Senate Commerce ranking member Ted Stevens announced Wednesday that he will introduce legislation addressing a longtime problem plaguing telecommunications carriers: phantom phone traffic that cannot be identified for billing purposes.
Under regulations known as intercarrier compensation, the telecoms are supposed to compensate each other when calls originating on one provider’s network are completed on another’s infrastructure.
But roughly 20 percent of telecom traffic cannot be identified, sometimes due to technical reasons though often because it has been disguised, creating daunting challenges for carriers that have nowhere to turn to recoup lost revenue.
During a committee hearing Wednesday on the topic, Stevens said the problem is particularly acute for small phone companies because they usually do not have agreements with large players to receive compensation based on estimated levels of unidentified calls.
“Phantom traffic is a definite problem for rural carriers in [his] home state of Alaska and throughout rural America,” said Stevens, whose bill was set for introduction either late Wednesday or today.
Industry witnesses disagreed on the severity of the situation and whether legislation is needed. Charles McKee, director of government affairs at Sprint Nextel, emphasized that while his company does not condone fraudulent activity, it recognizes that network limitations are sometimes to blame and that carriers have differing views about what constitutes stealth traffic.
His firm does not think congressional action is warranted, McKee said.
Angela Simpson, senior counsel for government and regulatory affairs at Covad Communications, a provider of Internet-based phone service, said tougher enforcement of existing regulations is preferable and warned that new requirements could be costly to implement.
“It is inaccurate to view all phantom traffic as fraud or theft,” she said, noting that many Internet phone companies do not track calls using methods favored by established carriers. Simpson also is president of the VON [Voice on the Net] Coalition, which represents providers of Internet-based phone service.
Testifying on behalf of the National Telecommunications Cooperative Association, Raymond Henagan, general manager at Rock Port Telephone Co. in Missouri, which has only nine employees, said 11 percent of the traffic on his system cannot be traced, resulting in revenue losses totaling $500,000 over the last 10 years.
“Senators, Missouri is the Show-Me State. I’m asking you to show me some action on this issue,” he said.
Larry Sarjeant, vice president of federal, legislative and regulatory affairs at Qwest Communications, one of three remaining regional Bell companies, noted in his written testimony that estimates for annual industry losses range from $600 million to $2 billion. The company has asked the FCC to take immediate steps to curb the problem.
The Stevens bill would require all voice service providers to ensure that calls can be identified and directs the FCC to issue new rules within a year of enactment.
“The fact that [the draft] is out there, and the fact that they’re having this hearing, may provide some incentive for the FCC to act,” said an industry source opposed to legislation.
Stevens so far has lined up as co-sponsors Senate Commerce Chairman Daniel Inouye, the only other member to attend Wednesday’s hearing, and Sens. Byron Dorgan, D-N.D., Mark Pryor, D-Ark., Gordon Smith, R-Ore., Olympia Snowe, R-Maine, and John Thune, R-S.D.
This article appears in the April 26, 2008 edition of NJ Daily.