(CN) – Global NAPs Inc., its founder and several affiliates are on the hook for a $57.7 million award to Verizon Massachusetts over the company’s failure to pay dial-up Internet access fees, the 1st Circuit ruled.
The judgment stemmed from GNAPs’ refusal to pay Verizon long-distance access charges for Internet traffic routed outside callers’ local area.
Federal law requires carriers to pay “reciprocal compensation” for local calls. For long-distance calls, the long-distance carrier pays “access charges” to the carrier that starts and stops a call.
As a carrier for Internet service providers, GNAPs received windfall profits from the many long calls made by dial-up Internet users, entitling GNAPs to reciprocal compensation. And because ISPs never make calls, the payments were one-sided.
The company further exploited the imbalance by giving ISPs virtual phone numbers appeared local to Verizon’s customers.
In 2002 the Massachusetts Department of Telecommunications and Energy (DTE) ruled that GNAPs has to pay long-distance access charges to Verizon whenever Internet traffic is routed outside the caller’s area, regardless of the number the Web user dialed.
GNAPs refused to pay the charges for three years, until Verizon finally cut its service in 2006. Verizon sued and won more than $57.7 million. Fearing GNAPs would transfer assets to avoid liability, it filed counterclaims seeking to hold founder Frank Gangi and several GNAPs affiliates liable for the judgment.
The Boston-based federal appeals court dismissed GNAPs’ appeal of the judgment and counterclaims.
It noted that a federal judge in Connecticut “found substantial evidence” that GNAPs had tried to block discovery and “had concealed and destroyed evidence.”
GNAPs also “played fast and loose with the courts in an effort to gain an unfair advantage,” Chief Judge Sandra Lynch wrote.
“The district court has handled this very difficult and very complicated matter with admirable care,” Lynch wrote, upholding dismissal of GNAPs’ appeal.