In August, a long-pending traffic pumping proceeding at the Iowa Utilities Board (“IUB”) came to a head. On August 14, the IUB announced its decision in Qwest Communications Corp. v. Superior Tel. Cooperative, et al. (“Qwest”), finding that the defendant local exchange carriers (“LECs”) had assessed terminating intrastate access charges improperly. On August 20, the FCC sought comments on a Petition for Declaratory Ruling filed by Great Lakes Communication Corp. (“Great Lakes”) and Superior Telephone Cooperative (“Superior”), two of the LEC defendants in Qwest, requesting that the FCC preempt the IUB’s expected final written ruling in Qwest. Great Lakes and Superior argued that the IUB intended to rule on matters affecting interstate access services and charges. On September 15, Qwest Communications Co., LLC, the plaintiff in the IUB proceeding, requested that the FCC suspend the comment schedule on the Great Lakes petition until after the IUB rules on Qwest’s complaint.

On September 21, the same day that initial comments were due on Great Lakes’ petition, the IUB issued a Final Order in Qwest ordering refunds of improper intrastate access charges and initiating a proceeding to “prevent this abuse in the future.” Qwest had alleged that the eight LEC defendants were engaged in a scheme to dramatically increase the amount of terminating access traffic delivered to their exchanges by means of agreements with conference calling and other service providers. The service providers offered free conference calling, international calling, and other services nationwide, which resulted in vast increases in the toll traffic terminating in the LEC defendants’ exchanges, and the LECs shared their increased access revenues with the service providers.

In ruling for Qwest, the IUB addressed three sets of issues: (1) the LECs’ alleged tariff violations; (2) prospective remedies for traffic pumping; and (3) one of the LEC counterclaims. Regarding the first category, the IUB found that terminating switched access charges were improper because the incoming toll calls were not delivered to “end users” of the LECs’ intrastate services, nor were they terminated at any end user’s “premises” or in the terminating LEC’s local exchange area, as the relevant tariff requires. The IUB found that the conference calling providers were not end users because they had not purchased the LECs’ local exchange services. The LECs’ supposed invoices to the providers were backdated or nonexistent. The IUB described the LECs’ backdating of invoices as “an attempt . . . to manufacture evidence, after the fact” and stated that “[t]he effort reflects badly on those [LECs] and the credibility of their cases.” The IUB also found that the revenue sharing and other factors showed that the service providers were business partners of the LECs, not the LECs’ end users.

The IUB also found that calls were not delivered to a separate “end-user’s premises.” The service providers did not own, lease, or control separate buildings or even separate areas in the LECs’ central offices for which they paid collocation fees. The IUB also found that most of the toll traffic at issue was not subject to terminating access charges because it did not terminate in the LECs’ exchanges. Rather, it was routed to distant points, including international locations in the case of calling card and international calling services, or was terminated in locations other than the exchange area of the LEC assessing the terminating access charges.

Regarding prospective remedies for the traffic and access rate manipulation alleged by Qwest, the IUB did not make a finding that revenue sharing agreements between LECs and their service provider customers are always unreasonable per se. The IUB expressed concern, however, that where a carrier’s access traffic volume surges after access rates are set based on low volume, the incremental cost of the increased traffic is less than the charge, the carrier is willing to share a portion of access revenues, and the carrier has market power over access services, the result is an unreasonable rate or service arrangement. “In an effort to curb this unreasonable result going forward,” the IUB initiated a rulemaking regarding high-volume access services. Based on evidence that some of the service providers offered pornographic content, the IUB also announced that it will initiate a rulemaking to consider restricting access to obscene calling services in Iowa. Finally, because carriers may issue telephone numbers only to end users, the IUB also directed the North American Numbering Plan Administrator and the Pooling Administrator to initiate proceedings to reclaim telephone numbers that Great Lakes issued to service providers and ordered the other LECs to report on whether they issued numbers to parties other than end users.

One of the LEC defendants, Reasnor Tel. Co., LLC, filed counterclaims against Qwest and intervenor Sprint Communications Co., L.P., based on their withholding of payment of the disputed access charges and their alleged call-blocking. The IUB found that, although withholding of payment “is not a preferred form of dispute resolution,” nothing is owed by Qwest or Sprint because the access charges were improper. The IUB also found that the record did not support any finding of call-blocking by Qwest but that Sprint blocked calls bound for the service providers by routing such traffic to inadequate facilities, thereby “choking” the traffic. The IUB accordingly placed Sprint on notice that it engaged in call-blocking and that any repeated call-blocking may result in civil penalties. Finally, the IUB rejected Reasnor’s claim that Qwest discriminated against its wholesale-carrier customers by offering them unequal discounts because Qwest provides discounts in a competitive market, unlike the access market manipulated by the LECs.

The IUB denied a motion filed on August 17 by Great Lakes and Superior to stay the proceedings. Echoing their FCC petition, Great Lakes and Superior had argued that, because most of the disputed access traffic is interstate, the case is preempted by the FCC. The IUB stated that it “is aware of its jurisdictional limitations with respect to interstate and international traffic and as such has limited its findings . . . to the intrastate issues raised in [Qwest’s] complaint.” The IUB also directed Qwest and the intervenor plaintiffs to calculate the access charge refunds they are owed. The IUB order covered a number of significant intrastate access issues that are also before the FCC on the interstate side and will be subject to intense interest and analysis as the FCC and other state commissions address these issues.