AT&T vs. the Farm Team

AT&T VS THE FARM TEAM
[SOURCE: BusinessWeek, AUTHOR: Lorraine Woellert]
Making money has never been easy for small-town phone companies, most of which rely on federal subsidies to survive. But two years ago, Ronald Laudner, chief executive of Farmers' Telephone, in rural Iowa, hit on a lucrative new source of profit, thanks to a convoluted federal mandate that requires long-distance carriers to pay rural phone companies. By the end of 2006 his call volume was up twelvefold and annual net revenues had doubled, to $2 million. That's when AT&T's lawyers came calling. Now Farmers', which serves about 1,600 local customers near Riceville, Iowa, is among a handful of rural telcos under assault from big telecommunications companies. The giants complain that the little guys have latched onto a lively industry of free conference-call, chat-room, and sex-line services that make economic sense only because of federal regulation. The so-called Universal Service Fund was set up to ensure that sparsely populated areas of the country could still get affordable phone service following the 1984 breakup of the Ma Bell monopoly. But the big boys say smaller carriers are exploiting loopholes in the program and raking in cash from larger players. "This was not created to give people access to free porn or other seemingly legitimate services," says Qwest spokesman Robert Toevs. "From our standpoint it's a pure scam."
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