Kelly Cobb

For two years, President Obama's Federal Communications Commission (FCC) has launched a number of regulatory campaigns purporting to protect consumers. Their onerous Net Neutrality Internet regulations – sure to be shot down in court or by Congress – were labeled as helping to “ensure robust Internet for consumers.” Their ongoing “bill shock” effort would place burdensome requirements on wireless providers under the guise of keeping phone bills down, while the FCC itself has helped raise the tax on consumers' wireless bills to over 16 percent.

With its anti-free market horse-blinders directed at piling on ever more regulation, the FCC has failed to rectify harms to consumers and companies caused by abuse of rules it already has on the books. Yet, the Commission’s announcement this month to reform two programs presents an opportunity to eliminate the waste, fraud and abuse the FCC has long ignored.

Amongst the FCC's worst oversights has been the rise of shell phone companies setting up shop across the country that take advantage of the Commission's intercarrier compensation regime. Under this system, companies compensate each other for phone calls that start on one network and are completed on another, so consumers aren't billed by both companies.

Yet, the rules open the door for abuse from companies like Native American Telecom (NAT). Shortly after it was founded in 2008, NAT entered into a contract to provide phone service with the Crow Creek Indian Reservation in central South Dakota. By setting up shop on an Indian reservation, the company avoided state oversight and took advantage of FCC rules that allow companies in rural areas to charge astronomically higher compensation rates than if they were located in an urban area with more phone traffic.

But providing phone service to a small, rural community was never the goal. Instead, NAT teamed up with FreeConferenceCall.com to direct a huge number of phone calls through – but not starting or ending on – the Indian reservation. President Obama's campaign alone ran “millions of minutes” through FreeConferenceCall.com in 2008.

By inflating call volume, NAT could demand enormous compensation from other phone carriers at a higher rate due to its rural location. With a newfound pot of gold, NAT hired an employee who also happened to work as the legal and finance director for another company owned by the CEO of FreeConferenceCall.com.


Kelly Cobb

Kelly William Cobb is government affairs manager at Americans for Tax Reform (ATR) and executive director of DigitalLiberty.Net and StopETaxes.com.