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AT&T Sues Rivals Over Routing

The telephone carrier accuses WorldCom and Onvoy of conspiring to redirect domestic calls through Canada.

September 03, 2003|From Reuters

WASHINGTON — AT&T Corp. on Tuesday sued rival telephone carriers WorldCom Inc. and Onvoy Inc. in federal court for alleged racketeering and fraud, charging the two companies with plotting to improperly route calls via Canada in a way that forced AT&T to pay hefty connection fees.

WorldCom, which is in the process of changing its name to MCI, has been battling allegations about call routing for weeks. It has accused competitors of seeking to derail its plan to reorganize and emerge from bankruptcy protection.

"The lawsuit alleges, among other claims, fraud, civil conspiracy, unjust enrichment, racketeering conspiracy and substantive racketeering through a pattern of multiple acts of mail fraud and wire fraud," AT&T said. The lawsuit was filed in federal court in Virginia and relies on federal racketeering laws.

U.S. telephone carriers pay each other to connect calls to their networks that can cover different areas. The fees can vary depending on the location or how they are routed, so most companies try to find the cheapest route.

Telecommunications companies such as AT&T, Verizon Communications Inc. and SBC Communications Inc. have charged, however, that WorldCom went beyond least-cost routing, and that it took advantage of an agreement AT&T has in Canada to reduce the costs of connecting calls between the two countries.

AT&T, the No. 1 U.S. long-distance carrier, said it was seeking unspecified damages from WorldCom once it emerges from bankruptcy, expected later this year. WorldCom sought protection from creditors last year after being rocked by an accounting scandal that has reached $11 billion.

WorldCom said the issue in the lawsuit was a commercial dispute, while Onvoy, a Minnesota telecommunications carrier, denied the charges.

AT&T charged that WorldCom and Onvoy were still engaged in misconduct, and said it learned of the claims it was making as a result of a federal grand jury investigation.

The U.S. Attorney's Office for the Southern District of New York and the Federal Communications Commission have been probing whether WorldCom improperly routed calls or hid call details to avoid fees, after a former Onvoy employee came forward.

Separately, Verizon said that U.S. prosecutors were negotiating to delay a request by WorldCom creditors for documents from the rival carriers and to interview witnesses there about the routing allegations.

AT&T accused WorldCom and Onvoy of conspiring with other carriers as early as July 2001 to reroute WorldCom customers' domestic calls via AT&T's network through Canada so that AT&T had to pay the connection fees. An analysis for 663 million minutes of international calls made on its network over two days in July 2003 between Canada and the U.S. showed that only half were cross-border calls, the lawsuit said.

Most of the remaining calls either originated in the United States or had details missing, AT&T said. Some calls routed through Canada included those from U.S. government agencies such as the Defense Department, the carrier said.

But WorldCom spokesman Brad Burns said that the law firm hired to review the allegations has discovered nothing wrong with its dealings with Onvoy and that the AT&T allegations were meant to hurt its reorganization process.

A hearing is slated for next week on WorldCom's plan to emerge from bankruptcy.

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