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Free sex chat?

Article Excerpt
Why would the operators of websites like hotlivesexchat.com, allfreecalls.net, and freecalls2theworld.com route phone calls to their services through rural American towns like Riceville, Iowa? To take advantage of complicated telecommunications regulations and make a bundle of money from American consumers of long-distance telephone calls.

The Federal Communications Commission regulates the fees that local telephone carriers can charge long-distance carriers for calls originating from the long-distance carrier's network. The local carriers initiate the process of setting those rates by filing schedules of rates with the FCC. The FCC, in turn, evaluates the proposed rates to ensure that local carriers receive a "reasonable" rate of return based on projected costs and projected volume of calls routed through the local carriers' networks.

The operators of sex chat lines, conference bridges, and other high call volume operations make millions of dollars in profits through a form of regulatory arbitrage. Website operators advertised the services over the Internet as free or as limited to the cost of the long distance call and contracted with local wire-line phone carriers to provide the services and split the revenues created by the increased call traffic. The federally mandated rates that the local carriers could charge were based on...

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