U.S. FCC to close Internet call fee loophole
WASHINGTON, Feb 22 (Reuters) - Federal regulators this week will
finally move to close a loophole that allows new local phone
companies to collect hundreds of millions of dollars from dominant
carriers for calls to Internet service providers.
A new Federal Communications Commission order, expected to be
approved at the agency's Feb. 25 meeting, would eventually exempt
computer users's calls to Internet providers from contractual
arrangements among the new carriers and dominant companies that
require payments for completing local calls of each others' customers.
The payments, called reciprocal compensation, apply only to local and not long-distance calls. The upcoming decision will declare that calls to Internet providers are more like long-distance than local calls,
people familiar with the agency's plan said.
The regional Bells and GTE Corp.(NYSE:GTE - news) paid about $600 million in 1998 for ISP-related traffic and analysts project the figure will rise to $1 billion this year.
The FCC had scheduled a vote on the order at its meeting last month, but decided to hold off and review the wording of the decision after the Supreme Court ruled in favor of the agency on a related legal issue.
Commissioner Harold Furchgott-Roth, one of two Republicans on the five-member body, on Monday said he wanted a further delay.
But a spokesperson for FCC chairman William Kennard, a Democrat, said the item would be on Thursday's agenda fora vote despite Furchgott-Roth's request.
''In this fast moving market, further regulatory delay would not be in the public interest and we plan to go ahead with this item at the meeting,'' Kennard's spokesperson said.
The FCC originally said it would release the ruling in November, 1998. It then decided it needed more time to explain to state regulators that it did not want to reverse their rulings that reciprocal compensation should be paid for Internet calls under existing arrangements.
Instead, the FCC wanted its ruling to apply only to future arrangements negotiated among the carriers as current contracts expire over the next two years.
Because the modem banks of Internet service providers receive thousands of calls but never call out, they generate vast fees for the new phone firms that serve them, including units of long-distance giants MCI WorldCom Inc. (Nasdaq:WCOM - news) and AT&T Corp. (NYSE:T - news) and smaller firms like e.spire Communications Corp. (Nasdaq:ESPI - news) and Focal Communications Corp.
The Bells, including New York-based Bell Atlantic Corp. (NYSE:BEL - news), Atlanta-based BellSouth Corp. (NYSE:BLS - news) and San Antonio, Texas-based SBC Communications Inc. (NYSE:SBC - news), have argued unsuccessfully to the states that calls to Internet providers should be treated as long-distance and exempted from reciprocal compensation.
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