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Technology Stocks : FCC Regulations -- Ignore unavailable to you. Want to Upgrade?

To: MikeM54321 who wrote (1)	4/10/1998 4:27:00 PM
From: Francis Gaskins	Respond to of 54

From today's Wall Street Journal Editorial -- Hitting Up the Internet April 10, 1998 When John in New York picks up his phone to dial Mary in Dallas, chances are he's using a traditional long-distance carrier, such as MCI or AT&T. But in order for that call to connect, it must be routed through local phone lines in both cities. Hence, long-distance carriers pay local phone companies "access fees" of about a nickel per minute to begin and end such a call. Now, as it has in myriad other ways, the Internet is changing things. In lieu of MCI, John can place his call using an Internet long-distance service. The call is routed through his local phone service to a computer, which puts the call on the Internet. There, the call travels to Dallas, where it is transferred to Mary's local phone service. The main difference between the two methods is cost. By using the Internet, our caller spends half of what he would using the traditional method. Partly, this is because Internet service providers don't pay access fees to local phone companies. In addition, all phone companies pay subsidies to the government's "universal service fund," which has existed since the 1930s. The fee helps underwrite phone use for low income inner-city residents and rural areas, where service is more expensive to provide. Internet phone concerns are exempt from this fee, too. All this could change if regulators at the Federal Communications Commission have their way. At the urging of Senator Ted Stevens (R., Alaska), the FCC will send a report to Congress today\E\Editorial\*Friday asking for permission to burden Internet phone companies with universal service fees. Internet telephony comprised less than 1% of the long-distance market last year in the U.S. But even that small amount generated some $200 million in business. Within the next five years, some estimate that Internet telephony will account for 25% of all international phone calls. Mr. Stevens happens to head the Senate Appropriations Committee, and his state, Alaska, happens to be a major beneficiary of the universal service fund, an elephantine entitlement for the bureaucratic sector that takes in the better part of $5 billion a year. The Senator simply wants to fatten the till. But the efforts of the FCC mark a terribly significant and unfortunate shift in the Clinton Administration's policy toward cyberspace. Not 10 months ago, the President's task force averred that Internet "innovation, expanded services, broader participation and lower prices would thrive in a market-driven arena, not in an environment that operates as a regulated industry." Leveling stiff fees on Internet telephony providers will result in costlier Internet service for consumers. Worse, the technological development of a new medium will suffer due to regulatory efforts to preserve a clearly outdated business model. The real question, says Jim Lucier of Americans for Tax Reform, is: "As we move toward new models of technology, do we need to subsidize old models? Do we need an FCC to lock old or obsolete technologies in place?" This is precisely right. It was no doubt too much to hope that government would not try to grab a piece of the Internet's action. Liquor, gasoline, tobacco, telephone calls--all were subjected to various excise taxes levied by a public sector intent on propping itself up. Now of course they are targeting Internet traffic as a source of revenue unto eternity. That it is in this instance being done explicitly on behalf of preserving a policy status quo created for the 1930s says a lot about Washington's mindset, even as the whole world beyond the Beltway is in transition.

To: MikeM54321 who wrote (1)	4/10/1998 5:35:00 PM
From: Francis Gaskins	Read Replies (1) \| Respond to of 54

[RBOCS target Level 3 & Qwest business plans?] "Carrier bloc opposes new RBOC move to compete for long-distance data" By David Rohde, Network World Fusion, 4/8/98 Three of the four big long-distance carriers are saying no to a new legal gambit by three regional Bell operating companies to gain expedited entry to the long-distance market for data services. AT&T, MCI Communications Corp. and WorldCom, Inc. all told the Federal Communications Commission on Monday that they oppose the RBOCs' attempt to invoke an obscure piece of telecom law to get them into the long-haul data market without the usual regulatory fuss. Bell Atlantic Corp., Ameritech Corp. and US West, Inc. have filed petitions under the little-known Section 706 of the Telecommunications Act of 1996 to get free geographic rein to offer packet data services even before they receive regulatory clearance to become long-distance carriers. Section 706 directs the FCC to promote advanced data networks by removing regulations that hinder their deployment. In successive petitions, the three RBOCs asked the FCC to use Section 706 to drop restrictions against RBOCs carrying data traffic beyond their usual regional calling areas. They said such a move would help them build new regional broadband networks, potentially including Internet backbones. A top AT&T official said he wasn't buying the argument that the RBOCs would use Section 706 just to carry data traffic. Mark Rosenblum, AT&T's vice president of law and public policy, said Tuesday that once an RBOC gained long-distance data-network authority, it would begin shifting voice traffic normally restricted to local calling areas to different pipes. "This would allow them to transfer their monopoly from the old network to the new network," Rosenblum said. Rosenblum added that the traffic shift could even include residential circuit-switched phone calls, not just specialized packet-switched applications such as voice or fax over IP. AT&T appeared to be focusing much of its attention on Bell Atlantic, which filed the first Section 706 petition in January. In their written comments AT&T laywers derided the Ameritech petition as "a me-too request" filed on the heels of the Bell Atlantic request. AT&T and MCI are currently battling what appears to be progress by Bell Atlantic in its drive to get the New York Public Service Commission to approve full-fledged long-distance authority for the RBOC in New York state. MCI also filed written comments opposing all the Section 706 petitions, labeling them a "plan by several Bell monopolies to circumvent the Telecom Act." MCI merger partner WorldCom also used strong language, labeling the Section 706 petitions a "Trojan horse" for complete long-distance entry. Even so, the FCC must act in some fashion this year to implement Section 706. The Telecom Act requires the FCC to invoke Section 706 to drop at least some regulatory barriers on data-network deployment -- or show that it has a plan to do so -- within 30 months of the act's passage. That deadline is coming up this August.