Bells win partial victory in ISP ruling
By John Borland
Staff Writer, CNET News.com
February 25, 1999, 9:45 a.m. PT
news.com
update The Federal Communications Commission ruled
today that calls to ISPs are essentially long distance, a
decision that could save big local telephone companies
hundreds of millions of dollars.
The agency has been wrestling with the issue for more than
three months, after initially promising a decision by early
November.
But today's ruling doesn't settle the matter entirely. The
commissioners also said the decisions of some two dozen
states that had differed from today's ruling should be
upheld--meaning the Baby Bells will still be responsible for
huge sums to some of their local rivals.
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At stake are millions of dollars per year paid to small telephone
companies under contracts dubbed "reciprocal compensation."
The contracts govern who pays who when a customer makes a
call. If a Bell Atlantic customer calls an e.spire
communications customer under this system, Bell Atlantic
would pay e.spire for completing that call.
When these contracts were signed, largely in the wake of the
1996 Telecommunications Act, local phone companies thought
they would come out ahead since they controlled the vast
majority of local phone lines.
But many small phone companies began signing up ISPs for
service. The ISPs receive many calls, but
place very few--resulting in the imbalance
that favors the small telcos.
The Baby Bells and GTE have pressed the
FCC to rule that calls to ISPs are long
distance, since this would exempt the calls from the reciprocal
compensation contracts.
The FCC today agreed in part, ruling that even local calls to
ISPs ultimately find their way to the Internet at large, and so
are interstate calls.
But by protecting the states' earlier rulings--and by refusing to
say whether reciprocal compensation contracts were a good
idea or not--the agency left the big local phone companies
liable for the contracts they had already signed.
The Baby Bells and GTE paid competitors close to $600
million last year under these contracts, and analysts have
predicted this number will hit $1 billion for 1999. But some of
the big local phone companies had delayed paying their
smaller rivals while waiting for a final FCC decision.
The commission also said it would begin soliciting comment
on a proposal that left this kind of agreement between phone
companies up to individual negotiations, rather than to
sweeping federal regulations.
Net charges
The commissioners took pains to emphasize that their
decision would not affect consumers' Internet phone bills.
"It doesn't affect the way consumers get dialup access to
Internet," said chairman William Kennard. "Nothing we're doing
here should be construed as regulating the Internet."
But the decision was made under protest by one
commissioner, who has argued that it could inadvertently open
up the possibility for courts to impose per-minute access
charges on ISPs.
Commissioner Harold Furchtgott-Roth had asked to delay the
decision by at least another three weeks to study this issue.
But Kennard denied that request, saying commissioners had
already waited too long.
"I believe that part of operating efficiently is being decisive,"
Kennard said. "We owe the marketplace a decision."
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