Another Bell company doesn't want to pay reciprocal compensation fees to ISPs.
This time it's Pacific Bell (www.pacbell.com), which proposes ending the practice of treating Internet traffic as local in California and allowing the incumbent to retain the funds it's required to spend helping its customers reach their ISP.
Pac Bell's plan, filed with the California PUC (www.cpuc.ca.gov) July 14, would increase the cost of Internet access from 18 percent to 35 percent and harm rural Internet users, says the California Internet Service Providers Association (CISPA) (www.cispa.org).
"Pacific's proposal would lead to higher prices and fewer choices for Internet connectivity," said David Simpson, CISPA's general counsel. "Consumers shouldn't have to pay more for Internet access so Pacific Bell can cut its costs."
Simpson noted that internal documents turned over by Pacific Bell indicate that the company is studying methods for differentiating ISP-bound traffic from other phone traffic, a precursor to its developing different, and likely higher, billing for Internet calls.
Pacific Bell, which says it's unfair that it must pay its competitors these fees, claims that if it's required to continue paying reciprocal compensation, the company will have to recover its costs by raising rates.
But Pac Bell's proposed changes also would force ISPs to pass on their increased costs to consumers, which in turn would raise access costs for consumers, according to ISPs. Rural Internet users would be hit hardest because many of them would be forced to return to paying local toll charges as high as $240 per month, Simpson added.
Under the worst-case scenario outlined by the CISPA, a typical $20-a-month Internet connection could rise to $27.
"Online companies will have to raise their rates for transporting Internet traffic," Simpson said.
Internet traffic currently is deemed local, which means Pac Bell, a subsidiary of SBC Communications Inc. (www.sbc.com), is required to pay reciprocal compensation when its customers use the network of another local phone company to reach their ISP.
The nation's BOCs have been fighting competitors over reciprocal compensation for years, causing the competitors great financial harm in the process.
That's despite the fact that two federal courts and 33 states so far have ruled against the Bells. The California PUC itself ruled in October 1998 that Internet calls are local and that Pac Bell should pay its reciprocal compensation bills.
A California PUC arbitrator warned last spring that the changes would require an "industry-wide restructuring" that could "be very harmful to rural customers of ISPs," Simpson notes.
And last year the Nevada Public Utilities Commission www.state.nv.us/puc/ rejected a similar effort by the Bells, saying that if reciprocal compensation for local traffic bound for an ISP was denied, it would slow the development of competition."
"The existing inter-utility payment structure has helped create a robust and affordable Internet in California," Simpson said. "Like Nevada, California should not dismantle the system to favor the incumbent telephone monopoly at the expense of ISPs and their customers."
In early 1999, the FCC (www.fcc.gov) concluded that carriers are bound by their existing interconnection agreements, as interpreted by state commissions, and thus are subject to reciprocal compensation. The FCC said that Internet traffic is jurisdictionally mixed and appears to be largely interstate, or long-distance, in nature.
But the commission's decision preserved the rule exempting the Internet and other information services from interstate access charges. This means that consumers who access the Internet by dialing a seven-digit number won't incur long-distance charges.
In a notice of proposed rulemaking, the commission asked for comment on proposals governing future carrier-to-carrier compensation for handling this traffic. Comments on this proceeding are due to the FCC by July 21, with reply comments being due Aug. 4.
And on Capitol Hill, H.R. 4445 is under consideration in the U.S. House of Representatives (www.house.gov). The bill essentially would eliminate reciprocal compensation for competitors.
Competitors claim that any telecom company that carries telecom traffic, whether it's voice, data or video, deserves to be paid for its costs of terminating that traffic, plus a reasonable profit. Eliminating reciprocal compensation amounts to an unconstitutional 'taking,' they say, that could lead to either an increase in Internet rates, a return to monopoly provisioning, or discourage competitive investment.
