Net Access Providers Worried
As FCC Rethinks On-Line Regulation
.Bell Companies Assail AT&T's Internet Plan.
By KATHRYN JONES
his spring the Federal Communications Commission will again take a look at
Internet services as part of broader hearings on telecommunications policy,
and many Internet service providers are bracing for possible changes that they
fear could push up their costs -- and in some cases drive them out of
While F.C.C. officials said that the commission had no "pre-conceived
notions" about how to treat Internet service providers in its rule-making,
Internet service providers, or ISPs, are deeply worried that the commission
may try to reclassify them and on-line services like America Online,
Compuserve and Prodigy as long-distance carriers.
)Such a change, they said, could force them to pay access line charges to the
regional Bell operating companies, burden them with new rules and perhaps
bankrupt some of the 1,000 or so small and medium-size companies that provide
direct access to the Internet.
"It would turn the information superhighway into a very expensive toll road,"
said Fred R. Goldstein, a senior consultant at the BBN Corporation, an
Internet service provider. "If it passed, it would put a lot of ISPs out of
Stanton McCandlish, manager of on-line services at the Electronic Frontier
Foundation in San Francisco, agreed that such a move could have a harsh impact
on Internet service providers.
"It strikes me as unlikely that ISPs would be regulated as phone companies,"
he added. "But they do have reason to be concerned."
The FCC will again take a look at Internet service providers this spring as
part of broader hearings on universal service and access charges. A notice for
proposed rule-making may be issued as soon as Thursday.
The AT&T Corporation on Tuesday underscored how blurry the lines have become
between long distance carriers and Internet services. The company announced
that it would offer its telephone customers five hours of free access to the
Internet each month for a year, and unlimited access for customers for less
than $20 a month.
"There certainly is a recognition that the convergence is blurring the
distinctions of communications services," said Mark Corbitt, the FCC's
director of technology policy. "But there are no pre-conceived notions about
how to go forward. We want and encourage input from the Internet community."
Internet services, on-line information services and data services currently
are classified as "enhanced service providers," an area that the FCC looked at
in 1988 and left unregulated. But several trade publications have reported
that the FCC staff has circulated draft proposals to possibly reclassify
Internet service providers.
The hearings are bound to stir up another round of debate about whether
Internet and on-line services must pay their fair share into a universal
service fund. A major point of contention is expected to be how to classify
new Internet businesses that operate in areas not addressed under 60-year-old
"We've got a Congress and regulators that want to impose the old territory
that they know on an entirely new medium," McCandlish said.
For example, Internet service providers often use local lines to connect
their customers to the Internet, yet information is often carried across state
lines. That could be interpreted as "interstate traffic" and thus bring the
companies into the regulator's realm.
Moreover, new technologies allow users to transmit voice over the Internet,
even though such products don't supply voice-grade telephone service and
aren't widely used -- yet.
"We want to make sure the FCC distinguishes between actual content services
versus the actual network that makes interaction possible," said Robert L.
Smith, executive director of the Interactive Services Association, an industry
trade group that is expected to be involved in the debate. "How we should be
treating these data services will be much more complicated.
"Maybe what we'll see is a better understanding of the separating out of the
actual network from the services of the network," he added.
Goldstein noted that any reclassification of "enhanced" services could ripple
to other Internet users as well. For example, corporate telephone exchanges
that include modems and allow employees to telecommute in and connect to the
Internet might be reclassified, he said. So might home users who run
electronic bulletin boards, he said.
"The question," Goldstein said, "is where do you draw the line?"