IP: Bells Allege Internet Growth Clogging Network From:

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

From: jodins () uswest com
Date: Thu, 22 Aug 96 14:50:59 MDT
Subject: Bells Allege Internet Growth Clogging Network




BELL STUDIES SAY FLOOD OF INTERNET USE IS HARMING ACCESS TO PHONE NETWORK
       Copyright 1996 Warren Publishing, Inc.   8-21-96


       Studies sponsored by several RHCs suggest that rapid growth of
Internet calls for usage-sensitive pricing for Internet service
providers (ISPs).  And U S West (USW) urged FCC to consider burden
imposed by Internet on phone network when reforming access charges to
forestall what telcos claim would be disaster.


       Four Bell companies -- Bell Atlantic (BA), Nynex, Pacific
Telesis (PT) and USW -- said in studies that rapid Internet growth is
forcing LECs to pay for costly network improvements while not
providing means to recover those costs from ISPs, which pay flat fee
for lines and don't pay access charges.  America's Carriers
Telecommunication Assn. (ACTA) submitted BA's study last week in
petition asking FCC to regulate Internet telephony (CD Aug 19 p2).


       PT study said that company had $13.6 million in central office
reengineering costs in first half of year but received no access
charge revenue from ISPs.  ISPs pay 12% of what long distance carriers
pay for similar service, telco said.  Nynex had said in July 10 letter
to FCC that its Internet lines were growing 10% per month, meaning
that "the rapid expansion of such traffic suggested by the explosive
growth in lines portends dire consequences for network access."


       BA's study of traffic in first quarter of year estimated that
serving ISPs would cost $30 million in 1996 but revenues from ISPs
would be $8.2 million.  Assuming 40% growth in Internet traffic per
year, "this cross-subsidy would grow to approximately $120 million in
5 years," study said.  USW said "explosive use of the Internet... will
continue to require additional investment to prevent serious
blockage."  To solve problem, telco said FCC needs to put
usage-sensitive pricing in place to "send rational pricing signals"
and agency should consider issue as part of access charge reform
proceeding, which it has said it plans to complete by early 1997.


       FCC official said privately that agency is actively looking at
issue but hasn't decided on course of action.  For now, it's "focused
on reforming the broader regulatory structure" of access charges and
universal service, he said.  New technologies such as asymmetrical
digital subscriber line (ADSL) and integrated services digital network
(ISDN) that turn traditional phone lines into high-speed lines and
cable modems could make difference, official said: "With all those
uncertainties, we're trying to determine how significant a problem it
is."


       But agency is concerned about "incentives created by our
pricing structure."  FCC Chmn. Hundt has said in recent speeches that
he doesn't favor regulating Internet telephony as traditional
telephony but that different pricing structures should be examined,
official said.  Four studies are first information FCC has received on
topic, he said.  Agency hasn't opened formal docket on issue, and
received studies after asking telcos to substantiate their anecdotal
arguments, official said.


        Executives of several Internet or technology trade
organizations said they hadn't conducted studies or examined telco
studies in detail.  But Jack Nadler, counsel for Information
Technologies Assn. of America (ITAA), said unbundling subloop would
alleviate problem because data traffic could avoid going through
switch.  Data packets have address labels on them and don't need
switches to be directed to their destinations, he said.  "There is
obviously a need for fundamental access charge reform," he said:
"Simply taking the subsidy-ridden regime and dumping it on ISPs and
saying they should pay like IXCs, that is not reform."


       Commercial Internet Exchange hasn't taken formal position, but
Asst.  Dir. Ivan Kotcher said ISPs have developed to point where "it's
unrealistic to expect not to pay anything."  But he said they
shouldn't have to pay what IXCs do and regulators should be wary of
Bell companies' claims that Internet should be regulated to "protect
the public."


       CDviaNewsEDGE/LAN: 8/21/96
       Copyright 1996 Warren Publishing, Inc.