In the complaint, AT&T states that it paid $2,000,000 per month in termination charges to Superior Telephone Cooperative, a small LEC that serves a community of 142 people living in 57 households. At Superior's exorbitant rate of $0.13 per minute, that translates into 15,000,000 minutes. If every man, woman, child, and dog in the greater Superior area talked 24x7 they would still have to be talking on two phones at once to even approach that number. AT&T suspects that most of those minutes did not ring phones in Iowa but instead were routed via a gateway there to calls in other countries. Apparently the $0.13 charged by Superior was sufficient to pay for sending the calls over the Internet to destinations overseas where there was still room for profit after paying the presumably lower termination charges there.
AT&T's argument is that Superior is not entitled to charges for "termination" since connecting to the gateway is not considered termination but instead is just an intermediate routing in order to terminate the call elsewhere. They base their argument on a 1995 FCC ruling that providers of 800 service (AT&T in this case) only had to pay the same lower termination charges as they would for a direct-dialed call. The reasoning contained in the ruling called the intermediate switching "transparent" but it may take years of litigation to resolve whether the same rules apply in this case. Ultimately, the problem is a result of an attempt by the FCC to mandate different rates different types of phone calls, depending on whether the call delivered by the long-distance carrier terminates at an individual black telephone or at a box which does other things, whether they be playing an audio response or further extending the call to another phone.
If AT&T lost in the courts, it could try another approach. Instead of charging a flat rate for all long distance calls, it could charge a higher rate to calls to areas served by overpriced CLECs. Given that there are only 57 households server by Superior, there wouldn't be many complaints from callers, except those users of the free international calling services that AT&T wants to discourage anyway.