( BW)(PACIFIC-TELESIS)(PAC) Telesis study shows policy, technology
changes needed to fuel second wave of Internet growth
SAN FRANCISCO--(BUSINESS WIRE)--March 25, 1997--A new, extensive
study of Internet use in California predicts that on-line use will
continue to grow at spectacular rates into the next century, but that
this growth is dependent upon moving Internet traffic to a high-speed
data network from today's voice network.
The study, conducted by Pacific Telesis, concludes that the
current regulatory framework impedes, rather than enhances, further
Internet development. It makes a strong case for a regulation-free
Internet that will be fast, easily accessible, and affordable for all
customers.
"The Internet is the world's fastest-growing communications
medium, particularly in California," said Dave Dorman, president of
Pacific Bell, the main subsidiary of Pacific Telesis. "It's essential
to the nation's economic vitality. It has reached a phase of maturity
that requires greater bandwidth for users and a lower capital cost to
support its growth."
The solution lies in a combination of regulatory changes and new
methods of routing Internet calls, Dorman said. "The voice telephone
network has fueled the Internet's explosive growth. To take the Net
to the next level, with richer content and applications that demand
greater speed, we must move traffic to a high-speed network."
The company's suggestions were made in a filing Monday with the
Federal Communications Commission.
"We need to free the Net from regulation," said Dorman. "For
too long, regulatory policies have implicitly steered Internet
traffic onto the voice network. If, as we propose, the FCC removes
incentives that keep Internet traffic on the voice network, we'll see
greatly accelerated movement to high-speed data networks and fewer
busy signals for users."
Dorman said that federal and state regulators, industry
participants and local phone companies must work together to develop
compatible regulatory and technological solutions.
The first step is for the FCC to eliminate outdated pricing
schemes, which currently remove the incentive for local phone
companies and potential competitors to develop expanded data
networks. These controls give Internet providers virtually free
access to phone networks, significantly reducing motivation to move
to a longer-term data network solution.
Today, Internet Service Providers pay an average of just $0.00073
(seven hundredths of one cent) for each minute they access local
phone company networks. By eliminating subsidies and moving the fee
to just one cent, for example, the FCC would maintain the integrity
of the voice network and improve Internet accessibility without
significantly impacting customers.
In fact, about 80% of dial-up Internet users would pay less than
an additional $5 per month, Dorman said.
The Pacific Telesis study is believed to be the most extensive
ever compiled on Internet traffic. For two weeks in mid-January the
company tracked usage on some 880,000 dial-up Internet calls at 38
California switching centers. It confirmed that Pacific Bell is more
heavily affected by dial-up Internet traffic than any of the Regional
Bell Operating Companies, with nearly one-fourth of the states
households accessing the Internet.
Among the findings:
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-- Continuing growth -- At the end of 1996, an estimated 2.3
million users dialed into the Internet in Pacific Bell's territory.
By the year 2001, conservative estimates show that number will more
than double to 4.7 million households.
-- Internet doubles voice -- Internet customers use phone lines
an average of 45 minutes per day. Typical residence customers use
their phone just 22 minutes per day.
-- Traffic builds -- At the end of 1996, dial-up Internet traffic
accounted for 27% of total residential traffic, or 30 billion minutes
of use. By 2001, dial-up Internet minutes-of-use are anticipated to
total 78 billion, or nearly half of all residential phone use.
-- Heavy users live on-line -- Some 30% of dial-up Internet
sessions last three hours, and 7.5% of dial-up Internet calls last 24
hours or more. The average voice call lasts between four and five
minutes.
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"These statistics bode well for the Internet," Dorman said, "but
they also show how the current voice network can become overburdened
in situations where many are accessing the Internet for long
periods."
The study also revealed that Internet traffic has had widespread,
substantial impact on Pacific Bell's network. As of January, 62 of
the Pacific Bell switches serving Internet providers had experienced
on-line-related congestion, which eroded voice network performance.
Just three months earlier, only 23 switches had faced similar
problems.
The heavy use forces local phone companies to invest hundreds of
millions of dollars to upgrade the voice network to carry Internet
traffic. Pacific Bell strongly believes packet-data access
technologies should form the basis for future growth of the Internet.
Investment in the voice network for Internet use will only delay the
development of more appropriate data technologies, Dorman said.
"The existing solutions are neither long-term nor efficient,"
Dorman said, estimating that Pacific Bell will spend some $100
million in 1997 on just short-term solutions and more than $300
million over the next five years to support Internet Service Provider
traffic. "We should instead be investing in an expanded data network
to handle Internet traffic. We need to end congestion, end the busy
signals, and let the Internet grow as it can.
"Today's policies force Internet traffic to stay on the voice
network and will slow the second wave of Internet growth. Ending
this policy will put rational market forces to work for Internet
users," Dorman said. "New competitors will enter the market as it
becomes possible to make money. And investment dollars will be
directed to data networks, which will handle traffic for a long time
to come."
The Pacific Telesis study is available at the Pacific Telesis
website on the World Wide Web at
pactel.com .
Pacific Telesis is a diversified telecommunications company,
based in San Francisco.
FACT SHEET
Enhanced Services Provider Exemption White Paper
March 25, 1997
Pacific Bell has the nation's highest rate of Internet usage.
Pacific Bell's Internet user penetration rate is 33% higher than the
next highest RBOC.
Year's end 1996, Pacific had 2.3 million dial-up Internet users; 4.7
million predicted by 2001.
In 1996 dial-up Internet use was 27% of residence traffic; by 2001
will nearly rank with residence voice traffic.
Using an "aggressive" scenario, 3.9 million dial-up residence users
would average 3 hours daily on the Internet in 2001, making the
volume of Internet dial-up traffic 2.7 times that of voice.
Internet use is having a major impact on performance and investment
requirements of Pacific Bell's voice network.
A two-week traffic study of Internet use at 38 randomly selected
switching centers supporting ISPs collected detailed data from
880,000 dial-up Internet calls. Findings:
Daily Internet dial-up usage is double that of voice: 45 minutes
versus 22 minutes.
Some 30% of of Internet dial-up calls last 3 hours or more, and 7.5%
last 24 hours or more. The average voice call is four to five
minutes.
Voice busy hour for residences is consistently around 7 p.m.;
Internet dial-up fluctuates between late afternoon and late evening.
Congestion widespread and growing: One-third (227) of Pacific's 772
switching are ISP hubs; 62 have experienced congestion -- i.e.,
exceeded normal performance thresholds.
Network and economic problems created by the ESP Exemption will not
"self-correct." Maintaining the ESP Exemption creates no economic
rationale for ISPs to migrate dial-up Internet traffic to more
efficient data networks. The Exemption is an obstacle to sustaining
the accelerating robust development of the Internet.
Conservative assumptions show Pacific Bell generating $150 million
in revenue from ISPs but spending over $300 million to support ISP
traffic over the next 5 years.
The ESP Exemption requires Pacific to provide ISPs use of the voice
network for typically $0.00073 or less than a tenth of a cent per
minute. This is a 95% discount from the $0.014 per minute
(intrastate) interexchange carriers pay Pacific for network access.
All-you-can-eat pricing encourages end-users to stay on the voice
network longer than they otherwise would. AOL had a 36% increase in
total traffic the first week after introducing flat-rate access.
Such use forces Pacific to augment the voice network when a data
network is wiser for the long term.
The FCC needs to eliminate regulations that don't support innovative
investment needed to bring high-speed access to the Internet.
The ESP Exemption can be modified or ended without hurting either
the ISP industry or discouraging Internet use.
New Pacific Bell data access solutions such as Data Access Gateway
(DAG) and xDSL are being developed and will become attractive
choices.
Ending subsidized "competition" from the voice network will cause
Internet service providers and a wide range of equipment and service
providers to enter the market with new data access technologies.
Pacific Bell is developing high-speed, more reliable Internet
access.
Data Access Gateway is expected for limited deployment this summer,
pending further technology tests and regulatory approval. It
combines modem, server, router, and frame Relay data functions.
xDSL offers Internet access at up to 1.5 Mbps -- over 50 times the
speed of a 28.8Kbps modem using a standard copper line. While it
costs more than ISDN, xDSL has mass market potential as users begin
shifting purchases of entertainment, news, and information toward the
Internet. |
