Commerce Department settles telephone “traffic pumping” dispute in Minnesota

A little known practice called telephone “traffic pumping,” used by adult chat lines, dating hotlines, and free teleconferencing services have been secretly impacting the bottom line on Minnesota consumers’ phone bills. The Minnesota Department of Commerce and Tekstar Communications entered into a settlement agreement that addressed an action by the Department alleging violations of Minnesota telecommunication law, halting this costly scheme.

Acting on behalf of consumers, the Commerce Department took action against Tekstar Communications, a rural competitive local exchange carrier in Minnesota. The settlement, which will be submitted to the Public Utilities Commission for approval, does not include any finding or admission of wrongdoing by Tekstar, who agreed to reduce its intrastate switched access rates as well as pay a $146,000 settlement payment.

“We stopped these kinds of companies from exploiting loopholes and charging high fees on unsuspecting telephone customers in Minnesota,” said Commissioner Mike Rothman. “I hope this settlement sends a strong message that the Commerce Department will not tolerate phone companies that ignore laws designed to protect Minnesota consumers.”

Traffic pumping occurs when out-of-state chat lines funnel calls through rural telecommunication providers who can collect high access fees, which is passed on to unsuspecting Minnesotans by their long-distance carriers. The practice is virtually invisible to most Minnesotans since the cost of this scheme is not a line-item reflected on monthly phone bills; instead, it is passed on to consumers in the form of higher rates to help cover the millions of dollars charged to the national long distance and mobile carriers by rural telecommunication carriers engaged in contracts with chat lines and conference call services.

Rural competitive carriers have been allowed to charge high per-minute access fees, but recent changes by the Federal Communications Commission have helped to reduce the fees. While customers of per-minute services were not charged to use the conference call and chat lines, all of the placed calls generated excessive access charges which were passed on to long-distance and mobile providers. The higher access fees paid by the long-distance providers resulted in profit-sharing for the phone-based service providers that offer free teleconferencing or adult chat lines and the rural carriers, while Minnesota consumers are left holding the bag for the excessive fees.

As traffic pumping became more prevalent with the cost for consumers skyrocketing, many national carriers have asked regulators to intervene.

“Minnesotans have experienced a tough economy over the past few years, and we are stopping this nickel and diming of consumers,” stated Commissioner Rothman.

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