Mobile

Flat-rate Net access still alive, for now

Are the days of flat-rate local calls to ISPs drawing to an end? The answer appears to be no, despite a decision that reclassifies ISP calls as long distance.

Are the days of flat-rate local calls to Internet service providers drawing to an end?

The answer appears to be no, despite federal regulators' decision today that a call to an ISP should be treated as long distance.

The Federal Communication Commission ruled that an otherwise local call to an Internet service provider should be treated as an interstate transmission, since much of the traffic ultimately goes out onto the Net at large.

But the commissioners were quick to say that the decision would only affect contracts between individual telephone companies--and not the prices paid by individual Internet users.

"[Our decision] doesn't affect the way consumers get dialup access to the Internet," said FCC chairman William Kennard during today's meeting. "Nothing we're doing here should be construed as regulating the Internet."

Kennard went further in a later statement on the issue, reaffirming the Commission's intention to shield Net users from regulation that might raise prices or dramatically change the way companies charge for Net access.

"Those employing scare tactics have also suggested that the FCC is going to change the way consumers pay for dial-up access to the Internet. Again, nothing could be further from the truth," Kennard said. "We are not regulating the Internet and we will not do so as long as I am chairman."

Warning signs?
But not everyone is as confident as the FCC's chairman.

One commissioner, joined by a coalition of consumer groups, is warning that the FCC's decision may have inadvertently opened the door to future per-minute charges on Net access.

According to these groups, the decision today may have undermined federal regulators' legal justification for exempting ISPs, which are also known as enhanced service providers, from paying traditional long distance fees to the Baby Bells.

In a recent court decision, these critics note, a judge upheld the exemption by noting that not all traffic flowing through an ISP's server to a consumer went across state lines. But by now treating the calls as interstate, this justification disappears, they warn.

"It's fair to say that no one at the FCC wants to remove the enhanced service provider exemption," said Paul Misener, chief of staff to Commissioner Harold Furchtgott-Roth. "[The commission] is exposing itself to the legal risk of having the enhanced service provider exemption forcibly removed."

The Consumers Union and the Consumer Federation of America (CFA) also warned today that the FCC's decision could wind up backfiring on Net users down the road.

"We understand that [the FCC] doesn't want to give us usage charges for the Internet," said Mark Cooper, telecommunications analyst for the CFA. "But they're going to be hard-pressed not to slip down that slope. Once you say the Internet is like interstate calling, how are you going to stop from putting interstate charges on it?"

New confusion
Today's decision may open the door to a new round of litigation, however, as companies settle down and read the fine print.

Bell companies and their opponents hailed the FCC's ruling as a victory, even though the commission ruled that the companies must still follow through on their current contracts with rivals, as ordered by many states.

But several Bells said they plan to use the decision to try to undo state decisions anyway.

"Bell Atlantic will immediately ask state commissions to correct this situation and reconsider their decisions on so-called 'reciprocal compensation' because it's clear that these payments apply only to local calls," said Tom Tauke, Bell Atlantic's senior vice president for government relations.

It is possible that these new legal battles--or contract renegotiations in the future--could wind up finding ISPs paying more for their basic telephone access. This could be passed along to users in the form of slightly higher fees, some observers said.

But the issue of users paying per-minute access fees is very unlikely, even if today's decision did remove one prop holding up the issue's legal foundation. Any such proposal would meet with bitter opposition at the FCC and in Congress, observers said.

"The FCC understands that if they propose per-minute access charges, they will get 30 million emails saying that's a bad idea," said Chris Savage, a Washington telecommunications lawyer who has been closely involved in the debate. "They don't want to do that."