traffic pumping

Under the regulatory mechanisms of the Telecommunications Act of 1996, wireless, and long-distance carriers including AT&T, Sprint, T-Mobile US, and Verizon, pay access fees to local exchange carriers (LECs) for calls to those carriers' subscribers. The FCC permits rural carriers to charge substantially higher access fees than carriers in urban areas, based on the rationale that they must pay for substantial fixed infrastructure costs while handling lower call volume.{{cite web|url=http://broadband.wordpress.com/2007/05/09/sprint-nextel-fights-traffic-pumping-schemes/|title=Sprint Nextel fights 'Traffic Pumping' Schemes|date=May 9, 2007|work=Broadband News Blog}}{{cite web|url=http://googlepublicpolicy.blogspot.com/2009/09/response-to-at-letter-to-fcc-on-google.html|title=Response to AT&T's letter to FCC on Google Voice|author=Richard Whitt|publisher=Google Inc.|work=[http://googlepublicpolicy.blogspot.com Google Public Policy Blog]|date=September 25, 2009}}

Increasing the incoming call volume to those rural areas, and thereby their earnings from fees, 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 for routing these calls.{{cite web|url=http://www.dailyfinance.com/2009/10/09/atandt-vs-google-voice-sex-money-the-feds-and-your-phone-bill/|title=AT&T vs. Google Voice: Sex, money, the feds, and your phone bill|author=Sam Gustin|date=October 9, 2009|work=[http://dailyfinance.com Daily Finance]}} As a result of this arrangement, the rural carriers can receive millions of dollars of fees which they share with the service providers.

Payment for inbound long-distance calls to small rural telephone companies is normally handled through a shared pool, the National Exchange Carrier Association ("NECA"). Individual telcos are free to opt out of this process. For the first two years, they may bill interexchange carriers directly at an initially-high rural rate of five to thirteen cents per minute.{{cite web|url=http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-09-103A1.pdf |title=In the Matter of Qwest Communications Corporation, Complainant, v. Farmers and Merchants Mutual Telephone Company |date=November 25, 2009 |agency=Federal Communications Commission}} After two years the carrier either rejoins the NECA pool, provides evidence to support continuing to charge the high rural rate or reduces rates to a level that can be supported.{{cite web|url=http://www.iand.uscourts.gov/e-web/decisions.nsf/0/BB0CC844BC1291528625767200552C57/$File/Great+Lakes+Comm+v.+Iowa+Utilities+Board.pdf |title=Great Lakes Communication Corp. v. Iowa Utilities Board |publisher= |date= |accessdate=2014-06-15}}. (PDF) . Retrieved on 2014-06-15. A sudden increase in inbound calling volume at about the same time as a telephone company leaves the NECA pool therefore can represent profitable two years for that firm.

The numbers used for the service belong to a competitive local exchange carrier or independent telephone company and may be located in a rural numbering plan area in a sparsely-populated state, such as area code 218 in northern Minnesota or area code 712 in western Iowa.[http://talkee.com/all-chat-lines is one example of a conference bridge using +1-218 Minnesota and +1-712 Iowa extensively.]

In 2006, various startup companies began to offer voice over IP or Internet fax services which purported to be "free"; the companies operated from Iowa or used Iowa local numbers.{{cite news| url=http://pogue.blogs.nytimes.com/2006/10/19/19pogue-email/ | work=The New York Times | title=The Final Word on Futurephone | date=October 19, 2006}} One such service, {{mono|callchinaforfree.com}} invited users to call a number in Iowa's area code 641 to reach a voice-over-Internet gateway from which calls could be made to China (country code +86) at no additional cost.{{cite web|url=http://www.callchinaforfree.com/ |title=Call China For Free |publisher=Internet Archive |accessdate=2014-06-15 |date=2006-07-18 |url-status=usurped |archiveurl=https://web.archive.org/web/20060718041832/http://www.callchinaforfree.com/ |archivedate=July 18, 2006 }} Another, {{mono|talkdigits.com}}, operated under multiple names (FreeDigits, TalkDigits, OfficeDigits, FaxDigits, ClickDigits, and SIPnumber) to offer a "free US phone number" to receive "free inbound calls" and voicemail{{cite web|url=http://www.freedigits.com/ |title=VOIP Phone Service Providers, Broadband Business Phone, Free Internet Phone Service VOIP, Voice Over Internet Phone Service |publisher=Internet Archive |accessdate=2014-06-15 |url-status=unfit |archiveurl=https://web.archive.org/web/20080926131859/http://www.freedigits.com/ |archivedate=September 26, 2008 }}. Web.archive.org (2008-09-26). Retrieved on 2014-06-15. or "free fax service" with "unlimited incoming faxes"{{cite web|url=http://www.faxdigits.com/ |title=Sign up for a Free Fax Number from FaxDigits |publisher=Internet Archive |accessdate=2014-06-15 |url-status=unfit |archiveurl=https://web.archive.org/web/20080923142357/http://www.faxdigits.com/ |archivedate=September 23, 2008 }} which would then be delivered outside the region via broadband Internet.

By 2007, the calls to China for the price of a call to rural Iowa were no more{{cite web|url=http://www.callchinaforfree.com/ |title=Call China. Make Calls to China |publisher=Internet Archive |accessdate=2014-06-15 |url-status=usurped |archiveurl=https://web.archive.org/web/20070403145855/http://www.callchinaforfree.com/ |archivedate=April 3, 2007 }}. Web.archive.org (2007-04-03). Retrieved on 2014-06-15. as AT&T disputed millions of dollars in calls.{{cite web|url=http://gigaom.com/2007/02/07/atts-free-call-bill-2-million/ |title=AT&T's 'Free Call' Bill: $2 Million — Tech News and Analysis |publisher=Gigaom |date=2007-02-07 |accessdate=2014-06-15}} By 2008, the offer of a free Iowa number for inbound Internet voice and fax calls had also been withdrawn.{{cite web|url=http://signup.freedigits.com/ |publisher=Internet Archive |date=2008-09-15 |accessdate=2014-06-15 |url-status=unfit |archiveurl=https://web.archive.org/web/20080915070730/http://signup.freedigits.com/ |archivedate=September 15, 2008 |title=FreeDigits Signup }} As of 2014, IPKall offered "free" Washington (state) numbers to voice over IP subscribers anywhere on the Internet, but chose to discontinue services after May 1, 2016.

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 services assert that these long-distance carriers still profit when their customers use traffic-pumped services.{{cite web|url=http://www.freeconferencecall.com/factreport.asp|title=Fact Report: The Economic Impact of Free Conference Calling Services|author1=Alan Pearce |author2=Brian Barrett |name-list-style=amp |date=March 2010}}

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 carriers from using this kind of selective blocking,{{cite web|url=http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-07-2863A1.pdf|title=Declaratory Ruling and Order in the matter of: "Establishing Just and Reasonable Rates for Local Exchange Carriers"|date=June 28, 2007|publisher=Federal Communications Commission}} 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 the 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.{{cite web|url=http://www.connectiv-solutions.com/connectiv-solutions-releases-traffic-pumping-study.html|title=The Impact of Traffic Pumping|author=Brian Silvestri, Hulya Altinsoy, Chris King and Jovita Sequeira|date=July 2010}}

{{update|date=October 2017}}

The Google Voice 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 blocked calls to some of these carriers. {{As of|2014}}, Google Voice no longer blocks calls to these carriers, but charges its users a fee to reach them (while not charging for other calls to US phone numbers).[https://productforums.google.com/d/msg/voice/jkfZP6lz7I8/Odtux6moPAEJ Explanation on Google Product Forums]

AT&T has appealed to the FCC to intervene,{{cite web

| last = Siegler

| first = MG

| title = AT&T Goes After Google Voice, Net Neutrality And Double Standards (Full Letter To FCC)

| publisher = TechCrunch

| date = 2009-09-25

| url = https://techcrunch.com/2009/09/25/att-goes-after-google-voice-net-neutrality-and-double-standards-full-letter-to-fcc/

| accessdate = 2010-07-24 }} 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{{cite web

| last = Kincaid

| first = Jason

| title = AT&T Complaint Prompts FCC Letter To Google Inquiring About Google Voice

| publisher = TechCrunch

| date = 2009-10-09

| url = https://techcrunch.com/2009/10/09/att-complaint-prompts-fcc-letter-to-google-inquiring-about-google-voice/

| accessdate = 2010-07-24 }}{{cite web

| title = 10-28-09 Google Voice Letter to FCC

| publisher = Scribd

| date = 2009-10-28

| url = https://www.scribd.com/doc/21776911/10-28-09-Google-Voice-Letter-to-FCC

| accessdate = 2010-07-24 }} that its service, and those of 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 urged the FCC to revise "outdated carrier compensation rules" to end the practice of traffic pumping.

AT&T has written to the FCC, saying that Google's blocking of calls to traffic pumping numbers gives it a substantial cost advantage over traditional carriers.{{cite web|url=http://fjallfoss.fcc.gov/prod/ecfs/retrieve.cgi?native_or_pdf=pdf&id_document=7020039523|title=Letter to Sharon Gillett of the Federal Communications Commission|author=Robert W. Quinn|date=September 25, 2009}} AT&T further argued 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."{{cite web|url=http://blogs.ft.com/gapperblog/2009/09/the-intellectual-contradiction-of-google-voice/|author=John Gapper|work=Financial Times|title=The intellectual contradiction of Google Voice|date=September 22, 2009}} 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.{{cite news|url=https://www.reuters.com/article/politicsNews/idUSTRE59746O20091008?sp=true|title=Lawmakers seek FCC probe into Google Voice

|date=October 8, 2009|publisher=Reuters}} Some of the 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.

{{update|date=October 2017}}

The Iowa Utilities Board issued its final order in 2009 in a complaint proceeding brought by Qwest and intervened by AT&T and Sprint Nextel against eight rural telephone companies 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.{{cite web|url=https://efs.iowa.gov/cs/groups/external/documents/docket/mdaw/mduz/~edisp/023026.pdf |title=IN RE: QWEST COMMUNICATIONS CORPORATION, Complainant|publisher=Iowa |date=September 21, 2009 |accessdate=2014-06-15}}{{cite web|last=McElligott |first=Tim |url=http://www.billingworld.com/articles/pumpers-in-iowa-lose-big.html |title=Porn Pumpers in Iowa Lose Big |publisher=Billingworld.com |date=September 23, 2009 |accessdate=December 13, 2012}} 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 in 2009 on this case.

In 1996, AT&T filed a Section 208 complaint with the FCC against Jefferson Telephone Company, a rural incumbent local exchange carrier (ILEC) based in Iowa, which entered into a commercial agreement with a chat line provider.AT&T Corp. v. Jefferson Tel. Co., 16 FCC Rcd. 16130 (2001) 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).AT&T Corp. v. Frontier Commcn's of Mt. Pulaski, Inc., 17 FCC Rcd. Rcd. 4041-42, ¶¶ 1, 2 (2002). 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.AT&T v. Beehive Tel. Co., 17 FCC Rcd. Rcd. 11641 (2002).

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 the 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.{{when|date=December 2013}}

Several long-distance carriers lobbied{{Citation needed|date=April 2010}} the South Dakota legislature to propose legislation forbidding rural telephone carriers from entering into revenue-sharing agreements with traffic-pumped services.{{Cite web|url=http://sdlegislature.gov/Legislative_Session/Bills/Bill.aspx?Bill=1097&Session=2017|title=South Dakota House Bill 1097 (2010)|url-status=dead|archiveurl=https://web.archive.org/web/20170529170926/http://sdlegislature.gov/Legislative_Session/Bills/Bill.aspx?Bill=1097&Session=2017|archivedate=2017-05-29}} However the legislation was defeated.{{Cite web |url=http://legis.state.sd.us/sessions/2010/RollCall.aspx?Vote=906 |title=South Dakota House Bill 1097 Roll Call Vote Tally |url-status=dead |archiveurl=https://web.archive.org/web/20100215180949/http://legis.state.sd.us/sessions/2010/RollCall.aspx?Vote=906 |archivedate=2010-02-15 }}

• Deregulation
• Rent seeking

{{Reflist|30em}}

• [https://techcrunch.com/2009/09/25/att-goes-after-google-voice-net-neutrality-and-double-standards-full-letter-to-fcc/ Article containing AT&T's complaint to FCC about Google Voice]
• [https://techcrunch.com/2009/10/09/att-complaint-prompts-fcc-letter-to-google-inquiring-about-google-voice/ Article containing FCC inquiry regarding AT&T's complaint]
• [https://www.scribd.com/doc/21776911/10-28-09-Google-Voice-Letter-to-FCC Google's redacted response to the FCC about AT&T's complaint, with some technical details]
• [https://www.fcc.gov/encyclopedia/traffic-pumping Traffic Pumping] definition on Federal Communications Commission site
• [https://efs.iowa.gov/efs/ShowDocketSummary.do?docketNumber=FCU-2007-0002 Iowa Utilities Board Docket Summary FCU-2007-0002]
• {{Cite web|url=https://gimletmedia.com/episode/104-case-phantom-caller/|title=#104 The Case of the Phantom Caller - Reply All by Gimlet Media|website=gimletmedia.com|language=en-US|access-date=2017-09-19}}

{{Federal Communications Commission}}

Category:Telecommunications economics

Category:United States federal communications legislation