When Google rolled out its new Google Voice phone service earlier this year, company engineers noticed something astonishing.
"There were a very small number of exchanges primarily in rural areas where there were an inordinately high number of calls," says Rick Whitt, Google's Washington-based counsel for telecommunications and media. "The volume was way off the charts, and the costs were way off the charts."
And the call volume and costs challenged the Google Voice business model.
"We realized quickly that if we allowed this to continue, the free nature of the service to consumers would be threatened," adds Whitt. "Something like 26 percent of our costs overall were just going to these few exchanges in these areas."
So, Google Voice simply cut the cord to the area codes and local phone exchanges generating excessive calls and long distance fees. And suddenly, Google Voice customers couldn't reach friends, family and businesses in those areas.
Alarm bells went off at Great Lakes Communication Corp. in Spencer, Iowa.
"They were blatantly blocking tens and tens of thousands of numbers," says Josh Nelson, president of Great Lakes Communication. "Google was blocking our entire telephone exchange. That's not acceptable."
A Google spokeswoman acknowledges that "thousands" of calls were blocked.
Twenty members of Congress with rural districts agreed, demanding action by the Federal Communications Commission. Telecommunications giant AT&T joined them, arguing that Google Voice was acting like a phone company, and phone companies are not allowed to block calls.
Google's selective call blocking also gave it a competitive advantage over AT&T and other long-distance providers because Google Voice was simply eliminating high-cost areas from its service. Conventional phone companies must complete phone calls to everyone.
The dispute is forcing the FCC to suddenly address a key question in an evolving technological era: Is a computer company a phone company if it provides phone services?
Highlighting A Controversial Practice
The dispute also focuses renewed attention on a controversial practice that permits certain rural phone companies to charge inflated fees for the incoming long distance calls that reach their customers.
The practice applies to so-called competitive local exchange carriers, a special federal designation for some rural phone companies. CLECs provide competition to the dominant carriers in small cities and towns. And they help assure availability of phone service in places with small and scattered populations.
CLECs may encounter higher costs for providing services to fewer people, so they're permitted to charge more for the long distance calls their customers receive. Some CLECs charge 20 times more for those calls, and long distance providers must pay them.
Long distance calls typically cost companies like AT&T half a cent a minute. CLECs collect from 1 to 5 cents a minute, says Nelson of Great Lakes Communication. AT&T says the range is 3 to 10 cents a minute.
Some CLECs, including Great Lakes, engage in a practice derisively labeled by critics as "traffic pumping" or "access stimulation." These CLECs partner with companies providing chat room and free teleconference services. Some of the chat rooms feature sexually oriented talk. Customers call a local phone number in a CLEC exchange, often in Iowa and South Dakota, generating enormous call volume and long distance fees not otherwise possible in such rural places.
"They're gaming the system," complains Scott Cleland, a telecommunications consultant and analyst with Precursor LLC and chairman of NetCompetition.org. "It's basically like a one-way ATM machine."
Pulling The Plug
Great Lakes Communication has access to 800 local numbers assigned to it in Spencer, Iowa, population 11,000. But none are actually used in homes and businesses in Spencer. They're leased to some of the nation's biggest teleconference companies, and they generate 2.5 million calls a month.
"We host and cater to many large conference calling companies," Nelson explains, adding that the companies Great Lakes serves "vary from 24 channels to capacities of 7,000 to 8,000 channels on a single call." Each channel accommodates a single conference call participant.
Nelson won't name the companies involved or how much money the practice generates. He splits the profits with the teleconference and chat room providers. Long distance carriers say traffic pumping costs them millions of dollars a month in what they consider inflated fees.
And it cost Google Voice more money than expected for what is supposed to be a free service. Google won't provide precise numbers. But it reacted with the equivalent of the nuclear option in the telecommunications world: It pulled the plug.
In response to the protests and an FCC inquiry, Google engineers identified about 100 rural phone numbers apparently connected to traffic pumping. Those phone numbers are still impossible to dial using Google Voice.
Google says customers wanting to reach those numbers can get off their computers and go to their cell phones or land lines.
Still, the outrage and scrutiny continue.
"They talk about [the] significant percentage of the traffic Google Voice subscribers [generate] to these kinds of services," notes Ross Buntrock, an attorney at Arent Fox in Washington, who represents Great Lakes Communication and other rural phone companies.
"Guess what?" Buntrock says. "People like these services."
Buntrock adds that "traffic pumping" or "access stimulation" is completely legal.
"We don't live in communist Russia," he says. "When [government] makes rules and people follow those rules, they're allowed to be in business until those rules are changed."
Acting As A Phone Company Or Not?
By continuing to block calls, Google is skirting the rules that apply to other phone services. But Google insists that it is not a phone company, despite the phone services Google Voice provides.
Google Voice "piggybacks on top of your existing phone connections, and it's a Web-based application," Whitt maintains. "It's software on the Web, and so it's not using traditional phone lines and traditional phone networks the way the legacy carriers do."
Google Voice doesn't replace conventional phone services, Whitt adds; it's used to manage those services.
AT&T has not responded to Google's response to the FCC nor to NPR's request for comment. But telecommunications consultant and analyst Scott Cleland says Google Voice should be regulated based on the service it provides and not the way the service is provided.
"Clearly, Google Voice does things like a telecommunications provider," Cleland continues. "It enters the game by creating an application. But, on the back end, it has to connect people much like a telecommunications company does."
To Cleland, Google is "a computer application company, but it is engaging in telecommunications services."
The FCC also declined to comment for this story, although a spokesman confirmed that the agency is reviewing the call blocking practices of Google Voice. The agency has also launched a broader evaluation of the convergence of telephone and computer technologies under its "network neutrality" initiative.
Cleland says the regulatory issues and rate structure are so complex and arcane, they even defy the understanding of experts, especially when it comes to rural phone service.
"It doesn't get more complex than that stuff," Cleland chuckles. "If you really study this stuff, you'd go blind."
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With Google Voice, it's possible to obtain one phone number that forwards your calls to an office, home or cell phone — or any combination of them. Last week, Google announced that this service is now available for use with existing cell phone numbers instead of having to obtain a separate number from Google.
The service is only available in the United States by invitation. A spokeswoman for Google says this means requests for service are not always granted immediately. Google says there are now hundreds of thousands of active users.
When it comes to voice mail, the service will transcribe voice messages into text using Google's speech recognition engine. That means the messages can be read via e-mail or text message.
There are three ways to use Google Voice to make either domestic or international calls. These include dialing the Google Voice number from the phone of your choice (mobile or land line), downloading a Google Voice application for use on a BlackBerry or Android phone, or initiating calls from the Web.
For domestic calls, there's no charge other than the minutes used if you're calling from a cell phone. For international calls, the rates are based on whether you're calling a cell phone or a land line.
The service still works while overseas, but there may be other charges associated with using it abroad.
--Joshua Brockman
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