IP: Pac Bell says Net use may collapse phone system

[Dave Farber <farber () cis upenn edu>]

  =20
                Pac Bell says Net use may collapse phone system
                                      =20
ISPs rebut dire, 'trumped-up' prediction


   Published: Oct. 24, 1996
  =20
   BY HOWARD BRYANT
   Mercury News Staff Writer
  =20
   As many as one of every six telephone calls in Silicon Valley now
   doesn't go through on the first try because Internet denizens are
   tying up the lines, Pacific Bell reported Wednesday.
  =20
   Under normal circumstances, less than 1 percent of calls go
   uncompleted, the company said. The situation is so dire that
   California's entire phone system is in danger of breakdown, a company
   executive said, with Silicon Valley especially on red alert.
  =20
   ''The explosion of the Internet is flooding our network,'' said Ralph
   Parker, marketing manager for Pac Bell's industry markets group. ''We
   have a change in phone patterns that has thrown everything off
   kilter.''
  =20
   But rather than being a sign of imminent collapse, critics called Pac
   Bell's startling statistic a trumped-up charge designed to scare the
   public and pressure federal regulators into ending a price break
   Internet service providers enjoy when tying into Pac Bell's network.
  =20
   ''The Internet is a baby and Pac Bell has been in this game since
   Alexander Graham Bell's bar mitzvah. Now they're saying that in the
   last three weeks, we broke the phone system? Come on,'' said the head
   of a service provider who asked not to be named for fear of reprisal
   by Pac Bell. ''We had a good year, but let's put our thinking caps on
   here.''
  =20
  Delicate position
 =20
   The issue of phone system overload puts the ISPs in a delicate
   position because while they may have strong disagreements with Pac
   Bell, they also depend on connections to Pac Bell's network for their
   success.
  =20
   The telephone system was built to handle phone calls averaging four
   minutes long, Parker said. But most people connecting to the Net or an
   online service do so for an average of 22 minutes. In fact, Pac Bell
   said its research showed that 10 percent of all Net connections last
   an hour or more.
  =20
   In a Pac Bell central office in Santa Clara, 2.5 percent of phone
   lines accounted for 20 percent to 36 percent of the office's total
   traffic, the company said. Much of the slowdown takes place between 7
   p.m. and 11 p.m. -- a clear indication that it's Internet use, not
   normal business calling, that is responsible.
  =20
   The result is a slow but steady breakdown of regular telephone
   service, the company said. Customers see the problem when getting
   ''fast'' busy signals, or messages advising that all circuits are busy
   or that a call didn't go through, the company said.
  =20
  Workforce cutbacks
 =20
   But one ISP executive said the real issue is Pac Bell's own cutbacks
   in its workforce. Over the past year, the company has made
   considerable reductions, which, some charge, has hurt service.
  =20
   ''This may, or may not be, a crisis that can be rapidly resolved. This
   may, or may not be, a crisis that exists at all,'' the executive said.
   ''Pac Bell is to blame with its poor planning, huge bureaucracy,
   untimely layoffs and poor execution in its operation.''
  =20
   At the heart of the issue is a pricing conflict between Pac Bell and
   the ISPs. In 1983, the Federal Communications Commission gave
   companies that offered Internet services, and other ''enhanced service
   providers,'' an exemption from the per-minute fees that other
   companies, such as long-distance telephone companies, pay to use Pac
   Bell's network.
  =20
   The reasoning behind the exemption was to protect start-up companies
   from high up-front access charges that would stunt growth of a brand
   new industry.
  =20
  Cutting the subsidy
 =20
   But now that the Internet access business is booming, and with some of
   the companies offering Net access being some of the largest in the
   world, such as AT&T, Pac Bell and other local phone providers across
   the nation want the FCC to eliminate the exemption. By ending the
   subsidy, Parker said Pac Bell could then take the added revenue it
   would receive from the service providers and reinvest it in the phone
   network to prevent a collapse.
  =20
   Wiping out the subsidy would force Internet companies to find new,
   more efficient ways of pricing that better reflect actual usage,
   Parker said.
  =20
   In all likelihood, Net service prices would increase for consumers.
  =20
   The critics noted that at the same time Pac Bell is warning of
   disaster, the company also has been trumpeting its own success. Dave
   Dorman, Pac Bell's president and chief executive, said in July that
   during the first five months of the year, Pac Bell added 368,000 new
   customer lines, 132 percent more than the average for the same period
   over the last five years. Two-thirds of those lines serve residential
   customers, he said.
  =20
   ''We expect 1996 to be a very good year, comparable to our all-time
   highs during California's boom time,'' Dorman said.
  =20
   The company also has been pushing its own Internet access service and
   boasting of how quickly it has signed on customers.
  =20
   It's those statements and statistics that lead Pac Bell's critics to
   question the severity or validity of a crisis.
  =20
   ''This is clearly a ruse,'' said Dick Severy, director of public
   policy for MCI. ''They've added 691,000 access lines this year.
   Business lines are up. It's curious.''
  =20
     _________________________________________________________________
                                     =20
  =20
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Posted-Date: Thu, 24 Oct 1996 02:32:33 -0400
Date: Thu, 24 Oct 1996 02:32:26 -0400 (EDT)
From: Daniel Updegrove <daniel.updegrove () yale edu>
X-within-URL: http://www.sjmercury.com/business/dial1023.htm
To: farber () central cis upenn edu
Subject: dial1023.htm




   [LINK]
  =20
                Pac Bell says Net use may collapse phone system
                                      =20
ISPs rebut dire, 'trumped-up' prediction


   Published: Oct. 24, 1996
  =20
   BY HOWARD BRYANT
   Mercury News Staff Writer
  =20
   As many as one of every six telephone calls in Silicon Valley now
   doesn't go through on the first try because Internet denizens are
   tying up the lines, Pacific Bell reported Wednesday.
  =20
   Under normal circumstances, less than 1 percent of calls go
   uncompleted, the company said. The situation is so dire that
   California's entire phone system is in danger of breakdown, a company
   executive said, with Silicon Valley especially on red alert.
  =20
   ''The explosion of the Internet is flooding our network,'' said Ralph
   Parker, marketing manager for Pac Bell's industry markets group. ''We
   have a change in phone patterns that has thrown everything off
   kilter.''
  =20
   But rather than being a sign of imminent collapse, critics called Pac
   Bell's startling statistic a trumped-up charge designed to scare the
   public and pressure federal regulators into ending a price break
   Internet service providers enjoy when tying into Pac Bell's network.
  =20
   ''The Internet is a baby and Pac Bell has been in this game since
   Alexander Graham Bell's bar mitzvah. Now they're saying that in the
   last three weeks, we broke the phone system? Come on,'' said the head
   of a service provider who asked not to be named for fear of reprisal
   by Pac Bell. ''We had a good year, but let's put our thinking caps on
   here.''
  =20
  Delicate position
 =20
   The issue of phone system overload puts the ISPs in a delicate
   position because while they may have strong disagreements with Pac
   Bell, they also depend on connections to Pac Bell's network for their
   success.
  =20
   The telephone system was built to handle phone calls averaging four
   minutes long, Parker said. But most people connecting to the Net or an
   online service do so for an average of 22 minutes. In fact, Pac Bell
   said its research showed that 10 percent of all Net connections last
   an hour or more.
  =20
   In a Pac Bell central office in Santa Clara, 2.5 percent of phone
   lines accounted for 20 percent to 36 percent of the office's total
   traffic, the company said. Much of the slowdown takes place between 7
   p.m. and 11 p.m. -- a clear indication that it's Internet use, not
   normal business calling, that is responsible.
  =20
   The result is a slow but steady breakdown of regular telephone
   service, the company said. Customers see the problem when getting
   ''fast'' busy signals, or messages advising that all circuits are busy
   or that a call didn't go through, the company said.
  =20
  Workforce cutbacks
 =20
   But one ISP executive said the real issue is Pac Bell's own cutbacks
   in its workforce. Over the past year, the company has made
   considerable reductions, which, some charge, has hurt service.
  =20
   ''This may, or may not be, a crisis that can be rapidly resolved. This
   may, or may not be, a crisis that exists at all,'' the executive said.
   ''Pac Bell is to blame with its poor planning, huge bureaucracy,
   untimely layoffs and poor execution in its operation.''
  =20
   At the heart of the issue is a pricing conflict between Pac Bell and
   the ISPs. In 1983, the Federal Communications Commission gave
   companies that offered Internet services, and other ''enhanced service
   providers,'' an exemption from the per-minute fees that other
   companies, such as long-distance telephone companies, pay to use Pac
   Bell's network.
  =20
   The reasoning behind the exemption was to protect start-up companies
   from high up-front access charges that would stunt growth of a brand
   new industry.
  =20
  Cutting the subsidy
 =20
   But now that the Internet access business is booming, and with some of
   the companies offering Net access being some of the largest in the
   world, such as AT&T, Pac Bell and other local phone providers across
   the nation want the FCC to eliminate the exemption. By ending the
   subsidy, Parker said Pac Bell could then take the added revenue it
   would receive from the service providers and reinvest it in the phone
   network to prevent a collapse.
  =20
   Wiping out the subsidy would force Internet companies to find new,
   more efficient ways of pricing that better reflect actual usage,
   Parker said.
  =20
   In all likelihood, Net service prices would increase for consumers.
  =20
   The critics noted that at the same time Pac Bell is warning of
   disaster, the company also has been trumpeting its own success. Dave
   Dorman, Pac Bell's president and chief executive, said in July that
   during the first five months of the year, Pac Bell added 368,000 new
   customer lines, 132 percent more than the average for the same period
   over the last five years. Two-thirds of those lines serve residential
   customers, he said.
  =20
   ''We expect 1996 to be a very good year, comparable to our all-time
   highs during California's boom time,'' Dorman said.
  =20
   The company also has been pushing its own Internet access service and
   boasting of how quickly it has signed on customers.
  =20
   It's those statements and statistics that lead Pac Bell's critics to
   question the severity or validity of a crisis.
  =20
   ''This is clearly a ruse,'' said Dick Severy, director of public
   policy for MCI. ''They've added 691,000 access lines this year.
   Business lines are up. It's curious.''