Copyright 1999 The Atlanta Constitution
The Atlanta
Journal and Constitution
February 27, 1999, Saturday, ALL EDITIONS
SECTION: BUSINESS; Pg. 01D
LENGTH: 935 words
SERIES: Home
HEADLINE: FCC chief reassures Net users
BYLINE: Michael E. Kanell
BODY:
By ruling Thursday that dial-up
Internet connections are in some ways interstate calls, the Federal
Communications threw a scare into consumers fearing that higher costs for some
phone companies would quickly trickle down to the user at home.
But
don't worry, keep surfing, urged agency Chairman William Kennard --- and many in
the industry agree.
Use of the Net has ballooned, with an estimated 147
million people hitting the Net at least once a week, according to the Computer
Industry Almanac. Moreover, that number is expected to keep jumping --- to 320
million by 2000 and 720 million by 2005. Growth is at least partly spurred by
current rates that typically permit all-you-can-surf for no more than $ 20 a
month.
In announcing the decision, Kennard shrugged off the notion that
FCC regulation could eventually mean higher costs for phone companies that carry
the Net connections --- expenses that would be passed along to users.
Yet his reassurances did not convince all consumer groups or analysts
that the Net will stay cheap.
The FCC is committed to nudging the Net
into greater growth, not chilling it with high rates, assured Kennard. The
agency's interest is limited to considering how much --- if anything --- phone
companies should pay each other for passing along Internet calls, he said. He
promised no change in the exemptions that protect Internet service providers
like Atlanta-based MindSpring Enterprises, the companies that are connecting
consumers to the Net. Those exemptions, provided for in the
Telecommunications Act of 1996 and FCC regulations, keep ISPs
from paying the same kinds of charges for connections that phone carriers pay.
And none of the other players wants to slow the Net's explosive growth.
The regional phone companies --- BellSouth, other Bells and GTE --- want
to carry Net connections on their own Internet service providers. Their local
rivals, the competitive local exchange carriers, or CLECs, would like to do the
same, and they are already serving many of the ISPs. And long-distance carriers
from AT&T to MCI WorldCom want their networks to carry the data traffic.
Meanwhile, ISP prospects for profit depend on the Net's surging popularity.
Triggering this week's FCC ruling was a question about reciprocal
compensation, which requires that when a phone company is passing along a local
call, a customer has to pay the company that takes the call. With voice calls,
both companies pay each other about the same amount, but Internet calls travel
one way --- the Net customer dials up an Internet service provider. And since
regional Bells like BellSouth still control the residential market, they are
generally the ones doing the paying when a customer connects to the Net through
another phone company that is serving the ISP.
So consumers fear that
the companies serving their ISP will face added costs and pass the charges along
to the ISP, which will then raise rates to the user. But Kennard says the
consumer cannot be charged long-distance rates for a local dial-up, and he
promises that ISPs will not face increased charges from their phone companies.
AOL Senior Vice President George Vradenburg said he is confident the
issue will stay between the incumbent local exchange carrier, or ILEC, like
BellSouth and the CLEC. "One always worries, but we don't worry because of this
decision."
No matter who ends up paying more for interconnection costs,
AOL will just seek the best rates for its phone service, he said.
"A
fight between the two of them may be significant to them," Vradenburg said. "But
if the CLECs get a price break, we buy access from CLECs. If the ILECs get a
price break, we buy from the ILECs."
Officials of Atlanta-based
MindSpring, one of the nation's largest ISPs, said Thursday they expect the FCC
ruling to have no impact on subscribers.
Kirsten Kappos, vice president
at Earthlink (another ISP), agreed Friday. Costs are going down, so at the
worst, a CLEC might see slightly less reduction, she said. "We think this is
status quo for us."
Wayne Gantt, economist and president of the Ansley
Group, said the best insurance for consumers are those market economics that
have for several years been driving down telecommunications costs.
If
there is a winner from FCC action so far, it would be regional phone companies
positioning themselves to take data traffic away from the long-distance
carriers, he said. Jeanne Schaaf, a senior telecommunications analyst at
Forrester Research, cautioned consumers not to assume the FCC's good intentions
are a guarantee.
Instead, by defining Internet calls as long-distance,
the FCC has given the Bells legal ammunition to challenge the regulations that
now protect ISPs --- and help keep their rates down, she said. "This lets the
Bells get their nose under the tent."
Assuming that the FCC rules
against the Bells, the dispute would likely end in court. Once that happens, the
promise of low rates is at risk, Schaaf said. "This ruling has opened the box."
Yet in a perverse way, an increase in dial-up costs might actually speed
the arrival of broadband --- the high-speed delivery of the Internet on which
many in the industry are betting their businesses. Consumers have not yet rushed
to technologies like cable modems and digital subscriber lines, which now cost
more than $ 100 to install plus about twice as much per month as dial-up access.
Those technologies are seen as necessary to making the Net a mass-market
medium with video and graphics. Raise the cost of dial-up, and suddenly
broadband doesn't look like such a leap.
GRAPHIC:
Graphic :
FCC - INTERNET SCORECARD
The Federal Communications Commission
says Internet connections are
long-distance. Now the FCC will consider how
much the phone companies
will pay each other for making those connections.
The players: Incumbent local phone companies (like BellSouth)
Abbreviation: RBOCs or ILECs
What's at stake: Hundreds of millions of
dollars they haven't paid CLECs
Position: Dial-up Net calls are
long-distance
The players: Competitive local phone companies (like ICG
or MCI WorldCom)
Abbreviation: CLECs
What's at stake: Would receive
reciprocal compensation from ILECs
Position: Dial-up calls are local
The players: Internet service providers (like MindSpring Enterprises
Abbreviation: ISPs
What's at stake: Changes in rules could add to costs
Position: Buys phone service from whichever is cheaper
The players:
Consumers
What's at stake: Could lose the all-you-can-surf deals for $ 20 or
less a
month
Position: Doesn't matter as long as no charges trickle down
LOAD-DATE: February 27, 1999
