An Alabama company has sued phone companies in Massachusetts, claiming they are failing to pay the state hundreds of millions of dollars in fees to support the 911 emergency call system.
Phone Recovery Systems has launched similar legal challenges in many other states and counties; it recently signed agreements to help several counties in Pennsylvania pursue 911 claims against phone companies.
In Massachusetts, Phone Recovery challenged the companies directly in Superior Court, using whistle-blower statutes that allow them to sue on the state’s behalf in exchange for a portion of whatever settlement they may obtain. The lawsuit, unsealed earlier this year, accuses Verizon, Comcast, and other companies that offer landline service of pooling customer phone lines to reduce the 911 fees they collect and paying too little to support the system.
The companies say the claims are meritless and seek to have them dismissed. Moreover, some corporate attorneys have said lawsuits like those filed by Phone Recovery are based on a flawed interpretation of the whistle-blower laws.
The Massachusetts Department of Telecommunications and Cable, which oversees 911 fees, had no comment.
In Massachusetts, the 911 system is funded through a monthly fee of $1.25 per subscriber that is added to customers’ phone bills. That charge was raised July 1 from 75 cents because the state’s emergency phone number system is being overhauled during the next several years to handle new technologies, such as Internet-based phone calls.
In its current fiscal year, the 911 system’s budget will more than double, to $144 million.
Cellphone lines are also subject to the $1.25 monthly fee, but those collections aren’t part of the lawsuit.
The state collected 911 fees for about 2.9 million nonmobile lines in 2013, according to the lawsuit, but Phone Recovery Systems contends there are about 7 million in use in Massachusetts. Company president Roger Schneider said past technological innovations have allowed phone companies to lowball the number of lines their customers have. For example, technological advances have allowed a single copper phone line to support as many as 23 phone numbers at once, but Schneider said telecom companies might only collect a single 911 fee.
Schneider said he first noticed a discrepancy between the fees customers paid and the amount regulators received while working for the 911 board in Madison County, Ala., where he ran an Internet business. Since 2012, he said, his company has filed whistle-blower lawsuits in dozens of jurisdictions. In many cases, he said, phone companies aren’t collecting the full amounts because their competitors aren’t and they don’t want to risk losing customers because of the fees.
“They’re undercharging customers who have very big accounts and sophisticated phone systems for competitive reasons,” Schneider said.
Phone Recovery Systems said it uses customized software that estimates how many landlines and Internet phone lines are in a given jurisdiction. If that doesn’t match up with the amount the 911 system is paid, Schneider’s company tries to sue under whistle-blower statutes and divide the winnings with the state, he said.
He said his company is working in about 30 jurisdictions, including about 12 in which lawsuits have been filed. He would not say how many cases have been dismissed. In Madison County, he said, it recovered $2 million from four phone companies.
Verizon did not reply to a request for comment. In a statement, a Comcast spokesman said the company “takes its tax and fee collection obligations seriously.”