A group of small Iowa independent telcos and CLECs have banded together to fight back against the industry’s telecom giants, claiming AT&T, Qwest Communications and Sprint are illegally blocking calls in order to avoid paying legal termination fees.

At issue is whether the larger incumbent carriers should have to pay termination charges to smaller companies who are taking advantage of high access rates in Iowa and VoIP technology to terminate calls for free-calling conference services or international calling services. Services such as Free Call Planet, FreeConferenceCall.com and others have teamed with Iowa telcos such as Great Lakes Communications Corp. and Superior Coop to set up inexpensive or free calling services that generate profits for the providers by racking up millions in termination fees. The local telcos provide the voice gateways for the services, and bill long-distance companies to terminate calls.

Both AT&T and Qwest have filed suit against the telcos, claiming the calling schemes are fraudulent and refusing to pay millions in termination fees because, their lawsuits claim, the Iowa telcos are not terminating local calls but serving as a midpoint for calls that terminate elsewhere. Both companies have said that the “free” calls cost them millions of dollars in termination fees for what amounts to fraudulent schemes that capitalize on regulatory fee arbitrage.

Now the Iowa telcos are fighting back, says attorney Jonathan E. Canis of Kelley Drye & Warren LLP, with a triple threat of response – a countersuit filed in federal district court in New York, planning meetings with the Federal Communications Commission in Washington April 18-20 and a grassroots campaign intended to build support for the Iowa telcos and the free calling plans.

Canis is pinning his highest hopes on the FCC discussions, in hopes the commission will act to prevent the blocking of calls, as it did in a VoIP case involving Madison River Telephone.

“Blocking is blocking – Madison River was VoIP, this is plain old telephony, so this is a better case for rapid action,” Canis said. “Thou shalt not block, period. It is so black letter law.”

The FCC hasn’t acted to date, he believes, because the case hasn’t been put before them. But On April 18-20, a group of CEOs of the companies involved will travel to Washington for meetings with FCC staff members.

“I’ll be there, local counsel will be there, but this is intended to have the CEOs meet directly with the commissioners,” Canis said. “We contacted the FCC staff and discussed a couple of different options with them. We understand mediation is an option – however, we are not pursuing that. I’m a big fan of mediation but we don’t think that is appropriate because it takes three months and we need help quicker We could file with the Federal District Court and seek temporary restraining order or injunction. We believe the FCC is the best and quickest way to resolve this issue.”

While AT&T has stopped blocking calls to the free calling services, its lawsuit help convince one of them, FuturePhone, to shut down. And other companies, including Qwest and Sprint, continue to block calls, according to Canis and Josh Nelson, CEO of GLCC.

In some cases, Nelson and Canis said, the calls simply don’t go through, or the company blocking the call will tell the caller the call is illegal or there is a problem with the local carrier.

“They have said their contract is for person-to-person calling only and that these calls are to a machine,” Nelson said. “If that’s true, they violate their own agreements when they let you call your voice mail.”

“Just a few carriers are engaging in blocking but all of the Bell companies are withholding access payments,” Canis said. “Our claims in New York on behalf of seven ILECs and CLECs seek to recover those access payments, some in the neighborhood of $10 million.”

The attorney said the loss of those payments is threatening the livelihood of some of the smaller companies.

GLCC, which serves 1500 local customers, is also mounting a grassroots campaign, calling on consumers to contact their state legislators and utility boards, as well as members of Congress and public interest groups to help them fight against the much larger service providers.