CARRIERS CUTTING CORNERS?

By Ryan Knutson

Local officials in several states have filed dozens of lawsuits saying phone companies, such as AT&T Inc. and Verizon Communications Inc., are doling out discounts to businesses at the expense of 911 emergency services.

Telecom operators are required by local laws to charge a 911 fee, typically about $1 for each phone line to support local 911 dispatch centers, including salaries, training and equipment for call takers. But with heated competition for business customers, phone companies have been undercutting one another by lowering those 911 fees for big businesses, resulting in less money for local authorities, the lawsuits allege.

Officials in many of the affected counties arrived at the conclusion with help from Roger Schneider, an entrepreneur from Huntsville, Ala., who stumbled across the issue 12 years ago. At that time, a representative from BellSouth, now part of AT&T, offered his small business such a discount without realizing that he was a member of the local 911 oversight board.

“My first thought was, ‘Golly, how much money is this costing the 911 board?’” said Mr. Schneider, who later set up a business to help local officials investigate the issue. After looking into it, he estimated Madison County, Ala., currently home to about 350,000 people, was shortchanged more than $1 million a year. Phone companies settled for more than $3 million in cases Mr. Schneider helped bring in Alabama.

Nationwide, local governments spent more than $3.1 billion on 911 services in 2014, while collecting $2.5 billion in 911 fees, leaving a $600 million funding shortfall, according to the most recent data from the Federal Communications Commission. Only a dozen states reported to the FCC that they collected enough fees to cover their 911 spending for the year, though not all states reported complete data.

Representatives for AT&T and Verizon said the companies comply with the applicable laws and collect 911 fees as required. “The claims are baseless, and by our count these lawsuits have been filed against more than 100 companies,” an AT&T spokeswoman said. A Verizon spokesman added: “It’s important to note that 911 charges are taxes that we’re required by law to collect from our customers and pass along to state and county 911 authorities.”

At a time when landline use is on the decline and 911 budgets are stretched to pay for technology upgrades, the revenue decline is forcing local governments to make tough choices. Some states, like Pennsylvania, have filled the gap with taxpayer funds while others have cut their emergency service budgets.

Most often call centers simply don’t invest, said Brian Fontes, chief executive of the National Emergency Number Association, a trade group representing 911 centers that isn’t involved in the suits. “The consequences are that you’re not making the upgrades in equipment. You’re not able to staff the centers as they should be,” Mr. Fontes said.

In recent years, the 911 system has come under major stress, and outages at some of the roughly 6,000 call centers nationwide have become more common. In the past 18 months, the FCC has reached settlements with five telecom companies totaling nearly $40 million for 911 outages that have affected millions of people.

In January, AT&T prevailed against 10 counties in a separate case in Tennessee, which had filed a lawsuit in 2011 claiming the company had failed to collect millions of dollars in 911 fees from business customers. A federal judge dismissed the suit, ruling the counties didn’t supply adequate evidence.

In court filings in Georgia, phone provider Windstream Communications Inc. said state laws only allow counties to go after end users for unpaid 911 fees, not telephone companies. In Pennsylvania, Verizon and other defendants argued 911 fees are required to be collected for “qualifying phone lines,” not every single phone number.