Two Small Telephone Companies Ask $56 Million for Unfair Treatment by AT&T
June 9, 1994. Two small midwestern long distance companies are suing AT&T for unfair treatment, requesting $56 million in damages to be settled by a jury trial.
Telegroup, Inc., of Fairfield, IA, and Progroup, Inc. of Chicago, IL, are switchless resellers of long distance services. Both companies purchase time from major telephone carriers, including AT&T, and resell that time at discounted rates to small and medium-sized businesses. Telegroup, one of the nation's largest resellers, sells both domestic and international long distance service.
"We thought AT&T would welcome our business since we bring them a lot of customers. But they have actually tried to thwart our success and that saddens us," Telegroup Chairman Fred Gratzon said Tuesday. "We believe AT&T did break the law and they should be called on to make right for that."
Telegroup attorney Richard Yeskoo said that many switchless resellers went out of business between 1989 and 1992 when AT&T intentionally created delays in connecting long distance service for reseller customers.
"Initially, it was taking nine months to get orders provisioned, which is outrageous," Yeskoo said Tuesday. "AT&T was dragging its feet."
Yeskoo said that AT&T is now engaging in more sophisticated tactics that challenge resellers. AT&T raised rates for resellers six times since 1991 while offering tremendous price breaks to the nation's largest industrial companies by creating carefully worded tariffs designed to apply only to those specific companies.
"They're trying to squash resale by not making available the rates they offer to other large customers," Yeskoo said.
In the continuing battle of David versus Goliath, Telegroup recently won a decision by the U.S. Federal Communications Commission (FCC) that awarded Telegroup the right to sell sharply discounted international long distance. AT&T had petitioned the FCC to deny Telegroup's international certificate. The FCC noted that Telegroup's service would increase international trade by reducing phone rates internationally "to the ultimate benefit of U. S. rate payers and industry."
"What this means to the consumer is that we can supply incredibly low international rates, not only for overseas companies but for American companies," Gratzon said. "The FCC wants to lower international rates to stimulate communication and more international trade. They know we are one of the only things that's going to put downward pressure on the rates."
Telegroup, founded in 1989 by Fred Gratzon and Clifford Rees, had gross revenues of $30 million in 1993, customers in 114 countries, and branch offices in 13 countries. Chairman Fred Gratzon projects that sales in 1994 will hit between $80 to $100 million, with close to 80 percent of that revenue from international sales.
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