IP: Bells won't spare a dime

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

Posted-Date: Fri, 4 Oct 1996 22:20:07 -0400
From: Barry Raveendran Greene <bgreene () cisco com>
Subject: Bells won't spare a dime


Hello All,


This just came over the wire. Bottom line, the good old days of riding as a
Virtual Added Network (VAN) over the telephony infrastructure are over.
Internet network designs need to take into account the telephony network
design. Otherwise, the Internet traffic load will over load the telephony
switches, impacting basic services, causes regular phone sessions to be
impacted, forcing the regulators to fine the Telco, forcing the Telco to
pass the cost down to the VAN/ISP.


Also note that Telco's cannot just go out and upgrade their exchanges.
Central Office (CO) switches have a 1 to 2 year purchasing cycle. So if an
ISP overloads a switch today, forcing the Telco to upgrade their switch,
and the Telco start's the purchase cycle today, you can expect relief
perhaps 6 months to a year. It is not like adding another router, UNIX
host, or terminal server.


Barry




[snip]


Bells won't spare a dime


By Jeff Pelline and Nick Wingfield
October 3, 1996, 7 p.m. PT


As the strain on phone lines stemming from
increases in Internet traffic gets worse and worse,
the Baby Bells are under pressure to spend billions
of dollars on upgrades or risk delayed connections
for regular phone calls. But the Bells don't want to
be stuck with the bill.


Instead, they argue that the Internet service
providers who are creating the demand should
foot more of the bill.


The price tag for the upgrades needed to support
the demand generated by Internet usage would
cost a collective $1 billion for the seven Baby Bells
over the next several years, according to a newly
released study by Bellcore, an industry research
group.


The stakes are high, not only for the companies
and their stockholders, but for consumers. The
bottom line: You could wind up paying more for
Internet access, or worse, having your calls
occasionally not go through.


Nobody's saying that a phone network crash is
imminent. But Pacific Telesis chief executive Phil
Quigley, in a speech at an investment banking
conference in San Francisco this week, offered
this worst-case scenario to hammer home the
point: "Those of you who live in earthquake
country know what happens when everybody
picks up the phone at once. For the rest of you,
welcome to town."


Quigley is not alone in his assessment of the
situation. "The question is not what it does to ISPs,
but what it does to consumers," said Sky Dayton,
founder and chairman of EarthLink Network. His
fear: "People could use the Internet less."


If that happens, it would cause a ripple effect that
could stunt the growth of a burgeoning industry.


To prevent that, the Bells have petitioned the
Federal Communications Commission to step in
and re-regulate network access rates to help pay
for the upgrade. The government petition includes
making ISPs pay more for the infrastructure
upgrade.


Quigley sums up the industry's position like this:
"Don't look for local exchange carriers to step up
to a role of dumb elephants who do the heavy
lifting for peanuts; it ain't going to happen."


ISPs have already invested more than $1 billion in
Net access hardware, according to market
research firm Yankee Group. But that's not
enough, the Baby Bells contend.


Pacific Bell, Pac Tel's subsidiary for phone
service, is spending $14 million to $15 million for
switch upgrades this year alone, a spokesman
said.


But FCC officials said today that it is not expected
to weigh in with an opinion any time soon and
won't even set the guidelines for how to make
rules about changing the rates until November at
the earliest.


Meanwhile, Internet demand is increasing by the
minute. Online services that provide Net
connections are now subscribed to by about 8
percent of U.S. households, but the number is
growing rapidly. Moreover, the average Internet
connect time has grown to more than 33 minutes
from around 20 minutes in 1992, according to
Pacific Bell.


The history of the problem goes back 13 years,
when regulators let ISPs pay the Bells less than the
going rate to carry their Internet traffic. The policy
was intended to help the fledgling ISPs get off the
ground. At the time, the Bells had limited
objections. Why? In those days, ISPs were little
more than online bulletin boards for a limited
number of users.


But that was then. Nowadays, those Internet
providers are barreling toward the mass market
with tens of millions of subscribers. With new
technologies, the services carry graphics and
animation, which further strains the phone
network.


But they still pay only about 12 percent of what
long distance carriers such as AT&T, MCI, and
Sprint pay to use the Baby Bells' network,
according to the regional phone companies.


In fact, companies such as Netcom, Microsoft
Network, and EarthLink now compete with the
Bells as well, since many of the local telephone
carriers now provide their own Internet access
services.


As Quigley put it, "Now they're in flight, and it's
time to pull the flaps."


But even the ISPs who say they sympathize with
the Baby Bells' plight wonder if the new
competitive picture has something to do with
inspiring their recent complaints.


"Part of my concern is that these telcos are getting
into the Internet business," said Jeffrey Rubenstein,
president of the Florida Internet Service Provider
Association and Cybergate, an ISP. "They're
becoming our competitors and now they're
complaining."


The likely outcome of the fight is still unknown,
although the phone companies do have one of the
strongest lobbies anywhere, according to Jerry
Michalski, managing editor of industry newsletter
Release 1.0.


But so far, the FCC is being careful to adopt a
neutral tone and hope the problem resolves itself.
In a statement for the FCC, Chairman Reed Hundt
summed up the commission's view like this: "I
don't know what the full answer is to this problem.
But I'm inclined to believe our best guidance is to
let technology, competition, and access reform
make the problem go away. We are working to
open markets so these forces can operate most
effectively."






Copyright =A9 1996 CNET Inc. All rights reserved.


[snip]





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