Moving Along The I-Way

In December 1996, the FCC refused to allow phone companies to charge a different rate for data calls than for voice.   Since the divestiture of AT&T in 1983, under the Modified Final Judgment (MFJ) that has been supervised by Judge Harold Green, long-distance phone firms pay local phone companies for access to local phone lines, but Internet-access firms and other non-voice service providers are exempted from such charges.

With the exploding popularity of the Net, local telephone companies are charging that this exemption has left them unable to unclog the public switched voice networks and, more significantly, has discouraged them from making the investment required in their data networks that would truly let the Internet meet consumers’ needs.

The phone companies argue that the small number of users should bear the cost of upgrading and supporting access to the Net.  Internet Service Providers (ISP’s) counter-argue that access charges would slow or possibly even strangle the growth of the Net and that the phone companies are crying wolf because they are trying to get into the Net access business themselves.

Blair Levin, the chief of staff for FCC Chairman Reed Hundt, spoke at the Comnet and noted that “Now is not the time to act,” indicating that the federal government is unlikely to subject Internet providers to access charges for using local telephone lines.

Levin also mentioned that it would be unreasonable to impose old rules (access charges) on new technologies and that reform was needed on the part of the FCC and access charges.

The underlying logic of the phone companies is that while typical residential voice calls average 5 (3 ccs) minutes in duration (typical business calls use twice as much line time), data calls can go on for hours, overtaxing the public switched network. They want these data users to pay for upgrading the network.  It is perhaps a tribute to the increasing maturity of the Internet in terms of richness and variety of content that more and more users are staying on line longer.

This increase in data calls does appear to have been a boon for the local exchange carriers, in that second residential line installations were up 25% in 1996, compared to an average increase of 8% in years past.

Curiously enough, NYNEX, in the New York City metropolitan area, created a new twist on unlimited, untimed service last year. [Previously, in New York City, the only calling plan available was one where callers paid for each local call.] They offered an unlimited service to residential customers, based on call usage patterns of that customer in a given three-month period that rolled forward depending on when you signed up.  It seems paradoxical for them to argue that they’re losing money on local calls while they’re creating unlimited services at the same time.

By any measure, however, the increase in volume and length of Internet-related calls does have an impact on the existing circuit-switched voice telephony networks.  The potential for bottlenecks is greatest at the terminating central office (CO) switch that provides service to ISPs, but they can also occur at originating points where there is a high concentration of Internet users or telecommuters.

Depending on the extent of congestion, users can expect delayed dial tone, denial of dialtone, and ACB (All Circuits Busy) messages — clearly an unacceptable level of service in an era of instant gratification.

What is the alternative?  Nortel has developed an innovative approach, Internet Thruway, which minimizes traffic congestion by migrating long-duration data and Internet calls from the public switched network onto a more efficient, highly scalable packet-data network.

This is technically an enhancement to the public switched network, in that it maintains the traditional circuit-switched pathways for voice calls while adding packet-switched capabilities for data.  The telephone companies will enjoy a new revenue opportunity by providing outsourcing of modem management functions to the ISP, removing obstacles presently inherent in the ISP’s business model.

As the popularity of the Internet continues to soar, more and more telephone company customers will go “on line.”  It is likely that many of these customers will use phone company facilities for access.  As this occurs, it will no longer remain a question of how to service an “elite” minority of users but how to provide the ubiquitous “data dial tone” that has long eluded the public-at-large.

Jonathan B. Spira is the CEO and Chief Analyst at Basex.  This article originally appeared in the Basex Online Journal of Industry and Commerce (BOJIC).

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