An Analysis Concerning The Long and the Local of IT.
Can the FCC Declare Some Local Calls to Be Long-Distance?
Regional Bells are pushing for calls to Internet service providers to be reclassified
January 13, 1999 Business Wire
Expect another delay from the Federal Communications Commission on a decision with major repercussions for the Baby Bell companies and some of their new competitors. Republican Commissioner Harold Furchtgott-Roth is now preparing a dissent to a consensus agreement apparently reached by the other four commissioners, according to FCC sources.
At issue: Under the 1996 Telecommunications Act, the Bells had insisted that local phone companies pay for carrying each others' calls. The theory was simple: Many Bells thought they'd earn a windfall from new entrants in the local-calling market, whose few customers would probably initiate far more calls to the Bells' many customers. But burgeoning use of the Internet has dashed the scheme, riling the Baby Bells and throwing existing telephone regulations into play.
Here's how reciprocal compensation was supposed to work: If a Bell customer makes a local call to a customer of a new competitor, the Bell would pay for the call and vice versa. Eventually, the payments would even out, since customers of rival phone companies were expected to initiate calls to the Bells' customers, too.
ONE-WAY TRAFFIC. But along came the Internet. And many of the Bells' customers now make local calls to Internet service providers to get on the Internet. All the calls go in one direction -- from local phone customers to the Internet. As a result, Bell Atlantic, for one, has had to pay out $200 million in reciprocal compensation fees to ISPs.
The Bells have asked the FCC to decide whether these local calls to ISPs are considered local or long-distance calls. If they're long-distance, then the reciprocal compensation rules shouldn't apply.
A majority of the FCC now seems to agree that the calls are indeed long-distance calls -- subject to the jurisdiction of the federal government. But the FCC would keep allowing the states, which regulate local calling rates, to oversee the private compensation agreements negotiated between the Bells and the ISPs.
The agency would prefer to do this rather than risk endless litigation from the states over jurisdiction. Still, Furchtgott-Roth will likely object to the characterization of these calls as long-distance, questioning the grounds upon which the FCC could one day call them local calls and the next, long-distance. With Furchtgott-Roth's dissent, a final FCC decision could drag on for another couple of weeks.
By Catherine Yang in Washington
EDITED BY DOUGLAS HARBRECHT
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