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AT&T Pays FCC $18.25 Million to Settle IP Relay Fraud Claims
Except Years of IP Relay Fraud Likely Netted Telco Much, Much More
by Karl Bode 12:11PM Thursday May 09 2013
Since around 2004 I've talked about the significant amount of fraud involved in the government's IP Relay service, which is intended to help the hearing impaired communicate with phone users via the Internet with the help of paid transcription workers (I remember talking with my grandfather over TRS versions of the service as a child). Unfortunately, for the better part of a decade the service has been abused by scammers and other assorted technoscumbags, with carriers doing nothing about it because they're paid by the FCC (aka you) about $1.50 per minute to carry this traffic.

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Estimates at the peak of IP Relay's abuse suggested that anywhere between 80-90% of the traffic on IP-Relay networks is scammers using stolen credit cards to anonymously mail-order electronics in bulk. Carriers could have erected any number of simple authentication systems to recognize scammers and cut down on the fraud, but when you're being subsidized by the government at $1.50 a minute, why would you?

So in 2008 the FCC finally passed rules requiring that carriers register users and at least try to verify their names and addresses. Four years later, the Department of Justice filed a lawsuit against AT&T for failing to adhere to these standards while bilking taxpayers out of tens of millions of dollars by abusing IP Relay subsidies. According to the complaint, the DOJ accused AT&T of intentionally implementing an authentication system they knew wouldn't work so they could keep raking in the cash:
quote:
The complaint alleges that, out of fears that fraudulent call volume would drop after the registration deadline, AT&T knowingly adopted a non-compliant registration system that did not verify whether the user was located within the United States. The complaint further contends that AT&T continued to employ this system even with the knowledge that it facilitated use of IP Relay by fraudulent foreign callers, which accounted for up to 95 percent of AT&T’s call volume. The government’s complaint alleges that AT&T improperly billed the TRS Fund for reimbursement of these calls and received millions of dollars in federal payments as a result.
AT&T issued a statement to the press at the time insisting it wasn't their fault that Nigerian scammers were abusing IP Relay, or that the FCC didn't implement good rules to stop it. When you consider that 95% of AT&T's IP Relay call volume was fraudulent, and AT&T was receiving $1.50 for every minute of every call made over the last decade, the numbers start to get absolutely staggering. The DOJ's claimed impact of millions of dollars may be a severe under-estimate. It's not out of the realm of possibility that we could be talking billions.

The steps taken today will not only ensure the integrity of the program, but also send a strong signal to providers that we will not tolerate abuse of the system.
-FCC, after more than a decade of IP Relay fraud and abuse.
AT&T has so far been unsuccessful at repeated attempts to have the DOJ's IP Relay lawsuit dismissed. Meanwhile, the FCC had been conducting its own investigation into AT&T's IP relay practices, and this week announced that AT&T has settled with the FCC to the tune of $18.25 million. Like the DOJ, the FCC argued that AT&T intentionally did their best to skirt FCC rules so the fraud would continue and AT&T could continue raking in profits.

According to the FCC, AT&T has agreed to reimburse the TRS Fund $7 million plus interest, on top of paying $11.25 million to the United States Treasury. AT&T is also required to implement "a robust compliance plan" that includes "new operating procedures, comprehensive training of its employees and contractors, and periodic reporting requirements."

"The steps taken today will not only ensure the integrity of the program, but also send a strong signal to providers that we will not tolerate abuse of the system," said outgoing FCC boss Julius Genachowski in a statement.

Except not really. Again, AT&T has received $1.50 per minute government subsidies for more than a decade (Relay was invented in 1974, then converted in the early 2000s to use the Internet) during which billions of minutes of fraudulent IP Relay calls were placed. In other words, an $18 million fine is chump change compared to what AT&T has made off of IP Relay fraud. This from a company that likes to repeatedly complain that it's just too expensive to seriously upgrade more than half of their last-generation DSL users because they're just not profitable enough.

While AT&T operates the lion's share of these services, Sprint and others have also played a role -- their exclusion from the DOJ suit and FCC settlements suggests they did a better job adhering to the rule changes imposed by the FCC in 2008. Obviously there's plenty of government culpability here as well for running yet another program where it takes years for regulators tasked with consumer protection to stand up to a giant carrier and campaign contributor who is clearly committing and facilitating fraud.

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ArrayList
netbus developer
Premium
join:2005-03-19
Brighton, MA

1 recommendation

Nothing like giving them what they deserve.

A slap on the wrist is par for the course. Happy they didn't do anything substantial.

VernonDozier

@comcast.net

Re: Nothing like giving them what they deserve.

Indeed. Likely, they'll raise rates though. Being publicly traded, AT&T has an obligations to find pocketchange in other people's couches before providing a reasonable service
SunnyD

join:2009-03-20
Madison, AL

1 recommendation

Pure speculation.

Karl, when you have actual documents in hand that can specifically address these "billions" of minutes with an exact amount, then you are more than welcome to make those accusations. While I have no love lost for AT&T or any national carrier, your article (as more often than not) in this case is pure speculation and total sensationalism. Nothing more.
Expand your moderator at work

Mojo 77

@184.105.144.x

Re: Pure speculation.

Oh FFS. Only this website would have boobs come out defending AT&T for abusing a system used to help the elderly and hard of hearing.

IP Relay has been abused for decades. As the article notes, you should be able to do the math at $1.50 per minute subsidies with a decade or two of abuse, when 80-90% of all IP relay traffic is fraud. Do the math.

The chicken-shit FCC didn't call for an audit of course so we'll never know for sure, but if you think this netted them anything less than a billion you're a fool.

Alex J

@he.net

Re: Pure speculation.

Also, the article doesn't even mention that IP Relay has been used for prank calls for several decades. Nice of taxpayers to fund the bill for that, and nice of regulators to do nothing about it. This was a massive story in 2004 I remember. It's mind blowing that we're just now seeing any real action on this:

»www.nbcnews.com/id/4781806/ns/te···U8bWsiSo

battleop

join:2005-09-28
00000

1 recommendation

Re: Pure speculation.

"Also, the article doesn't even mention that IP Relay has been used for prank calls for several decades."

Uhmmm.........
--
I do not, have not, and will not work for AT&T/Comcast/Verizon/Charter or similar sized company.

FFH5
Premium
join:2002-03-03
Tavistock NJ
kudos:5
said by Mojo 77 :

Oh FFS. Only this website would have boobs come out defending AT&T for abusing a system used to help the elderly and hard of hearing.

IP Relay has been abused for decades. As the article notes, you should be able to do the math at $1.50 per minute subsidies with a decade or two of abuse, when 80-90% of all IP relay traffic is fraud. Do the math.

It isn't defending AT&T to question the amount of fraud minutes claimed by Karl. Until he can find stats showing how many IP Relay minutes were used and how much was fradulent, the total amount of loss is speculation.
--
"If you want to anger a conservative lie to him.
If you want to anger a liberal tell him the truth."

Mojo 77

@184.105.146.x

Re: Pure speculation.

What I really like is there's a huge article here clearly outlining proven fraud perpetrated against a service that's intended to help the elderly and hard of hearing, and you and barney here's only comment is that you think it's outrageous to speculate that we could be talking billions of dollars in fraud.

The DOJ lawsuit alleges tens of millions, the FCC alleges unspecified millions. Neither did an audit because they're weak-kneed weasels and AT&T would fight them for years in court. The DOJ estimated that 95 percent of AT&T's IP Relay call volume was fraudulent foreign callers. The article speculates that it could top out in the billions, and with a decade of use I'd tend to agree that's a very real possibility over 10-15 years of abuse.

You guys are either trolls or obtuse.

OSUGoose

join:2007-12-27
Columbus, OH

1 recommendation

Re: Pure speculation.

How much of that "foreign" traffic was US prankers using intl VPN's

ArrayList
netbus developer
Premium
join:2005-03-19
Brighton, MA

Re: Pure speculation.

none most likely.

cork1958
Cork
Premium
join:2000-02-26

1 recommendation

said by FFH5:

said by Mojo 77 :

Oh FFS. Only this website would have boobs come out defending AT&T for abusing a system used to help the elderly and hard of hearing.

IP Relay has been abused for decades. As the article notes, you should be able to do the math at $1.50 per minute subsidies with a decade or two of abuse, when 80-90% of all IP relay traffic is fraud. Do the math.

It isn't defending AT&T to question the amount of fraud minutes claimed by Karl. Until he can find stats showing how many IP Relay minutes were used and how much was fradulent, the total amount of loss is speculation.

Yeah,
I love stats to but I'm not such a blind nit wit that I can't see that no matter what the actual stats may be, we all know how true this is and the fact the FCC did absolutely nothing about it just proves that office needs to be eliminated! Just as AT&T and Verizon, just to mention a couple, need to be also!
--
The Firefox alternative.
»www.mozilla.org/projects/seamonkey/
SunnyD

join:2009-03-20
Madison, AL

2 recommendations

I completely agree that if/with no audit, than the fine is mostly a hollow victory. But let's be honest, without that audit saying "billions" it no more relevant than saying "tens". It only serves to make things potentially more sensational than they are.

Personally, I'd have preferred to see a full audit. From what I can tell, the DOJ may still pursue this further (it appears that their investigation isn't linked to the FCC's action at all?). Perhaps criminal charges may still come of it too. One can only dream. Until then, this is a step forward no matter how minuscule it happens to be.

Mojo 77

@184.105.146.x

Re: Pure speculation.

I completely agree that if/with no audit, than the fine is mostly a hollow victory. But let's be honest, without that audit saying "billions" it no more relevant than saying "tens". It only serves to make things potentially more sensational than they are.

The article simply speculates we could be talking billions, with $1.50 per minute and ten to fifteen years of abuse (not to mention prank calls). I think that's entirely within the realm of possibility and not "sensational." What's "sensational" is that it took ten to fifteen years for the government to do anything about it.

It's very, very unlikely you'll see either the DOJ or FBI pursue an audit, based on historical cases like this. I bet if you did a real audit of any incumbent telco's coffers over the last thirty years, you'd find a hell of a lot worse than a billion in IP relay fraud.

okim65

@zoominternet.net
Not speculation. I am a previous IP Relay operator and I KNOW for a fact that day after day, week after week, month after month, and YEAR AFTER YEAR for SEVEN YEARS, I was one of HUNDREDS of operators that processed these calls, complained about the calls, reported these calls and NOTHING was done by AT&T. We were simply told to PROCESS the call KNOWING we were defrauding people.

humanfilth

join:2013-02-14
cyber gutter

1 recommendation

prison for fraud

Until the day that the executives of these corporations get put in prison for their obvious fraud, ripping off the people for billions of dollars is nothing but a misdemeanor(as shown by the tiny fine)

And that also goes for those people that bribe the government, along with those politicians who accept the bribes.

Lobbying = Bribery

cableties
Premium
join:2005-01-27

But..

how will ATT pay for the money loss in phone book advertising decline?
--
Splat

ArrayList
netbus developer
Premium
join:2005-03-19
Brighton, MA

Re: But..

people pay for phonebooks? I've never paid for a phonebook. It's part of the service. Hell, AT&T delivered phonebooks to me for probably 10 years after I ditched my land line.

chip89
Premium
join:2012-07-05
Independence, OH

Sprint

Expect that sprint does't even offer this anymore and landlines all together.
josephf

join:2009-04-26

"(IP Relay was first established in 1974)" ??

TRS may have been established in 1974, but IP Relay (which the scammers use from overseas) is much more recent. IP Relay is the Internet version of TRS. Established after 2000.

kontos
xyzzy

join:2001-10-04
West Henrietta, NY

Re: "(IP Relay was first established in 1974)" ??

said by josephf:

TRS may have been established in 1974, but IP Relay (which the scammers use from overseas) is much more recent. IP Relay is the Internet version of TRS. Established after 2000.

And the Gov't rules weren't changed until 2008. If they had tried to limit access to the relay service before that, I wonder how much of a fine they would have faced.
FastLearner

join:2003-09-14
Arvada, CO

1 recommendation

$1.50 a min?

Looks like its time to make an adjustment to the subsidy. It can cost the carrier more than a few pennies per min.
axus

join:2001-06-18
Washington, DC

1 recommendation

Re: $1.50 a min?

I think they are paying a person to translate the message. I can see how it's expensive, though $0.50 per minute should be plenty. If it's done with computer voice, it should be much cheaper.
patcat88

join:2002-04-05
Jamaica, NY
kudos:1

Re: $1.50 a min?

said by axus:

I think they are paying a person to translate the message. I can see how it's expensive, though $0.50 per minute should be plenty. If it's done with computer voice, it should be much cheaper.

The relay operator is always a human, never software. The service would be impossible to use if it was software due to accents, bad/noisy landline phone or bitrobbed mobiles, asking the RO if they reached a male or female on the other end, etc.
FastLearner

join:2003-09-14
Arvada, CO

1 recommendation

Re: $1.50 a min?

That make more sense. I figured it was a machine translation.
equivocal

join:2008-01-23
USA

1 recommendation

It must be pretty obvious to the humans that 80-90% of their work is facilitating spam. What a demoralizing job. I guess they get into a mode where they don't think about the content. Data entry jobs get like that, and the guy who claimed to transcribe Morse code while reading novels.

VernonDozier

@comcast.net
Subsidies like this are pretty good. I wish I could have a product with that kind of return.

All your selling is bandwidth.
Taget

join:2004-07-29

1 recommendation

That slap on the wrist must sting....

...perhaps half the 600mhz offering in the next wireless auction and a lollipop will make them feel better?

linicx
Caveat Emptor
Premium
join:2002-12-03
United State
Reviews:
·TracFone Wireless
·CenturyLink

1 recommendation

Boo hoo

Power hungry FCC is power-less without Congress. It cannot enforce. It is a watchdog that promotes deep pocket lobbyists over We The People.

Outgoing should not be allowed to join any person or group that is a registered lobbyist for a regional, state or federal person, or group, for at least 10 years after departure from FCC.
--
Mac: No windows, No Gates, Apple inside

thender
Screen tycoon
Premium
join:2009-01-01
Brooklyn, NY
kudos:1

http://www.removed.us/vms/iprelay

The good old days.

Twaddle

@sbcglobal.net

What more proof do we need?

ATT is held guilty of a massive fraud involving potentially millions of dollars and NO ONE goes to jail, No accounting audit nothing but a token slap on the wrist fine which will be paid by ATT customers. Your local welfare mother will get a jail term for fleecing some food stamps yet ATT fleeced Millions and nothing??? Just more proof that the Federal government is bought and paid for by the highest bribe/payoff. Not much better than the Russian Mafia government.
videobruce

join:2002-05-14
Buffalo, NY

deregulation

You can thank Republican deregulation for this and just about everything else related to big business.
It started in 1981, continued in 1989 and repeated in 2001.

If you think otherwise, your head has been in the sand. of course, if you support all or any of this, you are adding to the problem.