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SBC VoIP fee furor draws eyes to BellSouth program

With SBC under the gun for a new package that raises costs for Net phone providers, BellSouth's similar offering is examined--but less harshly.

While local phone giant SBC drew considerable fire last week for a service offering to Internet telephony providers, fellow carrier BellSouth has been selling similar services for more than a year without any protest--at least before the SBC furor.

BellSouth began in mid-2003 to sell wholesale access services that let Internet phone service providers complete customer calls on BellSouth's local phone network. The service package raises the costs to Internet phone companies, which is what drew criticism when SBC unveiled its Tiptop service package late last week.

The Tiptop furor included rare public criticism from Federal Communications Commission Chairman Michael Powell, who warned that the FCC would not tolerate local phone companies raising prices to hurt Internet telephony rivals. The debate has cast a spotlight on BellSouth's own offering.

"It's fair to say that Chairman Powell was also sending a signal to BellSouth," an FCC spokesman said Monday.

But there are several key differences keeping BellSouth's product in the good graces of regulators, while all but dooming the future of SBC's new offering--differences that may help further sort out how Net phones will be regulated.

"These are apples and oranges," a BellSouth spokesman said.

The hubbub involved VoIP, or voice over Internet Protocol, in which home phone service is delivered over a broadband Internet connection rather than via the heavily taxed and regulated traditional local phone network. While such calls avoid regular phone lines for the most part--keeping service cheap--access to local phone networks is required to complete VoIP calls to the vast majority of telephone numbers in the United States. Thus, VoIP companies, which charge users a low flat fee, must negotiate deals with the local networks to complete many calls.

Regulators fear that the nation's leading local carriers may defend themselves from the competitive threat of VoIP providers--cable companies and VoIP upstarts such as Vonage--by charging VoIP firms more for access to their telephone lines.

BellSouth's offering does add to VoIP providers' costs, but may be arguably justified because it includes more than mere access to the local lines. The BellSouth service converts the VoIP call into signaling traditional phone networks understand, a more complicated and costly process than what is provided by SBC's Tiptop, which just transports a call to the right telephone number.

Tiptop apparently goes too far, according to several sources familiar with the FCC's perspective. While BellSouth's program for VoIP providers is just a service option, paying for Tiptop is the only way those providers can connect to SBC's network, according to a source familiar with SBC's plans. An FCC spokesman said on Monday that Tiptop also created a large number of complaints from potential customers, while BellSouth's offering did not.

Powell said in a statement last week that Tiptop should not be used to force higher charges onto VoIP firms. "Should we conclude that this tariff is being used to justify the imposition of traditional tariffed access charges on VoIP providers or to discriminate against SBC's competitors, the commission will take appropriate action," he said.