SBC to raise INternet fees

[David Farber <dave () farber net>]

SBC Seeks to Levy Higher Fees
 On Internet Phone Companies
Plan Aims to Raise Charges
 On Local-Network Calls;
 Bell to Tap Web Market, Too

By ANNE MARIE SQUEO
Staff Reporter of THE WALL STREET JOURNAL
November 17, 2004; Page B10


Even as SBC Communications Inc. announced the broad rollout of its 
Internet-based phone service, the telecom giant appears to be 
attempting a regulatory maneuver that would let it levy higher fees on 
rival Internet phone companies.

SBC plans to file a new tariff with the Federal Communications 
Commission that potentially increases the fees paid by Internet service 
providers for calls completed on the company's local-phone network. 
While Internet calls largely avoid the traditional public-telephone 
network, they do connect to it when the recipient of the call isn't an 
Internet phone user. The tariff would go into effect immediately, and 
according to an earlier SBC filing, the company plans to have it in 
place as soon as tomorrow.

The move could mark the first time a regional Bell phone giant has 
tried to assess higher fees -- traditionally levied on long-distance 
phone calls -- on Internet phone technologies.

The situation has caught the attention of FCC Chairman Michael Powell, 
a staunch proponent of keeping the emerging Internet phone market free 
from heavy regulation. Senior FCC officials said Mr. Powell is 
concerned about the impact of SBC's plans and believes the proposal 
"may need substantial modifications."

Just last week, the five-member FCC voted unanimously to shield 
Internet phone services from state regulations, taxes and fees as part 
of a broader effort to keep this emerging market free from the 
requirements historically applied to the traditional phone companies. 
The FCC also is in the midst of redefining the complex system phone 
companies use to compensate one another for completing calls. At the 
urging of an industry group that includes SBC, the agency is 
considering phasing out the fees altogether.

SBC officials defended the new tariff, saying that FCC and industry 
officials are misinterpreting it. A spokesman for SBC, based in San 
Antonio, said Internet phone providers wouldn't be required to 
subscribe to the new service, dubbed Tiptop.

"SBC recognizes that there is disagreement in the communications 
industry over the appropriate rates that [Internet phone] providers 
should pay when connecting to the circuit-switched network," said James 
Smith, SBC's senior vice president. "Contrary to the mistaken 
impressions of some parties who are trying to sow regulatory confusion, 
Tiptop is not a mandatory service."

News of the filing came as SBC said it would make Internet phone 
service available by early next year to about five million residential 
subscribers of its high-speed Internet connections.

Currently, most providers of Internet phone service connect to 
local-phone networks through arrangements with companies that lease 
access to the Bell networks. Because these calls travel over the 
Internet until they must connect locally to a customer using a 
traditional phone, the Internet phone service companies have been 
paying fees associated with local calls, not long-distance calls. These 
fees for local connections are substantially lower, and SBC plans to 
designate its tariff for Tiptop somewhere between the two amounts.

An earlier SBC filing said the plan would be implemented in nearly all 
of the company's 13-state territory by tomorrow, leading industry and 
FCC observers to expect the company will provide just one day's notice. 
That would limit any ability by the FCC to suspend it from going into 
effect, though the agency could open an investigation afterward.

FCC officials asked SBC to put the "voluntary" promise into writing to 
ensure the company wouldn't in the future cut off alternative ways to 
connect. The company hasn't done so yet, though both sides are working 
on draft language that would resolve this issue.

Internet phone service is emerging as a revolutionary technology that 
will bring new entrants to the phone industry because they won't need a 
phone network to compete, just a software package. With behemoths like 
SBC entering the new market while trying to protect their old 
territory, rivals expressed concern about where the new tariff could 
lead. "What happens when it's not just voice and it is voice and 
video," asked Bob Quinn, vice president of regulatory affairs for AT&T 
Corp., which markets a rival Internet phone service.

Separately, SBC and Microsoft Corp. are set to announce as soon as 
today a $400 million, 10-year agreement that calls for the Redmond, 
Wash., company to provide the software SBC will use to provide 
television services to U.S. consumers. The technology will let the 
company deliver 1,000 or more new TV channels, far more than cable-TV 
providers currently offer.

--Almar Latour contributed to this article.

Write to Anne Marie Squeo at annemarie.squeo@wsj.com1

 URL for this article:
http://online.wsj.com/article/0,,SB110065122384576170,00.html

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