T-Mobile Facing $1.25 Billion Legal Action For Blocking GSM Gateways (FCTs)

T-Mobile Facing $1.25 Billion Legal Action For Blocking GSM Gateways (FCTs)

T-Mobile UK is facing a potential £625 million (US$1.25 billion) lawsuit for damages from a former reseller of SIM cards, VIP Communications. The claim is based on a report which VIP Communications says was prepared by T-Mobile internal staff to calculate the economic impact of VIP Communications' business model - valued at some £57 million per year.

VIP Communications is a telecoms reseller which was until 2004 offering GSM Gateway products - these are routers which typically sit inside an office PBX and direct office landline to mobile calls via a GSM SIM card. As on network mobile to mobile calls are typically cheaper - the business model is that a GSM Gateway would lower an office call costs. However, the operators have previously argued that GSM Gateways create an abnormal concentration of outbound mobile call traffic in a specific area and disrupt their networks.

The UK trade magazine, Mobile News said that T-Mobile has not yet received a legal claim and dismissed the actions. A spokesperson said "VIP complained to Oftel [Ofcom] around five years ago that T-Mobile had discriminated against it by terminating services to illegal SIM boxes it was operating,"

"VIP also threatened to sue us at that time, but have never done so. Ofcom found in our favour."

GSM Gateways have caused sufficient problems for network operators that some companies have developed tools to detect their presence in a network. Sevis Systems launched such a product in 2006 which it said was designed to target what it called SIM Box Fraud - mainly aimed at users who try to bypass the local landline operator's monopoly on international traffic. The GSM Association also published a white paper in 2003 which claimed that the use of GSM Gateways for traffic reselling "could constitute a fraud."

VIP Communications is currently engaged in further legal action in the UK's High Court of Appeal to overturn the decision to block it from selling T-Mobile SIM cards for use in the GSM Gateways. If VIP wins the legal action - then it could open a flood of litigation from other previous resellers who were all cut off around the same time from selling SIM cards.