Iowa Telcos: AT&T Owes $12 Million

Several of the Iowa telecom service providers who have been named as defendants by AT&T in the ongoing Free Calls controversy have filed legal claims of their own, suing AT&T for more than $12 million in total unpaid bills, non-payments that the companies claim have caused “significant, ongoing harm.”

In two separate suits filed Feb. 5 in the U.S. District Court, Southern District of New York, attorneys for six Iowa telcos filed collection actions for what they claim is more than $12 million in unpaid bills by AT&T for long-distance access to their “local” calling customers. In its own lawsuit, AT&T has contended that the so-called free calling services (a list that included international calls as well as chat rooms, conference calls and podcasts-by-phone) were an illegal arbitrage scheme designed to use regulatory loopholes to make AT&T bear the burden of the so-called “free” calls.

While AT&T’s legal actions (and a similar move by Qwest) have forced several of the service operators out of business, the Iowa telcos aren’t going to be pushed around so easily, and have found formidable legal help themselves. Jonathan Canis, attorney with Washington-based Kelly Drye & Warren LLP, which is representing the Iowa telcos, says this latest tussle is reminiscent of AT&T’s legal battles with CLECs earlier this decade, a matter he says the telco giant ultimately settled out of court.

“This is deja vu all over again,” said Canis in a phone interview Monday, asserting that there is “tons of [legal] precedent” to prove that the rates charged by the telcos were legal, and that AT&T is, as the lawsuits claim, “deliberately flouting its legal obligations” by both not paying its bills, and by seeking redress not at the FCC (where the telcos claim such complaints belong), but through the courts.

Fans of telco legal battles should be heartened to know that this one looks like it will slog along at glacial pace, as venues and legal issues are straightened out (Canis said the telcos chose to file in New York courts since those courts have experience in such matters, AT&T does business in New York and “it was a convenient forum for us”). Some interesting tidbits from the telco filings:

— It appears that tiny Superior Telephone Coop was the big player in the free-calls schemes, since it claims $7,071,820.77 in unpaid bills from AT&T, which it said stopped paying its bills from Superior on Oct. 1, 2006. Superior appears to have been the partner of free international calling operation FuturePhone, which shut down shortly after AT&T filed its lawsuit in late January. Superior has not responded to calls or emails for information.

— Two other Iowa telcos are seeking bills from AT&T in the millions, including Farmer’s Telephone Company ($1,826,617.97) and All American Telco Company ($2,025,470.80). AT&T, the lawsuits say, has been withholding payment from All American since May 1, 2006.