November 5, 2019 – Two rural communications companies have filed a class action lawsuit, individually and on behalf of a class of similarly situated companies, against T-Mobile USA, Inc., Inteliquent, Inc., and  10 Doe Defendants, who may include intermediate communications service providers.[1] The lawsuit is captioned as case: 1:19-cv-07190, and was filed in U.S. District Court for the Northern District of Illinois, Eastern Division.

The two rural companies listed as Plaintiffs on the complaint are Craigville Telephone Company, Inc. d/b/a AdamsWells Internet Telecom TV, an Indiana corporation, and Consolidated Telephone Company d/b/a CTC, a Minnesota corporation. The Plaintiffs state that the precise number of class members that may be part of the lawsuit is unknown. But, they state that class members “may be ascertained from records possessed by the FCC and defendants,”[2] and note that there are over 2,000 local exchange carriers operating within the U.S. So, until some discovery takes place, we won’t know how many of the over 2,000 ILECs were in fact harmed by T-Mobile and its intermediate providers, and should be added to the class. Surely not all rural ILECs were impacted by the defendants’ conduct. And, it’s likely there was minimal impact for some and significant impact for others. Some rural ILECs probably have evidence or traffic records showing they experienced considerable problems receiving traffic from T-Mobile’s intermediate carriers.

The alleged injuries and claims for relief in the lawsuit stem from T-Mobile’s violation of the FCC’s rural call completion rules. In April 2018, T-Mobile entered into a Consent Decree with the FCC’s Enforcement Bureau, ending an investigation into whether T-Mobile violated those rules.[3] Under the terms of that settlement, T-Mobile was required to pay a $40 million civil penalty to the U.S. Treasury, and follow a compliance plan, for three years, designed to ensure T-Mobile obeys the FCC’s call completion rules. The Enforcement Bureau also required T-Mobile to make admissions of guilt. Specifically, T-Mobile admitted that it: (1) violated Section 64.2201 of the FCC’s rules prohibiting the insertion of false ring tones; and (2) did not correct problems with its intermediate providers’ delivery of calls to consumers in certain rural areas.

The FCC’s 2013 Rural Call Completion Order specifically prohibited the use of false ring tones, formally known as false audible ringing, which was identified as a major cause of call completion problems.[4] Fake ringing occurs when an originating or intermediate provider prematurely triggers audible ring tones to the calling party before the call setup request has actually reached the terminating rural provider. When that happens, the caller thinks the called party’s phone is ringing, even though it is not, and the caller eventually hangs up after thinking that nobody is available to receive the call. Absent the false ring tone, the calling party would experience silence during an excessively lengthy call setup.

According to the 2018 Consent Decree, in 2013, T-Mobile used a “Local Ring Back Tone” (LRBT) for out-of-network calls from its customers that were routed via Session Initiation Protocol (SIP) trunks and that took more than a certain amount of time to complete. T-Mobile continued to use LRBT after the FCC rule prohibiting the practice went into effect in January 2014, and even expanded the use of LRBT calls on additional SIP routes. Because this practice was applied on a nationwide basis without regard to time of day, the FCC’s Enforcement Bureau estimated T-Mobile’s false ring tones were injected into hundreds of millions of calls each year.

The FCC’s Consent Decree Set A Path To The Courthouse For Carrier-Victims To Obtain Recovery For T-Mobile’s Illegal Conduct

In their complaint, the rural company Plaintiffs explain that the FCC’s Consent Decree did not force T-Mobile to compensate carriers that were harmed by the illegal conduct. The Plaintiffs further explain, however, that “the FCC acted to ensure that impacted carriers could obtain appropriate compensation by picking up where the Commission left off.” Because the FCC declared the use of false ring tones and the failure to oversee intermediate providers to be “unjust and unreasonable practices” in violation of the Communications Act, and by extracting admissions of guilt from T-Mobile, the rural company Plaintiffs claim “the Commission ensured that carrier-victims would have a clear and efficient path to the courthouse to obtain recovery for T-Mobile’s illegal conduct.” That brings us to the class action complaint.

First, the complaint outlines T-Mobile and Inteliquent’s motivation for inserting false ring tones into calls placed to certain rural areas. It’s all about preventing the payment of access charges:

On information and belief, after T-Mobile and Defendant Inteliquent entered into a Master Services Agreement in 2015 in which Inteliquent was to become the exclusive carrier to transit and terminate traffic for T-Mobile, the evidence will reveal that Inteliquent was losing money on the contract and became desperate to reduce one of its primary costs, known as access charges, which Inteliquent was required to pay on T-Mobile’s behalf to local phone companies for the privilege of using their networks to terminate calls made by T-Mobile’s subscribers. As a result, T-Mobile and Inteliquent began to actively conspire to develop strategies to deter or prevent customers from making phone calls for which there are high per-minute costs to complete.[5]

Wait, there’s more:

One of the ways in which T-Mobile’s intermediate providers who failed to deliver calls (whether Inteliquent or other Doe Defendants)created savings was to route calls to other parties that were not equipped to deliver the traffic to its intended destination in a reliable manner, to the point of creating significant volumes of call failures. Inteliquent and Doe Defendant intermediate providers may have also intentionally dropped or failed to deliver calls. Moreover, Plaintiffs believe that discovery will reveal that the fake ring tone scheme was hatched jointly by T-Mobile and Inteliquent.[6]

As for injuries caused by T-Mobile’s conduct, here is what the complaint says:

T-Mobile’s fake ring tone scheme injured the class members’ businesses in multiple ways, including: l lost opportunities to seek intercarrier compensation for calls the scheme blocked from connecting to the Plaintiffs’ switches, lost profits and revenue, reputational harm caused by Plaintiffs’ customers’ false impression that their local rural carrier was responsible for call completion failures, loss of good will with customers, lost time value of labor hours associated with investigating and responding to customer complaints, loss of revenue due to discounts and monetary concessions the class members have made to appease and retain their disgruntled customers, and industry wide harm to the reputations and business opportunities for local rural phone companies.[7]

The complaint lists the following eight claims for relief against the various Defendants:

• Count I: Violation Of Section 201(b) Of The Communications Act Of 1934, As Amended, Fake Ringtones (T-Mobile)

• Count II: Violation Of Section 201(b) Of The Communications Act Of 1934, As Amended, Failure to Ensure Delivery of Calls (T-Mobile, Inteliquent, and certain Doe Defendants)

• Count III: Violation Of Section 202(a) Of The Communications Act Of 1934, As Amended (T-Mobile, Inteliquent, and certain Doe Defendants)

• Count IV: Violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) (all Defendants)

• Count V: Violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(d) (all Defendants)

• Count VI: Tortious Interference With Contract, Illinois Law (T-Mobile)

• Count VII: Violation Of Illinois Consumer Fraud And Deceptive Business Practice Act (all Defendants)

• Count VIII: Civil Conspiracy (all Defendants)

The Plaintiffs have asked the Court to enter judgment against all Defendants jointly and severally, in an amount no less than $750,000,000, premised on the requests for relief set forth in the complaint. They are seeking a judgment against all Defendants and in favor of Plaintiffs and the Class, for all economic, monetary, actual, consequential and compensatory damages caused by their wrongful conduct. The Plaintiffs are also seeking treble and punitive damages, as well as expenses and attorney fees.

So that is the basics of the lawsuit. It looks like more bad news for T-Mobile, a company that is trying to push its merger with Sprint over the goal line. The FCC recently approved the T-Mobile/Sprint transaction with conditions. But, T-Mobile/Sprint is still facing a lawsuit to block the merger filed by a group of state attorneys general. Like the recent announcement of significant Lifeline program fraud carried out by Sprint, this class action lawsuit against T-Mobile will be used by the states opposing the merger of two of the nation’s largest wireless providers. The state AGs and other parties opposing the merger probably wish this lawsuit had been filed a year ago. From another angle, this lawsuit could finally result in some justice for rural carriers that have been struggling with call completion problems for at least 10 years now.

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[1] Craigville Tel. Co. et al. v. T-Mobile et al., case: 1:19-cv-07190, Class Action Complaint And Jury Demand, U.S. District Court for the Northern District of Illinois, Eastern Division (filed Nov. 1, 2019) (Complaint).

[2] Complaint at ¶ 303.

[3] T-Mobile USA, Inc., File No.: EB-IHD-16-00023247, Acct. No.: 201832080003, FRN: 0004121760, Order, DA 18-373 (Apr. 16, 2018).

[4] Rural Call Completion, WC Docket 13-39, Report and Order and Further Notice of Proposed Rulemaking, FCC 13-135 (rel. Nov. 8, 2013).

[5] Complaint at ¶ 9.

[6] Complaint at ¶10.

[7] Complaint at ¶ 3.