How 2 Guys’ Iowa Connection Took Big Telecoms for a Ride

THE WALL STREET JOURNAL—Two-and-a-half years ago Ron Laudner was the anxious owner of a rural phone company serving this tiny town, where Main Street was emptying out as restaurants and other businesses disconnected their phones and moved to busier commercial districts.

More than 1,800 miles away, David Erickson was running a Web-based conference-calling business in Long Beach, Calif., shopping around for phone companies to be his partners.

In mid-summer 2005 this unlikely duo struck a deal. They routed millions of minutes of Mr. Erickson’s conference calls through the switches of Mr. Laudner’s Farmers Telephone of Riceville. To do it, they used outdated federal regulations to charge telecom companies such as AT&T Inc. and Verizon Communications Inc. steep rates and collected huge profits at their expense. Together, the two made hundreds of thousands of dollars. Soon, Mr. Laudner cut other deals to generate even more traffic.

“I’m not going to argue I didn’t think it was amazing,” Mr. Laudner says.

But the big phone companies had another term for it. “Verizon is not going to stand by while irresponsible companies use this traffic-pumping scheme to overcharge our company,” says Tom Tauke, vice president of public affairs, policy and communications for Verizon. Read article.