TCS Daily

Voice of the Future?

By Duane D. Freese - December 13, 2002 12:00 AM

What might spur the next tidal wave of growth and use of the Internet and broadband? Well, how about something old fashioned - like a long distance phone call.

As The Wall Street Journal reported Dec. 5, broadband connections are proliferating like kudzu. But it's voice, not data or video, that is becoming one of the biggest selling points. Callers are finding that by bypassing the phone monopolists' connection charges, they can cut their long distance phone bills by 20 to 30 percent.

Even some enlightened African countries - South Africa, Chad, Ghana and Zimbabwe - are deploying voice over Internet Protocol (VoIP) for the same reason. It allows their residents to avoid the rip-off in international tariffs charged by the old-line national phone monopolies.

The idea of using IP telephony to save money is simple. But its use isn't as seamless as regular voice communication over dedicated phone lines and channels. To send voices over the Internet requires that it be broken into packets of information just as data is. Those packets can go over separate lines, where they can be lost or delayed, degrading the message one hears. That's one reason it hasn't taken off in this country up to now.

Nonetheless, the move to IP telephony makes great sense, especially in developing countries where quality is not an issue. As Federal Communications Commissioner Susan Ness told the ITU World Forum more than a year ago, "IP telephony can spur deployment of Internet facilities and applications in developing countries, thereby leapfrogging technology and the need to expand more costly legacy systems."

And as quality keeps improving with the investments of companies like AT&T into VoIP systems, it could lead to a revolution in calling here as well, promoting true real-time multimedia applications.

Monopoly Madness

But the old phone monopolies both abroad and here seem intent to keep that from happening.

Some foreign governments, spurred on by what former FCC Chairman William Kennard called the incumbent "regulatory capitalists," have simply outlawed and criminalized use of the Internet for voice use.

Here, incumbents have been more subtle. The Bells are trying to collect the same per-minute access charges on phone-to-phone VoIP long distance calls that they collect for regular circuit switched long distance calls. They argue that a voice long distance call that begins and ends on their phone system should be charged the same no matter the format that it takes. They've even gotten the New York Public Service Commission to agree.

It's that decision that has led AT&T to ask the FCC to reaffirm its longstanding position against imposing such dated charges on Internet services. For history suggests this is just another shortsighted attempt by the Bells to grab revenue at the expense of new and better uses of the Internet.

Rewind, Repeat

That history goes back to 1983, prior to the break up of AT&T, when the FCC set up access charges of 5 cents a minute on long distance calls for the local telcos in order to support universal service.

The Internet was barely a baby, then, and the locals wanted to charge Internet Service Providers the same access charge for calls to their network. The FCC, encouraged by Congress, said, no. It wanted to give the Internet a chance to grow.

That decision was vital to the subsequent explosion of the Internet a decade later, and with it the economic boom engendered by the productivity growth made possible with interconnectivity. For it made flat rate charges for Internet connections possible, and thus affordable to just about everyone.

The Bells benefited as much from this as any in the high tech community. During the 1990s, they saw the number of second phone lines rocket upward by more than 50 million, adding substantial revenues at little cost as most homes had two lines installed to start.

Yet, rather than try to feed Internet growth, they attempted to slow down people's use of it.

In 1996, Ed Young, a lobbyist for BellAtlantic that would later merge with Nynex to become Verizon, told Washington policymakers: "There's no longer a free lunch. Internet welfare has to stop." One Bell consultant opined: "Internet is not a societal right, it's a business."

BellAtlantic, PacBell and the other Bells' main complaint was that the popularity of the Internet threatened a communications meltdown. Flat-rate service plans for Internet connections were driving up use of their local phone lines. That degraded service for voice customers. Studies they passed along to the FCC showed surfers hogging phone lines for an average 18 minutes a call, versus the less than five minutes for people making voice calls. It showed their cost of provisioning a local loop to an ISP at $75, while earning only $17 a month in revenues. Continued expansion in use of the Internet, they intoned, could lead to "service interruptions" that "could affect public safety services, such as 911 service, with unthinkable consequences."

Their solution: per minute access charges. They initially wanted to charge three cents a minute, the same rate charged by long distance carriers, to cover the cost of upgrades to accommodate Internet traffic. That would have boosted the average ISP's cost to $100 a month for each subscriber who logged on for more than two hours a day. That would certainly discourage overuse. It would have made Net surfing a pastime only for the rich, scuttled computer sales and left alternative communications services, such as cellular phone, hung out to dry.

Fortunately, though, the FCC didn't succumb to the horror scenarios put forth by the Bells, but listened to the sense of Compaq, Intel, AOL, CompuServe and others. The Internet Access Coalition turned out a report debunking the Bells' claims.

Faced with facts that Internet calls weren't clogging their systems, and that they were reaping revenue windfalls from second lines equal to six times the revenues they said they'd need to upgrade their networks, the Bells retreated. They asked for one-cent-a minute, and then negotiated reciprocal compensation packages with the ISPs to terminate calls.

But they didn't give up trying to assess per minute charges on the Internet.

In 1999, they were back. This time, though, they argued that the Internet and ISPs were threatening the viability of the Universal Service Fund.

But the FCC again found differently. In a report to Congress on the Universal Service Fund, it found the fund was not being eroded, because ISPs leased capacity on basic telecommunications facilities from interstate carriers, and the contributions of interstate carriers into the fund reflected those lease payments. So growth of ISPs actually helped increase funding for the fund.

Again, the cry of wolf had no merit. And it has no merit now, with VoIP.

Before the Bells can assess any access charge on VoIP calls, they should have to prove that it poses a real burden - not one of their imaginary ones - on their phone networks.

Per minute access charges would have thwarted the Internet data revolution, they can't be allowed to delay its growth as a medium that gives the people a real voice.



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