FCC Rules Dial-Up Calls to Net
Should Count as Interstate Calls
Dow Jones Newswires
WASHINGTON -- A dial-up call to the Internet is interstate in nature, the
Federal Communications Commission ruled Thursday in a long-awaited
vote.
The decision could spell the eventual end to lucrative deals enjoyed by
competitive local exchange carriers such as ICG Communications Inc.,
e.spire Communications Inc., MCI WorldCom Inc. and AT&T Corp.'s
Teleport unit. These companies have earned millions as middlemen
between dominant carriers and Internet-service providers, or ISPs, by
treating calls to ISPs as local calls.
But the definition doesn't mean that calls to an
ISP would be billed as long-distance, the
commission said. Nor would it overturn
existing contracts for compensation between
competitive carriers and the incumbents.
Indeed, exactly how future rates would be set will be the subject of
another proceeding altogether.
The FCC began contemplating the issue in October, when it ruled that
high-speed Internet access being provided by GTE Corp. was interstate in
nature. Given the nature of the Web, more than 10% of the traffic would
likely begin in one state and wind up in another, enough to classify the
service as interstate, the FCC reasoned.
Decision Opened Door
But that decision opened the door for the FCC to address the problem of
"reciprocal compensation" between the competitive carriers and the
incumbents. Under reciprocal compensation, local-phone companies and
their new rivals must pay one another for local calls completed on one
another's networks. The agreements, resulting in hundreds of millions of
dollars in payments, apply only to local calls. Many of the new companies
have teamed with Internet-service providers that receive high volumes of
one-way calls. That creates an imbalance in the reciprocal system, giving
the new local carriers a larger portion of reciprocal-compensation
payments from GTE and the Baby Bells.
The Bells estimate these payments could mount to the billions. The FCC's
new policy will end that windfall for the competitive companies.
While competitive carriers will lose a substantial source of revenue,
analysts say most are prepared for the loss. But Commissioner Harold
Furchtgott-Roth, who abstained from voting on procedural grounds, has
echoed the fears of those who feel the new policy will mean that calls to
the Internet will be billed like long-distance calls.
Mixed Opinions
In a statement, MCI Worldcom Inc. chief policy council Jonathan Sallet
praised the decision for requiring that the Bells honor current agreements
with competitive local carriers. But the company said the Bells should
abandon efforts to get out of those contracts and warned that the impact of
the new FCC policy on future contracts remains to be seen.
But Cronan O'Connell, vice president of the Association for Local
Telecommunications Services, which represents competitive telephone
companies, said she believes the FCC's decision will strengthen the hand
of her members when they negotiate with the Bells. Essentially, the FCC
said that new agreements should be negotiated in the context of existing
ones, Ms. O'Connell said.
Bell Atlantic Corp. had a far different view. A company statement said Bell
Atlantic will ask states to reconsider current agreements on reciprocal
compensation. The FCC's action made it clear, the company said, that
such agreements pertain only to local calls.
The agreements have allowed hundreds of millions of dollars to be "doled
out" to a few carriers, Bell Atlantic said. |
