ISPs want open telco market

The Internet Access Coalition has stepped up to the plate in the ongoing debate over whether federal regulators should let overburdened phone companies charge Internet service providers fees for connecting their customers to the Net.

The coalition's answer: Phone companies can't handle increased Net traffic because there is no competition. Instead of letting local phone companies such as Pacific Bell charge fees to upgrade their switch-centers to handle increased demand, the coalition is calling for an open market so that private companies, not the government, can solve the network-congestion problem.

The group, led by America Online, Microsoft, Netscape, and Intel, among others, is squaring off with the telcos over how and who should pay for upgrades to relieve Net congestion. Last December, the Federal Communication Commission tentatively ruled that ISPs should not have to foot the bill. The agency's final ruling is expected in May. Yesterday was a deadline for comments on the issue.

"In the absence of competition, local phone companies have failed to keep their local networks technologically up to date. They have failed in preparing the public switched-telephone networks for the growth on data traffic," said Paul Misener the steering committee chairman of the IAC. "All we are asking is for an open marketplace for the phone companies and their competitors to provide data-friendly technologies."

The telcos are fighting back, however. Pac Bell released its own study today reiterating that the FCC needs to relax regulations on telcos so they can upgrade their networks. Pac Bell estimates that over the next five years it will generate $150 million in revenue from ISPs but will have to spend over $300 million to support the Net traffic.

Pacific Bell has proposed charging ISPs about 1 cent per minute to help recoup costs. With this fee, the company said in a statement, "80 percent of dial-up Internet users would pay less than $5 additionally per month."

"We need to free the Net from regulation," stated Pac Bell president David Dorman. "For too long, regulatory policies have implicitly steered Internet traffic onto the voice network. If, as we proposed, the FCC removes incentives that keep Internet traffic on the voice network, we'll see greatly accelerated movement to high-speed data networks and fewer busy signals for users."

Under the FCC temporary ruling in December, ISPs and online services don't have to pay additional access charges to the phone companies, and ISPs want to keep it that way as the telco industry undergoes significant changes thanks to deregulation.

The FCC is looking at the interstate access charges as one of three main areas that it needs to reform to bring competition to the local phone market, as required by the telco reform act that was signed into law last year.

(Intel is an investor in CNET: The Computer Network.)