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March 2, 1997

Should phone companies
collect 'modem tax'?

By Timothy C. Barmann

For years, the rumor circulated on bulletin boards, and later on the Internet. The government was considering a "modem tax" to be levied whenever your computer made a call rather than you.

It's a rumor no more.

The Federal Communications Commission is now looking at whether Internet Service Providers, the companies that link computer users to the Internet, should pay extra fees to local telephone companies for incoming data calls.

The FCC is not actually considering levying a "tax," but whether to allow phone companies to charge Internet providers an additional per-minute fee, the same way they bill long-distance carriers. If such a fee were imposed, it would mean the end of "unlimited" or flat-rate pricing for Internet access.

Last June, NYNEX, Bell Atlantic and two other regional Bell telephone companies submitted a study to the FCC that said their phone networks were jammed with Internet traffic. And they said Internet providers pay only a fraction of what it cost the phone companies to serve them.

A news release on the Bell Atlantic Web site (http://www.ba.com) summarizes its findings:

"...Bell Atlantic is enthusiastic about the growth of on-line services and Internet access. However, we believe all users of the telephone network should contribute to the costs of operating the network. It is time now to agree on a plan to manage the costs of carrying Internet traffic while still assuring the unprecedented growth of on-line services and the Internet itself."

But several Rhode Island-based Internet providers say that's hogwash. Many note they are already paying what other businesses pay for each incoming line.

"When our system resources get overloaded, we have to buy more phone lines from the telephone company," said Jeff Thompson, vice president of operations for edgenet Internet services of Westerly. "When the local phone companies experience a system overload, they decide to get permission to charge us more?"

ISPs lease lines

In general, Internet service providers, or ISPs, lease dozens and sometimes hundreds of phone lines from the local phone company. The provider routes incoming data calls from customers through another high-speed phone line to the Internet.

John Sulima, who owns RIconneCT, of Westerly said if such fees were imposed, it would put companies like his out of business, or at the very least, restrict access to the wealthy.

About 30 percent of his operating expenses go to NYNEX already, "Greatly adding to the costs of Internet access will only stifle its development, just at the point where it's becoming more than entertainment and curiosity."

Sulima also wonders whether there's really something else at work here, since many of the Bell companies, including Bell Atlantic, are becoming Internet access providers.

"We have been following the story very closely," said Julio Burgo, co-owner of Big Dog OnLine of Providence.

"... It is an obvious attempt to eliminate local ISP's," he said.

Powerful lobbyists

Local Internet providers here and elsewhere have some powerful lobbyists behind them. Some 21 of the biggest high-tech companies, including Microsoft, Intel, IBM, Netscape, Apple and America Online, have joined a group called the Internet Access Coalition. (The group's Web page is at http://internetaccess.org/).

The group has its own study to debunk the Bell study. It was done by Boston-based Economics and Technology, a telephone consulting firm. That study says that the Bell companies overstated their network problems and have actually profited from the popularity of the Internet.

According to a summary of the study, posted on the Web site, some 6 million residential phone lines were used exclusively or primarily for online access in 1995. Local phone companies nationwide took in $1.4 billion for those additional data lines, according to the study.

The FCC, which has been looking at this issue since December, has indicated that it doesn't agree with the phone companies, at least now. "The FCC's initial proposal is that ISPs should not be required to pay ... access charges," says a question-and-answer page found on the FCC Web site. "But the Commission has made no final decisions." (The site is at http://www.fcc.gov/Bureaus/Common_Carrier/Factsheets/ispfact.html).

FCC Chairman Reed Hundt said in a speech last month that there is indeed a congestion problem on the Internet that needs to be addressed. "And the way this will really happen is not by coming in and imposing extra charges on Internet access providers, like the Bell Companies want," he said.

The FCC took public comments on the proposal through the middle of February. So much e-mail came in, according to news reports, that it shut down the agency's mail server at one point.

The FCC said it plans on issuing a "Report and Order" on reforming the interstate access charge system by May.

Computer calendar

The Barrington Community School will sponsor a two-session course called "Hitchhiking the Information Highway" this Wednesday and next from 7:30 to 9 p.m. It is being taught by the PC Users Group of Rhode Island, but will be held at the school.

Topics will include an overview of on-line information services, a review of what you need to go on line, comparing on-line services and how to sign up. Cost is $45 and class size is limited to 12. For more information, contact the school's assistant director, Catherine Gresh, at 245-0432.

Timothy C. Barmann is a Journal-Bulletin staff writer. His column runs every other Sunday on the On Line page. Send him comments via e-mail at tim@cybertalk.com or U.S. mail, c/o the Journal-Bulletin, 75 Fountain St., Providence, R.I. 02902.