[IP] AT&T says banned Internet plan saved it $250 mln
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Date: Mon, 10 May 2004 20:58:52 EDT
Subject: AT&T says banned Internet plan saved it $250 mln
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AT&T says banned Internet plan saved it $250 mln
By Justin Hyde
WASHINGTON, May 10 (Reuters) - AT&T Corp. <<aol://4785:T/>T.N> on Monday
said it had saved $250 million since 2000 by using a now-banned strategy of
paying lower fees on some long-distance calls by sending them partly over
the Internet.
AT&T, the top U.S. long-distance phone company, also said in a filing that
regulators were reviewing another strategy it had used on calls made on
certain prepaid calling cards that it estimated had lowered its fees by
about $355 million over the past few years.
The U.S. Federal Communications Commission ruled in April that AT&T had
improperly deemed some long-distance calls it carried over the Internet as
local calls, thereby paying local phone companies lower fees than normal.
Two local phone companies, SBC Communications Inc. <<aol://4785:SBC/>SBC.N>
and Qwest Communications International Inc. <<aol://4785:Q/>Q.N>, have sued
AT&T for back payments and punitive damages, with SBC asking for at least
$141 million. In its report, AT&T warned that other local phone companies
may file similar suits.
The decision by the FCC had been seen as a win for local phone companies,
as the FCC rejected AT&T's argument that calls that travel even partially
over the Internet backbone are not subject to higher FCC-mandated access
charges.
AT&T criticized the FCC's ruling when it was released, and told analysts in
April it did not expect to have to pay back charges from the ruling. It
also said additional costs from the ruling would be less than $100 million
a year, compared with the $9 billion a year it usually pays local phone
companies for connection charges.
AT&T's strategy converted traditional phone calls to data so they could be
carried on its Internet backbone, then converted back to voice signals in a
way that made them appear like local calls to local phone companies.
The FCC sought to distinguish AT&T's tactic from other similar services
that use technology known as voice over Internet protocol, or VOIP. Those
services offer phone calls that originate on high-speed Internet
connections, at a far lower cost than traditional phone service.
According to AT&T, the prepaid calling cards under review by the FCC
required users to listen to advertising before their calls were completed,
and the fees in question involved how the calls were forwarded through an
advertising center.
The company said it had saved $215 million in fees to other phone companies
since the third quarter of 2002, and about $140 million in federal charges
since the beginning of 1999.
"An adverse ruling by the FCC on the prepaid card petition would therefore
increase the future cost of providing prepaid cards and may materially
adversely affect future sales of prepaid cards, as well as potentially
exposing us to retroactive liability," the company said in its quarterly
statement.
05/10/04 12:05 ET
Copyright 2003 Reuters Limited. All rights reserved.
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