Big telecoms decry high costs of 'traffic-pumping'

— -- AT&T says schemes that route adult chat and other calls made by its customers to rural phone numbers are costing it hundreds of millions of dollars and may force it to raise the price of its $55 unlimited-calling plan.

With rural phone carriers able to charge high rates to connect calls to their networks, AT&T, the nation's largest phone company, says the ploys cost it $250 million last year.

"If left unchecked, these scams will impact the ability of carriers to offer consumers affordable unlimited-calling plans," says AT&T spokesman Michael Balmoris.

The FCC did crack down on the rural phone companies last summer, but a new band of rural competitors is skirting the constraints.

The rural upstarts say they're doing nothing illegal and accuse the large carriers of not paying their bills.

Rural phone companies are allowed to charge about 2 cents to 8 cents a minute to connect long-distance and wireless calls to their networks. The fees, up to 100 times higher than rates charged by large local phone companies, offset the rural companies' high costs and low call volumes.

About two years ago, specialty calling services saw an opportunity in the high fees and teamed with some rural phone companies, largely in Iowa. About 10 rural carriers provided local numbers to the services. The companies advertised the numbers, luring customers with free conference calling, adult chat and other services. Then they split the call-connection revenue with the rural carriers.

Ron Laudner, CEO of Farmers Telephone of Riceville, Iowa, says the set-up was routing up to 40 million minutes of calls each month to his network, generating $2.2 million in monthly revenue.

Yet, since most customers of AT&T, Verizon and Qwest pay a flat fee for unlimited local and long-distance calls, the strategy saddles those companies with added costs but little new revenue.