Wireless Net Neutrality

Submitted by Aldon Hynes on Wed, 03/14/2007 - 21:13

On February 8th, Tim Wu wrote a blog entry about his beta draft of Wireless Net Neutrality. For a long time I’ve thought that the wireless industry in the United States was not operating in the best interest of consumers, that there actions are anti-competitive. I’ve been concerned about why Europe and the Far East is so far ahead of us in wireless innovation.

Yet most of the time, it hasn’t particularly affected me. Sure, the ridiculous pricing on text messaging discourages me from using text messaging as much as I would otherwise.

Then, this evening, I got an email that changed things. I often use Free Conference.com for conference calls. They sent out an email saying,

As of Friday, March 9, it's come to our attention that Cingular Wireless has begun blocking all conference calls made from Cingular handsets to selected conference numbers. If you call our service, you receive a recording that says, "This call is not allowed from this number. Please dial 611 for customer service".

Earlier this week, Sprint and Qwest joined in this action, blocking cellular and land line calls to these same numbers. This appears to be a coordinated effort to force you to use the paid services they provide, eliminating competition and blocking your right to use the conferencing services that work best for you.

Being the good investigative blogger that I am, I set up a conference call. I received the following email confirming the call:

Primary Dial-in Number: 1-641-297-5500 (Iowa)
Alternate Dial-in Numbers: As long as everyone participating in your conference enters the same Participant Access Code, they will be joined together.
1-641-297-5510 (Sprint, Qwest and Cingular Customers)

So, I called in from my landline. There were no problems getting in at the primary dial-in number. It is worth noting that my landline is served by the new AT&T (Cingular). I then tried calling the Primary Dial-in Number from Cingular cellphone. Sure enough, I received the message, "This call is not allowed from this number. Please dial 611 for customer service"

So, I called customer service. After several minutes on hold, I learned that Cingular is spending $18 million a day on customer service. Well, maybe they had better policies they wouldn’t need to spend as much on customer service.

After a few minutes waiting on hold, I spoke with a customer service representative. I described the problem. The first suggestion was to power off and power on the cellphone. I explained that the phone was working fine. I was calling from the phone.

She then tried to call the number and said she was getting a busy signal. I said that it worked from my landline, but not from by cellphone. I suggested that they write up a ticket about a problem with their system. She put me on hold and contacted technical support. Yet again, I heard about $18 million a day.

When she came back, she said that the number I was trying to call had been restricted by the fraud department. I asked her what was fraudulent about trying to call a number in Iowa. She said that people calling that number were being charged an excessive rate. I asked her how that could be, since Cingular is the company that is doing the billing. I asked how Cingular would charge different rates for different numbers in Iowa. She wasn’t sure and checked again. She then went on to say that it is some sort of temporary billing dispute between Cingular and the conference call company. She said that it should be resolved in a couple of days.

For some reason, I don’t trust Cingular. It may be that FreeConference is partly responsible as well. I don’t know. FreeConference suggested contacting the FCC and the state attorney general. Sounds like a good idea to me. They are probably much better at getting to the bottom of this than I am. When I finish putting this post up, I’ll contact the FCC and the state attorney general. Let’s see what they make of the situation.

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Submitted by jeremy on Wed, 03/14/2007 - 23:03.

the reason a lot of these numbers are being blocked is because they are set up by rural telco providers that use loopholes in fcc policy to charge large carriers ridiculous prices. when at&t routes a call to another company it pays that company to terminate the call. rural providers in iowa have set up 'free international long distance' calling and free conference calling. most of these numbers terminate in towns of 500 people or less and while the big telcos usually pay 1000 or so dollars a month, in the past few months it has escalated to the millions. these companies set up numbers and the call terminates and then they route the call using voip, so, normally the terminating company would have to pay to complete the call elsewhere, but now they are not and it is costing millions to do so. it isn't necessarily illegal, but it is very unethnical. at&t has pending lawsuits against two companies based out of iowa for this very reason and all the major landline providers are trying to get this stopped. it honestly isn't a way for them to make more money, but to stop them from loosing money.

also, cingular and other wireless carriers have had in there terms of service that use for conference calling is prohibited in some form and this has been in tact for quite a few years.

Thanks, and more details

Submitted by Aldon Hynes on Thu, 03/15/2007 - 15:39.

Jeremy,

Thank you for providing this information. I have done a little checking and find some facts to back up what you are saying, but other things that don't quite fit.

For example, according the TheDirectory.org the number provided by FreeConference.com is terminated in St. Mary's Iowa. Answer.com lists the population of St. Mary's Iowa as being 134 in the previous census.

A quick search online shows lists Terms Applicable to Cingular Nation GSM Plans as including "Unlimited voice services may not be used for conference calling". I couldn't find places where that applies to plans other than Unlimited voice services. It may be that it does, but I can't find it documented on the web any where. In my case, my plan is not an unlimited voice service, so I don't believe it applies. If you can provide further information on which plans allow or don't allow conference calling. My guess is that if this became more widely known it would produce a further backlash against the cell phone companies.

I am also interested in any details you can provide about the pending law suits that you mention. Also, any details about the FCC rule, or the assertion that the interconnect cost has sky rocketed would be greatly appreciated.

Go To Webinar Troubles Tonight, 3/19/2007

Submitted by Kate Marrs on Mon, 03/19/2007 - 22:46.

I was forwarded a link to your site, last week.

Tonight, A friend in MI and here, I experienced the problems. The visual internet piece had no problems. The telecom portion did not work.

In CA - ATT/Cingular territory, I was blocked from my landline and my Cingular Cellular phone as well. My friend in MI is not on the same networks and had the same issues.

I will be able to register the complaints with Attorney General and FCC.

Please keep looking into this. I want to know more. Thank you for your help.

Kate Marrs

corrections

Submitted by Alex Cory on Mon, 04/02/2007 - 20:55.

the rates are actually not loopholes but part of the carrier exchange regulations that require every carrier to pay every other carrier if they use their system to connect calls. The rural rates are a little higher because of the higher service costs of those areas, but are set and reviewed every two years (including this year) based on costs and volume. Cingular/AT&T could have challenged these rates before the FCC. The conferencing businesses in these areas are neither illegal nor unethical and do not use VOIP and do not forward calls. They are entrepreneurial activities to create benefits for users and the local telephone company and even create profit opportunity for Cingular/AT&T. The "ridiculous" rates average around 4 cents per minute, while Cingular is charging a 10 cent rate (unless you go over your alloted minutes). These revenues reduce pressure to take money from you for nothing under Universal Service Fund taxes. Cingular/AT&T is not telling customers the truth either about why they are blocking or about losing money. They in fact charge more per minute for long distance services than they pay (even the "all you can eat" plans average revenues of 8 cents per minute). What they don't like here is that they make less money than they could make if you didn't have a free conferencing service option. As to their terms of service--if conference calling is prohibited, why do they tell you to use their 5 way calling service--to get you to pay them for conferencing...
Alex

cost. bottom line.

Submitted by jeremy on Tue, 04/03/2007 - 23:12.

it is a business, first and foremost. i used the word 'loophole' because these companies are in fact using the higher termination charge to their advantage. and international calls do use voip to finish connecting the call. to use your own example of .04 cents, the average customer pays 49.99 per month. let's say that they use these conference calling number twice per week for 45 minutes each call. with 30 days (4 weeks) in a billing period that is 14.40 per month that (regardless of what at&t charges, that is what it is costing them). so out of a 49.99 monthly service rate, about 29% is being spent on conference calling. now, given the usual customer does not spend that much and while at&t may eat those cost normally because it's is a cost that part of doing business, when escalated and multiplied by thousands possibly hundreds of thousands of customers, the cost is too great. they charge what they charge for rate plans based on assumed usage. there are other factors to consider when billing a customer, cost of networks maintained, employees, rental space, advertising and other overhead. anyone that has taken business 101 will tell you that when you provide a service and the cost is more than your profit, or causes you to increase your rates, it no longer sits well with investors or owners. i'm sorry for being blunt, but why is it so hard to accept the fact that to keep cost down (and being able to pass those savings on to customers) certain safe-guards have to be put in place???

You're making my point

Submitted by Alex Cory on Wed, 04/04/2007 - 23:15.

Even if I agreed with your calculations, the fact that they only make 35.59 a month in your example highlights the point--they are making profits, just not as much as they think they should. But your analysis is static, so you have to factor in the fact that this is new demand that does actually get consumers to increase their use of minutes. If this fictional caller is actually making two calls a week (way above average), they will need to buy more minutes. At 49.90, they are getting 500 or 600 minutes and using 360 of them on conference calls. And these plans are designed so that you are punished (financially) if you go over whatever you bought, so people typically buy more than they use. That creates a perception of something that is free to the user, but creates more profits for Cingular Sprint and Qwest. We actually create new business for long distance carriers that allows them to make more money. This is profitable business, so you miss the point (and buy into their one sided spin) that this is only a cost and somehow is an inescapable burden that they are going to have to pass on to other consumers. That is only true if you want to start guaranteeing profits to Cingular, AT&T, Qwest and Sprint.

Even if you still believe that this is somehow unfair, blocking is not the answer. If the rate is an issue for the major carriers, they need to work with the FCC (which is very pro major carrier) and try to rebalance the solution. What you do not do (as I suspect Cingular now realizes given the fact they have stopped blocking) is stop legitimate calls to a legitimate number that are being paid for by your customers.

Alex

yes...

Submitted by jeremy on Fri, 04/06/2007 - 02:05.

yes, i was making a point. i do work for cingular, now at&t, and very proudly. i won't go into details, but after katrina they helped more people i know than red cross and fema... but aside from that i respect their business model. i know that being an american consumer we all want things at the cheapest cost possible, and i came back to this blog to post that cingular has stopped blocking these numbers but after reading the post, i have to say one last thing... just about everyone that uses wireless services (at&t, verizon, sprint or t-mobile) is in some sort of business. rather they work for or run it. anyone that can say they want to see the business they represent to make less money is a fool. the fact that ALL business (except non-profit organizations) are in to make money and survive is human nature. i don't sympathize with crooks or business's that make a buck by fraud. i wish people would realize the intricate details that goes into running a wireless network (or any telco for that matter) because you would see that any dip into profit is bad. verizon is a prime example of a company that protects their profit at every angle. they don't provide the long distance service that at&t does, but they do and it just hasn't hurt them as bad. there are faults with all the telcos in america and that's mostly federal regulations to blame. yes deregulating 20 years ago was good, but blowing up in consumers face now. in the age of competition, it's hard to make a buck, and whatever company you may work for is after the same thing, profit and market share... if not, then i'd like to know what you do because if i didn't have to worry about customers, i'd have an easier job...

reply to jeremy

Submitted by Alex Cory on Sun, 04/15/2007 - 11:57.

I used to toil for Fortune 500 firms and started life deregulating dinosaurs in the energy business. I now work in early stage technology companies creating the pieces of the puzzle that big companies just can't figure out how to make happen. Competition is global and multilevel, but a very healthy thing. I disagree that deregulation blew up in anyone's face. There is no end-point here, but deregulation did unleash a lot of creative energy. Not everything that comes out of that works out, but it is positive in the end. I have no problem with AT&T figuring out how to make money. That is what it exists for. I just want them to be honest about what they are doing. Much of their system is very depreciated and a lot of infrastructure got built with subsidies, so they dip in the federal trough as much as any big company does. Given this, they should be careful about talking about schemes and fraud. If you look at their history, they have been on the other side of these regulatory arbitrages more than anyone. And blocking calls is wrong under almost any circumstances. The free conferencing companies aren't crooks or committing fraud. They are arbitraging rates and providing competitive services. And they are doing so at fee levels that still create profits for AT&T. While the 35.90 is revenue, not profit, you have to admit that if the rural telephone companies are creating 3 to 4 cents per minute of gross margin for AT&T on new long distance service, AT&T is making a profit. In the extreme (and very rare cases) where termination fees are 12 cents or more, clearly AT&T is not making a profit per minute. But the FCC does monitor this and in their last report, put the major carriers at 4.8 cents net of termination fees. Why doesn't AT&T go after those it thinks are out of whack economically and try to work with companies that are actually helping it create an alternative to those minutes just going to Skype? Surely a thinner profit is better than losing customers entirely? I wouldn't expect them to work for no profit, but that is clearly not the case with the free conferencing services.

Alex

forgot something

Submitted by jeremy on Fri, 04/06/2007 - 02:21.

while you say 35.59 is profit, you are still forgetting what it cost to run such network. do a little research. and when you find profit numbers, keep in mind the cost of business and the amount of subscribers, profit is made in numbers and if cingular or verizon wasn't the front runners, they wouldn't do what they do. also, look at the companies they pushed for the blocking, the major long distance carriers...............