FCC to Congress: No regulation of ISPs quite yet
By Nancy Weil and Torsten Busse
IDG News Service, 4/14/98
Internet service providers will rest easy after last week's Federal Communications Commission decision not to slap them with new fees or regulations.
In a report to Congress issued by the FCC, the regulator said that although some ISPs offering Internet telephony services could be classified as telecommunications companies, it did not recommend that ISPs need to pay universal access fees.
The FCC said that "certain forms of phone-to-phone IP telephony lack the characteristics that would render them 'information services' within the meaning of the [1996 Telecommunications Act] and instead bear the characteristics of 'telecommunications services.'" However, the FCC did not find it "appropriate to make any definite pronouncements in the absence of a more complete record focused on individual IP services offerings," the FCC said in a press release summarizing the findings of the report.
The FCC also "reaffirmed that information services providers are not subject to universal obligations, the access charges paid by long-distance service providers, or rate regulation."
Also, while ISPs using their own transmission facilities to provide an information service are currently not required to contribute to the universal service fund, the FCC said it reserves the right to "exercise discretions" under the Telecommunications Act to require ISPs to pay such fees. At the same time, the FCC acknowledged "the difficulties associated with determining the amount ISPs should contribute to the fund."
The FCC also said that leased lines offered to ISPs fall under the definition of telecommunications and require universal services fees, a subsidy that the FCC expects to grow as the need for such lines among providers will grow.
Access fees are paid by long-distance telecommunications carriers that use infrastructure owned by local telephone companies. The universal services fees paid by telecommunications companies creates a fund that is used to pay for telecommunications services for libraries, schools and rural areas.
Congress had asked the FCC to review the agency's own interpretation of relevant provisions of the 1996 Telecommunications Act. "Report to Congress on Universal Service" is the agency's report.
Before its release, the report created a backlash when a draft copy apparently was leaked to the Wall Street Journal, which reported that the FCC plans to reverse its long-standing policy and begin regulating providers of what are known as "enhanced" telecommunications services, including Internet service.
However, in the absence of more information which would allow the FCC to come away with a more clear cut definition of IP telephony and the status of ISPs, the FCC today did not recommend any new regulations.
The move should come as welcome news to ISPs and the Clinton administration which opposed new Internet regulations.
Under U.S. law ISPs have been classified as enhanced service providers and have not been required to pay access fees to local telcos or into the universal access fund. Last May, the FCC reformed the rate structure for telecoms, but did not alter how it has viewed ISPs.
The May reforms were designed to lower costs of local network access, thereby promoting competition in those markets. While the FCC said then that the altered rates should mean lower costs for residential and business customers, the commission offset the drop in access fees and sought to push universal services by adopting increased rates for multiple business and residential lines.
An amendment to 1998 appropriations legislation for the U.S. Departments of Commerce, Justice and State forced the FCC to review implementation universal service provisions of the Telecommunications Act of 1996 and called for the report to Congress, filed today. The FCC conducted a hearing on the classification of ISPs and universal access in February.
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