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Telecom giant says rural company milking federal regulations

Scripps News

By Steve Alexander, Minneapolis Star Tribune

March 3, 2010

Is a free chat room for singles a bargain for romance or a telecom scheme to bilk Qwest?

Qwest Communications alleges in a new Minneapolis U.S. District Court lawsuit that it's a scheme. Qwest, a 14-state regional telephone company based in Denver, is suing Tekstar Communications of Perham, Minn., for alleged unfair competition.

Tekstar, which provides local phone service in more than a dozen rural northwestern Minnesota communities, said it has done nothing wrong.

Qwest's suit claims Tekstar drove up its volume of incoming long-distance calls from around the world -- and thus increased Qwest's network costs -- by offering Minnesota phone numbers that connect to free conference call and singles chat services located in other states.

The disputed Tekstar callers are automatically transferred to Free Conferencing Corp. of Long Beach, Calif., which provides business conference calls, and Audiocom LLC of Las Vegas, which offers singles chat rooms.

Qwest's suit is based on federal telecom regulations that require Qwest and other long-distance companies to pay "access fees" to a local telephone company to which they deliver long-distance calls. Because Tekstar's incoming long-distance call volume increased tenfold after it began offering the free conference call and singles chat services, the suit claims Qwest paid millions of dollars in "excessive" access fees to deliver the higher volume of long-distance calls.

In addition, the Qwest suit alleges that Tekstar used part of the Qwest money to illegally subsidize the conference calling and chat room services so they could remain free to the public. Qwest alleges that this helps the services continue to draw high levels of incoming long-distance calls for Tekstar.

The suit names TekStar, Free Conferencing Corp. and Audiocom, and seeks unspecified damages. A related complaint has been filed by Qwest with the Minnesota Public Utilities Commission, Qwest said.

Tekstar and Audiocom said there's nothing wrong with what they're doing. Executives of Free Conferencing Corp. did not return a phone call. A Qwest attorney declined to comment on either the lawsuit or the responses of the defendants.

"Tekstar has complied with all laws and regulation," said Dave Schornack, Tekstar's director of sales and business development. He said the company has resolved this issue with other long-distance companies and has been trying to work with Qwest for the past two years on it.

"Apparently, Qwest would rather litigate than enter into a reasonable negotiated arrangement," Schornack said.

Tekstar negotiated a new rate with AT&T after it filed a complaint about the higher long-distance call volumes, said Dan Lipschultz, a Tekstar attorney. The terms weren't disclosed.

Warren Jason, a partner at Audiocom, said Qwest is hardly a victim of the Tekstar business model. At the same time that Qwest is paying higher access fees to Tekstar as a result of increased long-distance call volume, it's also collecting more fees from long-distance customers for carrying those calls.

"Qwest isn't losing money, it's just making less money," Jason said. "This is really an anti-competitive effort to eliminate companies that provide services such as conference calling, which the big phone companies make tremendous money on."

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)

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