Boucher Unfazed by Free Conferencing Defense of Revenue Sharing with RLECs

A recent lobbying push by free conference call providers is set on getting “the truth out” to Washington policymakers about how consumers benefit from a business practice that long-distance carriers decry as “traffic pumping,” Free Conferencing Corp. CEO Dave Erickson said in an interview. But House Communications Subcommittee Chairman Rick Boucher, D-Va., who’s working on a bill banning such arrangements, told us his views have changed “not at all.” Congress and the FCC are both mulling curbs on the practice, which involves revenue-sharing agreements under which rural local exchange carriers pay conferencing companies to send traffic to their exchanges.

Capitol Hill activity on the traffic practice has mostly been limited to the House, said legislative and industry officials. The House Commerce Committee has collected information from the RLECs and big interexchange carriers (CD Feb 18 p1). Meanwhile, Boucher included language banning “access stimulation charges” in the last version of Universal Service Fund legislation with Rep. Lee Terry, R-Neb. The bill defined the charges as “any switched access charge assessed by a local exchange carrier upon a connecting carrier for delivery of telecommunications during which a free or below cost service or product is provided by an entity with which the local exchange carrier has a business, financial, or contractual arrangement relating directly or indirectly to switched access revenues from the offering of such service or product."

The section on access stimulation in the current draft of the USF bill hasn’t changed since the last version, Boucher said. He said his legislation isn’t meant to make free conference services illegal. “If a company wants to provide that, and have it be advertiser-supported, or raise revenue in some other way … that would be fine,” he said. “We simply say that there can’t be a revenue-sharing arrangement for reciprocal compensation payments between such a calling service and the local exchange carrier."

Some FCC aides said they had seen a report submitted by Free Conferencing in defense of the practice, and it will be considered by the commission just like any filing. In meetings, “I have had some [free conference] entities talking about being the middle guy,” an eighth-floor aide said. “They've said that rural carriers aren’t getting paid by the IXC,” and that IXCs lump the conference call companies in with the rural carriers. There were “a lot” of meetings with free conference call advocates in September and October, said another aide.

An FCC spokesman said the National Broadband Plan “emphasizes the importance of fundamentally reforming intercarrier compensation along with providing interim solutions to address arbitrage.” Efforts to repair intercarrier compensation are recognized in the plan. Steps toward comprehensive reform include implementing “interim solutions to address arbitrage,” like access stimulation, the plan said.

Free Conferencing Corp. hadn’t been on the radar of many policymakers before CEO Erickson’s visits, and some legislators have confessed they were unfamiliar with the issue, said Mary Diamond Stirewalt. She does consulting for the company and previously worked at the FCC Media Bureau under former Chairman Kevin Martin. The company has had meetings with several Hill and FCC offices, including House Commerce Chairman Henry Waxman, D-Calif., and recently sent a report defending its business model around the Hill and the commission. Erickson said he’s received “very light” feedback from policymakers on the study, composed mostly of follow-up questions about his company.

Free Conferencing has a four-person team in Washington: Erickson, Stirewalt, Jeff Holoubek, legal and finance director, and Ross Buntrock, an attorney with Arent Fox. That’s a small battalion compared to the other side, which counts AT&T, Qwest and other big long-distance carriers among its ranks. Erickson and Holoubek live in Long Beach, Calif., but have made regular visits to the capital, including a week-long stay in April. Erickson plans to return next month, but no meetings had been set, he said. “We'll look to see who we can talk to and who would be willing to talk to us, and keep pushing."

Erickson’s company is “friendly” with the rural telcos with which it does business but lobbies on its own, he said. “We look to work together but not necessarily in all cases,” he said. “I don’t know where everybody else stands, and I don’t know that standing in the group is always the best thing to do when you don’t know that.” Erickson believes his company could eventually receive support from grateful customers, including American Indian tribes, he said. Competing free conference call providers have also increased Hill activity. Rival FreeConference.com last month began sending letters to customers urging them to write their congressmen (CD April 2 p5).

Erickson stresses to policymakers that free conferencing is “real consumers making real telephone calls,” he said. Erickson believes the term “traffic pumping” is biased, because it implies that his company’s traffic is artificial, he said. Yet there’s little escaping the expression when talking to Washington policymakers, he admitted. Another topic that comes up “in every meeting” is the alleged tie between the conference traffic issue and porn chat lines, he said. “We never were involved in anything like that, but somehow [free conferencing providers] get sucked into it."

Free Conferencing’s industry foes say the company is involved in unlawful arbitrage, because long-distance companies end up paying rural carriers for sending calls to free conferencing providers. Conferencing companies say their service is free, but long-distance carriers have to pay for it, said a USTelecom spokeswoman. That cost ultimately is passed to consumers, she said. “Traffic pumping is an unlawful practice that has cost American consumers millions of dollars,” said Qwest Senior Vice President Steve Davis. The Iowa Utilities Board ruled last year that participating RLECs “are violating their tariffs, misusing numbering resources, and engaging in unreasonable practices that have misled the industry and regulators.”

The recent push by free conferencing companies seems like a “last-ditch effort to hold onto their gains and profits,” said one long-distance provider official. Consumers may like free conferencing, but they probably would also like free cars, and either way someone has to pay, the official said.