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AOL: Hands off ISPs

America Online urges the Federal Communications Commission to protect Net service providers from having to pay universal service fees.

America Online today urged the Federal Communications Commission to maintain a hands-off regulatory approach when it comes to Net service providers.

AOL filed the comments in response to the FCC's pending report to Congress about universal service. As previously reported, the FCC has been mandated to review its implementation of the federal program, which traditionally subsidized phone service for rural and low-income residents but was revised last year to include up to $2.25 billion in annual funding for hooking public schools and libraries up to the Net.

Among the factors the FCC will address is whether the definition of "telecommunications providers" should be expanded to include ISPs. Currently, Net access companies are classified as "enhanced service providers" and therefore don't contribute to the universal service fund.

AOL, the nation's largest online service, urged the FCC to leave the current framework in place--and not to apply any telephone carrier regulations to ISPs.

"Burdening the new medium with telephone-like regulations designed for telephone companies operating in a monopoly environment will stymie growth and hurt consumers," George Vradenburg, senior vice president of AOL, said in a statement.

"Online services and ISPs already contribute millions of dollars a year to universal service as heavy users of telecommunications services," he added. "And ISPs will pay even higher rates to the carriers as they pass on their universal service and other charges to us."

FCC officials have maintained that it is too soon in the review process to say whether ISPs will ever be classified as telcos, and subsequently have to pay into the fund.

According to its January 5 public notice, the FCC report will clarify its definitions of "information service," "local exchange carrier," and "telecommunications service," and "the impact of the interpretation of those definitions on the provision of universal service to consumers in all areas of the nation."

In addition, the agency will review "the application of those definitions to mixed or hybrid services and the impact of such application on universal service, and the consistency of the Commission's application of those definitions, including with respect to Internet access for educational providers, libraries, and rural health care providers under the Act."

If the FCC were to recommend to Congress that ISPs be reclassified as "telecommunications services," online access providers could have to pay into the fund, but only after a lengthy rule-making process. This would be good news for telcos, which pay a big portion of the universal service fund now and have lobbied to the FCC in the past to collect other additional fees from ISPs to offset various costs.

In addition, there is a proposal in the works to require Internet filtering at schools that receive FCC universal service discounts, also known as the "e-rate." Last week, Sen. John McCain (R-Arizona) promised to introduce legislation mandating e-rate schools to filter out indecent Net sites.

The FCC is accepting public comment on the universal service issue until today, and will report to Congress in April.