Will the Bells crush Net calling?

Sue Ashdown, executive director of the American ISP Association, sees dangerous precedent if the Bells lobby successfully to get fees slapped on Internet phone calls.

3 min read
Telephone calls traveling over the Internet are surging in popularity. From virtually nothing a few years ago, Internet-based calling now comprises an estimated 10 percent of international calls. While domestic numbers vary between 1 percent and 5 percent, there is broad agreement that Internet calling is quickly growing.

And why not? The quality is almost on par with conventional calls, while the cost can be significantly lower. So, new technology is producing a quality product for a lower price and everyone's happy. Right?


The nation's Bell companies are quietly lobbying the nation's top regulators at the Federal Communications Commission. Their goal is to slap new charges on Internet-based calls in order to protect their own system. If the FCC goes along, it will effectively crush the growing entrepreneurial drive by numerous Internet providers to provide consumers with this service.

The Bells' assault on Internet phone calls (technically known as voice over IP, or VOIP) sets a dangerous precedent for the Internet. The Bells' goal is to establish what would amount to a massive Internet tax by hitting Internet telephony providers with huge access charges for connecting to the local Bell networks.

For years, the federal government has wisely held off taxing Internet services to encourage new investment and new services, such as VOIP calls. If the FCC sides with the Bells and reverses national policy by levying an Internet tax, it would set a chilling precedent.

Why? The Bells have a history of ignoring new Internet technology until they see small entrepreneurs making a go of it. Then they use their monopoly power and political contacts to drive the entrepreneurs out of the market, leaving consumers with higher prices and no competitive choice.

This exact same pattern played out in the Bells' takeover of the high-speed DSL market over the past few years. They initially showed no interest in these services to their captive customers. But when new, mostly small competitors started marketing these services, the Bells sprung into action--not by making consumers a more attractive offer, but by driving competitors out of the water.

The Bells' goal is to establish what would amount to a massive Internet tax.
Their big weapon against competitors--whether in Internet calling or DSL--is the tight hold the Bells continue to keep on their local telecommunications networks. Those networks were built over the decades with extensive public subsidies. So when Congress passed the Telecommunications Act of 1996 to bring competition to residential phone service, it required the Bells to grant competitors access to the local networks at reasonable wholesale rates.

As any independent provider of Internet service can attest, the Bells have spent the last seven years fighting implementation of this federal law and are making it as difficult as possible for competitors to access the networks. Their needlessly high wholesale access prices have driven most DSL competitors out of business or into bankruptcy and locked America's ISPs into a low-speed ghetto.

Not surprisingly, prices jumped immediately after the lockout was achieved.

The Internet as Americans know it today is built on competition, choice and low-cost access--attributes not usually associated with the Bell monopolies. In fact, it appears that the DSL debacle may have only been the first course and that the Bells are now moving in for the kill, with the Internet itself as the ultimate entree. We all deserve better.