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To: H James Morris who wrote (74853)	8/20/1999 2:49:00 PM
From: Glenn D. Rudolph	Respond to of 164684

Bell Atlantic Won't Compensate Local-Phone Rivals For ISP Calls AUG 19,1999 NEW YORK -(Dow Jones)- In a move that could deprive its upstart local-phone rivals of millions, Bell Atlantic Corp. has told those competitors in Pennsylvania it will no longer pay them for calls that Bell Atlantic customers make to Internet service providers. The latest shot in a money battle that has pitted Bell Atlantic (BEL) against competing carriers comes as Pennsylvania regulators near a ruling on local phone competition in the state. Under reciprocal agreements, local phone companies compensate each other a fraction of a cent a minute for each call made between their customers. But Bell Atlantic says it shouldn't have to pay millions of dollars to other carriers for the lengthy calls its own customers make to online services. Online services often use Bell Atlantic's competitors to provide local dial-in numbers for subscribers. "We have notified a number of companies under our interconnection agreements that we are putting the payments that we have been making for these Internet calls into an escrow account," Harry Mitchell, a spokesman for Bell Atlantic's Mid-Atlantic region, told Dow Jones on Thursday. The letters went out earlier this month. A Federal Communications Commission decision earlier this year was "fairly crystal clear" that calls made to ISPs qualify as interstate rather than local calls, even though the numbers dialed are local, Mitchell said. "They don't call it the World Wide Web for nothing," he said. "We're acting to stop the gravy train that these folks have been riding for many months." But the FCC also said existing reciprocal compensation agreements between Bell Atlantic and other carriers should stand or be left to state regulators. MCI WorldCom Inc. (WCOM) and smaller carriers plan to petition the Pennsylvania Public Utility Commission this week to stop Bell Atlantic, according to Carl Giesy, MCI WorldCom's regional director of public policy. "They agreed to this early on, and now they're finding that this agreement isn't to their best interests," Giesy said. Bell Atlantic's Mitchell said the company has paid hundreds of millions of dollars throughout the mid-Atlantic region to other carriers. In Pennsylvania alone, MCI WorldCom receives payments in the low tens of millions of dollars from Bell Atlantic, MCI WorldCom's Giesy said. "The whole system would be thrown into a bit of an uproar" if Bell Atlantic succeeds, Giesy said. "It's a significant revenue stream that we think we're entitled to." Smaller carriers derive a substantial percentage of revenue from the compensation they receive for calls made to ISPs, he said. Because the phone carriers factor in the compensation when setting rates for their ISP clients, Giesy said that Bell Atlantic's move, if unchanged, could result in higher rates for the ISPs' subscribers, who generally play a flat monthly fee for unlimited online service. In its ruling in February, however, the FCC said counting Internet calls as interstate calls shouldn't result in higher online costs. The Pennsylvania PUC previously ruled that Bell Atlantic must continue to make the reciprocal payments, but the company asked the commission to review its decision. The PUC could address the matter on Aug. 26, when it plans to decide numerous issues in a broad ruling on local phone competition in the state. More than five years after the Pennsylvania legislature passed a phone deregulation law, Bell Atlantic continues to serve a large majority of the state's residential and business phone customers. Copyright (c) 1999 Dow Jones & Company, Inc. All Rights Reserved.