issue of network neutrality is highly relevant, since Google is violating its own statement of the principle of non-discrimination, that "a provider 'cannot block fair access' to another provider." AT&T agrees with Google that the FCC should act to forbid traffic pumping schemes in the first place, calling them "patently unlawful", but asks that Google be required to accept the same common carrier requirements even if they are not shut down.
A bipartisan group of U.S. Representatives has joined in AT&T's complaint, urging the FCC to investigate Google Voice's practice of blocking calls to high-fee rural local exchange carriers. Some of these legislators have received significant campaign contributions
from AT&T, and represent districts where rural carriers profit from traffic pumping. Sam Gustin of DailyFinance suggests that there may be issues of conflict of interest
and pork barrel
politics involved in these legislators' efforts.
Utilities Board recently issued its final order in a complaint proceeding brought by Qwest
and intervened by AT&T and Sprint Nextel
against eight rural telephone companies
s in Iowa. Except for one call blocking finding against Sprint, the decision was unfavorable for the rural carriers, which may have to return the fees they received for calls directed to traffic-pumped services by Iowa residents. However, damages have not yet been assessed and the Iowa Utilities Board does not have jurisdiction over the vast majority of disputed calls—those that were directed to Iowa from callers in other states—so the reach of its decision is limited. Moreover, the Board has indicated that it is reconsidering its decision and several appeals have been filed challenging the lawfulness of the Board’s order, thus it is not yet a final decision.
The FCC subsequently issued a ruling on this case.
(ILEC) based in Iowa, which entered into a commercial agreement with a chat-line provider. AT&T’s complaint alleged that Jefferson violated Section 201(b) of the Communications Act of 1934
because it “acquired a direct interest in promoting the delivery of calls to specific telephone numbers.” AT&T also argued that the access revenue-sharing arrangement with the chat-line provider was unreasonably discriminatory in violation of Section 202(a) of the Act, because Jefferson did not share revenues with all its customers. The FCC rejected both these arguments and denied AT&T’s complaint.
In 2002, the FCC issued two more orders, denying similar complaints by AT&T directed at LECs that shared access revenues with chat-line providers. In AT&T v. Frontier Communications, the Commission rejected AT&T’s allegations that “revenue-sharing arrangements” constituted unreasonable discrimination in violation of Section 202(a) or violations of the ILECs’ common carrier duties under Section 201(b). In AT&T v. Beehive Telephone, the FCC again denied AT&T’s complaint against a LEC that engaged in a commercial relationship with a chat-line provider for the same reasons.
The FCC has more recently issued an order in a case involving an Iowa carrier relating to interstate calls (calls made from any state other than Iowa to an Iowa telephone number). In that order, the FCC determined that the Iowa carrier was not entitled to collect the entire amounts it billed to a long distance carrier, but that it was nevertheless entitled to some compensation. The exact amount of payment has not yet been fixed by the FCC.
Local exchange carrier
Local Exchange Carrier is a regulatory term in telecommunications for the local telephone company.In the United States, wireline telephone companies are divided into two large categories: long distance and local...
telephone carrier
Common carrier
A common carrier in common-law countries is a person or company that transports goods or people for any person or company and that is responsible for any possible loss of the goods during transport...
s in rural areas of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
inflate the volume of incoming calls to their networks, and profit from the greatly increased intercarrier compensation fees to which they are entitled by the Telecommunications Act of 1996
Telecommunications Act of 1996
The Telecommunications Act of 1996 was the first major overhaul of United States telecommunications law in nearly 62 years, amending the Communications Act of 1934. This Act, signed by President Bill Clinton, was a major stepping stone towards the future of telecommunications, since this was the...
.
, traffic pumping is the subject of an ongoing legal and regulatory dispute involving AT&T
AT&T
AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...
, Google Voice
Google voice
Search by voice is a branded name for a technology to "search by voice on your [digital device]", such as a mobile phone or PC, i.e. have the device search for data upon entering information on what to search into the device by speaking....
, rural phone carriers, and the U.S. Federal Communications Commission
Federal Communications Commission
The Federal Communications Commission is an independent agency of the United States government, created, Congressional statute , and with the majority of its commissioners appointed by the current President. The FCC works towards six goals in the areas of broadband, competition, the spectrum, the...
(FCC).
How it works
Under the regulatory mechanisms of the Telecommunications Act of 1996Telecommunications Act of 1996
The Telecommunications Act of 1996 was the first major overhaul of United States telecommunications law in nearly 62 years, amending the Communications Act of 1934. This Act, signed by President Bill Clinton, was a major stepping stone towards the future of telecommunications, since this was the...
, wireless and long distance carriers (such as AT&T, Sprint
Sprint Nextel
Sprint Nextel Corporation is an American telecommunications company based in Overland Park, Kansas. The company owns and operates Sprint, the third largest wireless telecommunications network in the United States, with 53.4 million customers, behind Verizon Wireless and AT&T Mobility...
, or Verizon) pay access fees to local exchange carrier
Local exchange carrier
Local Exchange Carrier is a regulatory term in telecommunications for the local telephone company.In the United States, wireline telephone companies are divided into two large categories: long distance and local...
s (LECs) for calls to those carriers' local subscribers. Rural carriers are allowed by the FCC to charge substantially higher access fees (as high as 10-20 cents/minute) than carriers in more urban areas, based on the rationale that they must pay for substantial fixed infrastructure cost
Fixed cost
In economics, fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs...
s while handling lower call volume.
In order to increase their incoming call volume, and thereby fees owed, rural carriers partner with certain telephone service providers to route their calls through the rural carrier. These services typically include phone sex and conference call
Conference call
A conference call is a telephone call in which the calling party wishes to have more than one called party listen in to the audio portion of the call. The conference calls may be designed to allow the called party to participate during the call, or the call may be set up so that the called party...
providers, which expect a high volume of incoming calls. Notably, these service providers do not need to establish a physical, local presence in order to route their calls in this way. Many of these companies are actually located in Los Angeles
Los Ángeles
Los Ángeles is the capital of the province of Biobío, in the commune of the same name, in Region VIII , in the center-south of Chile. It is located between the Laja and Biobío rivers. The population is 123,445 inhabitants...
, California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
. As a consequence of this arrangement, the rural carriers can receive millions of dollars of fees, which they then share with the ostensibly "local" service providers, who are responsible for vastly increasing call volume above typical rural usage.
Many of the rural carriers participating in these schemes are located in Iowa
Iowa
Iowa is a state located in the Midwestern United States, an area often referred to as the "American Heartland". It derives its name from the Ioway people, one of the many American Indian tribes that occupied the state at the time of European exploration. Iowa was a part of the French colony of New...
, South Dakota
South Dakota
South Dakota is a state located in the Midwestern region of the United States. It is named after the Lakota and Dakota Sioux American Indian tribes. Once a part of Dakota Territory, South Dakota became a state on November 2, 1889. The state has an area of and an estimated population of just over...
and Minnesota
Minnesota
Minnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...
.
Consequences
End-users of traffic-pumped phone services often do not pay directly for the high fees collected by rural local carriers and service providers. Many wireless and land line customers now have unlimited long-distance plans, and thus the entire inflated cost of using these services is borne by their long-distance carrier. Providers of traffic-pumped conference calling service assert that these long-distances carriers still profit when their customers use traffic-pumped services.In 2007, AT&T estimated that it would spend an additional $250 million to connect such calls, and has warned that it may have to raise its customers' calling plan prices unless regulators address the issue of traffic pumping. However, providers of traffic-pumped conference calls claim that AT&T has refused to provide evidence of these costs, and that it is a ploy by AT&T to leverage its market power to put competing conference calling providers out of business.
AT&T and other long-distance carriers have in some cases attempted to avoid these costs by blocking their customers from calling the phone numbers of traffic-pumping services. However, the FCC has forbidden common carrier
Common carrier
A common carrier in common-law countries is a person or company that transports goods or people for any person or company and that is responsible for any possible loss of the goods during transport...
s from this kind of selective blocking, and so the long-distance carriers are essentially obligated to complete these calls.
Based upon an independent study of 50% of long distance calls originating on wireless networks in U.S., calls terminating to carriers meeting a traffic pumping profile were estimated to cost $95 million annually, representing 11% of all long distance costs in the study. Extending to all wireless service providers, the cost is estimated to be more than $190 million annually.
Role in dispute between AT&T and Google
The Google VoiceGoogle voice
Search by voice is a branded name for a technology to "search by voice on your [digital device]", such as a mobile phone or PC, i.e. have the device search for data upon entering information on what to search into the device by speaking....
telecommunications service offers a service similar to long-distance telephone calling at no cost, using VoIP to connect users with their calling destinations. In order to avoid paying high connection fees to traffic-pumping carriers, Google Voice has blocked calls to some of these carriers.
AT&T has appealed to the FCC to intervene, charging that Google Voice ought to be required to connect these calls just as plain old telephone service
Plain old telephone service
Plain old telephone service is the voice-grade telephone service that remains the basic form of residential and small business service connection to the telephone network in many parts of the world....
(POTS) carriers are required to do so. Google has responded that its service, and those of other VoIP providers such as Skype
Skype
Skype is a software application that allows users to make voice and video calls and chat over the Internet. Calls to other users within the Skype service are free, while calls to both traditional landline telephones and mobile phones can be made for a fee using a debit-based user account system...
, is distinct from those of a traditional POTS common carrier
Common carrier
A common carrier in common-law countries is a person or company that transports goods or people for any person or company and that is responsible for any possible loss of the goods during transport...
, and that it should not be obligated to complete these calls. Google further charges that AT&T is trying to distract the FCC from concerns regarding network neutrality
Network neutrality
Network neutrality is a principle that advocates no restrictions by Internet service providers or governments on consumers' access to networks that participate in the Internet...
, and accuses AT&T of conducting regulatory capitalism
Regulatory capitalism
The term Regulatory Capitalism suggests that the operation maintenance and development of the global political economy increasingly depends on administrative rules outside the legislatures and the courts. The general trend despite and beyond the process of liberalization is that of growth rather...
, in which businesses exploit laws and regulations to stifle competition and slow innovation. Finally, Google urges the FCC to revise "outdated carrier compensation rules" to end the practice of traffic pumping.
AT&T has written to the FCC, stating that Google's blocking of calls to traffic pumping numbers gives it a substantial cost advantage over traditional carriers. AT&T further argues that the issue of network neutrality is highly relevant, since Google is violating its own statement of the principle of non-discrimination, that "a provider 'cannot block fair access' to another provider." AT&T agrees with Google that the FCC should act to forbid traffic pumping schemes in the first place, calling them "patently unlawful", but asks that Google be required to accept the same common carrier requirements even if they are not shut down.
A bipartisan group of U.S. Representatives has joined in AT&T's complaint, urging the FCC to investigate Google Voice's practice of blocking calls to high-fee rural local exchange carriers. Some of these legislators have received significant campaign contributions
Campaign finance
Campaign finance refers to all funds that are raised and spent in order to promote candidates, parties or policies in some sort of electoral contest. In modern democracies such funds are not necessarily devoted to election campaigns. Issue campaigns in referendums, party activities and party...
from AT&T, and represent districts where rural carriers profit from traffic pumping. Sam Gustin of DailyFinance suggests that there may be issues of conflict of interest
Conflict of interest
A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other....
and pork barrel
Pork barrel
Pork barrel is a derogatory term referring to appropriation of government spending for localized projects secured solely or primarily to bring money to a representative's district...
politics involved in these legislators' efforts.
State Administrative Commission rulings
The IowaIowa
Iowa is a state located in the Midwestern United States, an area often referred to as the "American Heartland". It derives its name from the Ioway people, one of the many American Indian tribes that occupied the state at the time of European exploration. Iowa was a part of the French colony of New...
Utilities Board recently issued its final order in a complaint proceeding brought by Qwest
Qwest
Qwest Communications International, Inc. was a large United States telecommunications carrier. Qwest provided local service in 14 western U.S. states: Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming.On April...
and intervened by AT&T and Sprint Nextel
Sprint Nextel
Sprint Nextel Corporation is an American telecommunications company based in Overland Park, Kansas. The company owns and operates Sprint, the third largest wireless telecommunications network in the United States, with 53.4 million customers, behind Verizon Wireless and AT&T Mobility...
against eight rural telephone companies
Telephone company
A telephone company is a service provider of telecommunications services such as telephony and data communications access. Many were at one time nationalized or state-regulated monopolies...
s in Iowa. Except for one call blocking finding against Sprint, the decision was unfavorable for the rural carriers, which may have to return the fees they received for calls directed to traffic-pumped services by Iowa residents. However, damages have not yet been assessed and the Iowa Utilities Board does not have jurisdiction over the vast majority of disputed calls—those that were directed to Iowa from callers in other states—so the reach of its decision is limited. Moreover, the Board has indicated that it is reconsidering its decision and several appeals have been filed challenging the lawfulness of the Board’s order, thus it is not yet a final decision.
The FCC subsequently issued a ruling on this case.
Federal Administrative Commission Rulings
In 1996, AT&T filed a Section 208 complaint with the FCC against Jefferson Telephone Company, a rural incumbent local exchange carrierIncumbent local exchange carrier
An ILEC, short for incumbent local exchange carrier, is a local telephone company in the United States that was in existence at the time of the breakup of AT&T into the Regional Bell Operating Companies , also known as the "Baby Bells." The ILEC is the former Bell System or Independent Telephone...
(ILEC) based in Iowa, which entered into a commercial agreement with a chat-line provider. AT&T’s complaint alleged that Jefferson violated Section 201(b) of the Communications Act of 1934
Communications Act of 1934
The Communications Act of 1934 is a United States federal law, enacted as Public Law Number 416, Act of June 19, 1934, ch. 652, 48 Stat. 1064, by the 73rd Congress, signed by President Franklin D. Roosevelt, codified as Chapter 5 of Title 47 of the United States Code, et seq. The Act replaced the...
because it “acquired a direct interest in promoting the delivery of calls to specific telephone numbers.” AT&T also argued that the access revenue-sharing arrangement with the chat-line provider was unreasonably discriminatory in violation of Section 202(a) of the Act, because Jefferson did not share revenues with all its customers. The FCC rejected both these arguments and denied AT&T’s complaint.
In 2002, the FCC issued two more orders, denying similar complaints by AT&T directed at LECs that shared access revenues with chat-line providers. In AT&T v. Frontier Communications, the Commission rejected AT&T’s allegations that “revenue-sharing arrangements” constituted unreasonable discrimination in violation of Section 202(a) or violations of the ILECs’ common carrier duties under Section 201(b). In AT&T v. Beehive Telephone, the FCC again denied AT&T’s complaint against a LEC that engaged in a commercial relationship with a chat-line provider for the same reasons.
The FCC has more recently issued an order in a case involving an Iowa carrier relating to interstate calls (calls made from any state other than Iowa to an Iowa telephone number). In that order, the FCC determined that the Iowa carrier was not entitled to collect the entire amounts it billed to a long distance carrier, but that it was nevertheless entitled to some compensation. The exact amount of payment has not yet been fixed by the FCC.