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Feds ding AT&T over Internet calls

The FCC says the leading U.S. carrier must pay traditional charges to local landline companies to complete VoIP calls--a ruling that could cost AT&T dearly.

Federal regulators ruled on Wednesday that AT&T must pay traditional local access charges to complete Internet phone calls, putting the long-distance carrier on the hook for billions of dollars in deferred fees.

Telecommunications companies closely watched the Federal Communications Commission decision for its potential impact on voice over Internet Protocol services. VoIP technology uses high-speed Web connections to carry phone calls, so it promises to bypass the traditional phone system, thus saving carriers and customers substantial fees.

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AT&T had argued that it was not required to pay the access fees to local landline companies for completing long-distance calls, when those calls travel partly over the Internet.

But the FCC disagreed. In a limited decision anticipated months ago, it chose to maintain much of the status quo between long-distance and local carriers for now. The FCC said its ruling affects only calls that begin and end on the public switched telephone network and use Internet Protocol networks in between. The ruling is not expected to impact commercial VoIP providers.

"The carrier has long been obligated to pay access charges for this service, and we unanimously confirm that it still is required to do so," FCC Chairman Michael Powell said in a statement.

The decision, a unanimous one, could prove very expensive for AT&T. Two years ago, the company, the largest U.S. long-distance carrier, stopped paying some of those access fees. AT&T estimates that it pays about $10 billion annually to local phone companies. It was unclear how much it might owe, given Wednesday's ruling, but some analysts said it could run up to several billion dollars.

"The FCC today chose to protect the monopoly revenues of the Bell companies at the expense of consumers everywhere," AT&T said in a statement. "This sends an ominous signal, as the FCC prepares to tackle even more critical questions that will either spur Internet telephony or stifle it in order to favor four monopoly phone companies."

The long-distance carrier said the decision could trigger more regulation of the Internet, which the FCC has previously established as a no-regulation zone. "The Commission took the first steps to regulate the Internet, despite its public statements to the contrary," the carrier said in the same statement.

BellSouth vice president of governmental affairs Herschel Abbott disagreed with AT&T's sentiment, saying in a statement that the ruling is "not regulation of the Internet. To be clear--it is nothing more than the application of clear and existing rules to a traditional voice telecom service." BellSouth and other regional Bell operating companies stand to gain the most by the ruling, analysts say.

An AT&T representative said Wednesday that the FCC's ruling would have little impact on the price or services offered in its newly announced home Net phone service, CallVantage.

Other Net phone service providers said they were happy that the FCC had issued its decision, which ended a two-year wait that has, to some degree, stalled development of VoIP services.

"We are pleased that the FCC has clarified the existing law pertaining to AT&T," said Jeff Pulver, the founder of Free World Dialup, a free Net phone service.

"I am confident that the FCC will effectively shape the policies, both domestically and internationally, needed to foster the growth, capabilities and ubiquity of IP communications," Pulver said.

This is the second of several major VoIP decisions to come from the FCC. In February, the agency handed a partial victory to Internet phone providers, when it ruled that voice communications flowing entirely over the Internet are not subject to traditional government regulations.