Google Voice is facing a probe by the Federal Communications Commission because it bypasses legacy telecom regulations by arguing that it is a software company, not a communications company. The end result is that users save money and parasitic telephone companies lose government-protected revenue.

A group of Republicans and Democrats in the U.S. House of Representatives called on the Federal Communications Commission to investigate Google Inc's ability to block calls to rural telephone exchanges ...

Citing media reports, AT&T has said the Google Voice service was blocking costly calls to phone numbers in certain rural areas in order to cut down on expenses. Phone companies are banned from blocking calls. ...

In 2007, the FCC told carriers they could not restrict calls to avoid fees associated with adult chat lines or free conference calls by companies routing calls through rural carriers in order to generate fees.

Here's how it works:

1. Rural phone carriers are allowed by the FCC to charge higher rates to other phone companies for call that go through their network. These higher rates are allowed because without them it might not be possible to operate phone services in areas with low population density.

2. Phone sex companies set up in rural areas and make revenue-sharing agreements with rural phone companies so they can split the high fees. (Of course the high fees wouldn't be needed to support the rural phone companies if the phone sex call volume were taken into account, but the high rate rules have existed for decades and will never be revisited.)

3. Legislators from rural areas get campaign contributions from rural phone companies, so they will fight to protect the high rate phone sex scam in order to protect these contributions.

Google provides Voice for free and realized that a high percentage of its cost was arising from a small number of calls that were being routed through these rural phone companies, so they decided to block the calls to eliminate the fees. FCC regulations prohibit telecommunication companies from blocking any calls, but Google argues that it isn't a telecommunications company, isn't offering phone service, and is not subject to FCC regulation.

The spat prompted an attorney for some rural carriers, Ross Buntrock, to file a letter on October 1 with the FCC to complain that AT&T is refusing to pay its bills to rural carriers.

"The only difference between Google's alleged call blocking and AT&T's refusal to pay terminating access charges for conference and chat-line calls is that the (local carriers) are forced to incur the costs of terminating AT&T's customers' traffic," Buntrock wrote.

A Google spokesperson said on Thursday that for AT&T to invoke rural America while AT&T is behind in its payments to rural carriers is "the height of cynicism."

AT&T isn't paying the fees either, which provides additional support for the obvious conclusion: the special high rates these rural phone companies are allowed to charge should be eliminated. The regulations intended to ensure that rural residents have phone service available have been corrupted to enrich rent-seekers, as most government regulations are. Let's deregulate, eliminate the parasites, and let the free market sort it out.

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