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Consumer Groups Assail FCC Decision on Internet Access Charges

WASHINGTON, DC -- The Federal Communications Commission's decision today to reclassify Internet Service Providers (ISPs) as interstate could make using the Internet cost more, according to two of the nation's leading consumer groups.

"At a minimum, today's decision ensures a continued morass of conflict and litigation, with no possible gain to the public and a severe potential loss," said Gene Kimmelman, co-director of the D.C. office of Consumers Union. "We predict the result will be increased costs of Internet use either directly or indirectly. Costs could go up directly through local usage charges or federal access charges being levied on Internet traffic. They could go up indirectly because Internet Service Providers could decide to reconfigure their networks to avoid the charges."

At issue is an FCC decision that reclassifies calls to ISPs as interstate in nature. These calls involve reciprocal compensation contracts between incumbent local phone service providers -- like regional Baby Bells and GTE -- and their competitors.

The consumer advocates said the FCC's decision is "muddled" and that it appears to avoid the fundamental consumer problem of inflated access charges. Although the FCC appears to hope that it can avoid per-minute charges on the Internet, the consumer groups expressed "serious doubts" such an outcome could be avoided.

"Today's muddled decision leaves fundamental questions unanswered," said Mark Cooper, research director for Consumer Federation of America. "We think that the public has every right to be fearful when the Commission declares that a substantial portion of Internet traffic is interstate and therefore subject to federal jurisdiction, but FCC Chairman Kennard states that 'Dialing up the Internet is just like a local call.'"

This decision starts the FCC down a path that could well lead to per-minute charges on Internet uses, like long distance calling or local measured service, according to Kimmelman, who called such an outcome "a disaster for consumers." FCC Commissioner Ness also came under fire for comments he made that "one could readily imagine, for example, that states will not seek to assess per-minute fees on Internet-bound calls."

"The public should be fearful that the states, goaded on by the incumbent local phone exchange companies (ILECs), which have always wanted to impose local measured service on consumers, could slap per-minute fees on Internet-bound calls," said Cooper.

"If the real problem is that inflated access charges attach to some services but not others, the better decision for consumers would be to bring access charges down to cost," said Kimmelman.

Last November, the CFA and CU wrote the FCC to express their concerns about the impact of this ISP decision on consumers. In that letter, the groups said allowing "incumbent local exchange carriers to carve out of (their) contracts (with competitors) the one type of traffic that is not to their advantage and lower the rate, while they charge the higher rate on traffic that is in their favor, is not only fundamentally unfair, it also would be horribly anti-competitive. No matter how the FCC tries to mince its words with respect to exiting contracts, an FCC decision to claim jurisdiction will give the ILECs another excuse not to pay their bills."

Legislators Propose Law Forbidding Net Regulation

Federal Communications Commission (FCC) Chairman William E. Kennard has taken great pains recently to deny that his agency wants to impose per-minute fees on dial-up Internet access calls, but a group of five senators and five Congress members now want his help in crafting language that would make Internet regulation legally off limits.

The members wrote to Kennard after receiving a deluge of phone calls and e-mails from constituents complaining that they heard via word- of-mouth and online that the FCC's stance on reciprocal compensation agreements would result in per-minute access charges.

They say they want Kennard to help them on crafting legislation that would amend the Communications Act of 1934 to specifically forbid charges or other regulations on Internet access.

"We were pleased to learn of your recent statement in a Mar. 11 speech that 'as long as I am chairman of the FCC, we will not regulate the Internet,'" the legislators wrote. "As you make clear in your speech, the fact that the Internet is unregulated by the FCC has been an indispensable factor in the Internet's development and explosive growth.

Sens. John McCain, R-Ariz., and Paul Coverdell, R-Ga., signed the letter, as did Reps. Tom Davis, R-Va.; Tom Campbell, R-Calif.; Christopher Cox, R-Calif.; Dick Armey, R-Texas; J.C. Watts Jr., R- Okla.; Lee Terry, R-Neb.; David Dreier, R-Calif.; and Jennifer Dunn, R-Wash.

"We... agree with you that the Internet should remain unregulated by the FCC and, specifically, that the government should not hit Internet users with per-minute access charges," the letter said. "Still, we note that at least one commissioner has voiced concern that the FCC's recent reciprocal compensation decision in fact 'put in jeopardy' the long-standing rule that bars local phone companies from assessing usage-sensitive access charges on Internet service providers."

Doubt and speculation have formed the locus of innumerable petitions and bulk e-mail swirling around the Internet that warn of per-minute charges, and accuse the government of over-regulating cyberspace.

The misunderstanding arises because of a recent FCC decision that reclassifies Internet access calls as long distance in order to remove those calls from the auspices of reciprocal compensation agreements. These agreements between local phone companies require phone company A to pay phone company B a fee when a company A customer calls a company B customer. Baby Bells took it on the nose and were required to pay out large fees to competitive local carriers whose main clients are ISPs, and as a result, only take in phone calls on their modem banks.

The baby Bells for the most part have refused to pony up, and now will not have to do so for calls that were made to dial-up modems. FCC and Senate Commerce Committee officials -- who released the letter to the media -- did not return telephone calls before deadline.



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