State rules calls to connect to Internet are long-distance
By Erica Noonan, Associated Press, 05/19/99
IN THE BOSTON GLOBE
State ruling could boost on-line fees
BOSTON - In what will likely drive up the price of going online in Massachusetts, state regulators have ruled that Bell Atlantic will not have to compensate competing companies for all calls made to the Internet.
In a decision announced Wednesday, the state Department of Telecommunications and Energy said that calls to the Internet would be considered interstate calls.
That means that Bell Atlantic, the state's dominant local phone company, will no longer have to pay competing phone companies a fee for all calls made to Internet service providers who are not Bell Atlantic customers.
The Telecommunications Act of 1996 had required communications companies to pay each other for completing local calls made by their competitors' customers, a practice the industry calls "reciprocal compensation.''
DTE Commissioner Paul Vasington said the ruling would have economic consequences for Bell Atlantic competitors and users of the Internet.
"(Bell Atlantic) competitors will get less revenue from this,'' he said. "They may change the rates they charge Internet providers and Internet providers could change the rates they charge to customers.''
Bell Atlantic had complained that companies that provide service to Internet providers often do nothing but receive calls. Therefore, few calls were being made to Bell Atlantic, and thus little reciprocal compensation resulted for the big phone company.
For example, a competitor charged Bell Atlantic for 1.8 billion minutes of use one year, but in return paid for just 20,000 minutes of calls, said Bell Atlantic spokesman Jack Hoey.
In October, the DTE ruled Internet calls should be considered local. But in February, the Federal Communications Commission said the calls were really long distance. However, it left states with the option of making its own determination on whether the calls were long distance or local.
After the FCC ruling, Bell Atlantic appealed to DTE officials to reevaluate their policy. In April, the agency allowed Bell Atlantic to stop paying reciprocal compensation to some phone companies, putting the money instead into escrow until a final decision was reached.
Bell Atlantic officials cheered the decision, saying that rates would have risen anyway had the DTE forced the company to continue paying competitors for all Internet calls.
"This is a pro-consumer decision ... A handful of opportunistic middlemen pocketed millions of dollars in charges they were assessing against Bell Atlantic to which they were not lawfully entitled,'' said Bell Atlantic-Massachusetts Vice President Robert Mudge in a statement.
Because it cannot be determined which local calls are Internet calls and which aren't, payment from Bell Atlantic to its competitors will be capped at a 2-to-1 ratio, Vasington said.
That means if a competitor pays Bell Atlantic for 20,000 calling minutes per month, Bell Atlantic would be obligated to pay for no more than 40,000 minutes of a competitor's call time.
Frank Gangi, president of Quincy-based Global NAPs, blasted the DTE decision, saying Internet users would suffer.
"The consumer once again gets the short end of the stick,'' said Gangi, whose company sells phone service to Internet service providers, voice mail companies and other business.
He said he would have to raise his prices an estimated 400 percent, costs that would necessarily be passed along to users.
"Our customers will pay more and their users will pay more. This is silly, if you dial a local number, it ought to be a local call. Bell Atlantic (has decided to) keep all the money.''
Gangi said he would appeal the ruling.
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