The Change Mariner

FCC weighs role in Internet calls

SeattleTimes:
The telecommunications industry, eager to find a route around a 100-year-old regulatory regime, has turned to a new path: the Internet.
In the month since a federal court in Minnesota ruled calls delivered over the Internet are not subject to state regulation, Qwest Communications International, Verizon Communications and SBC Communications have announced intentions to beef up their ability to deliver phone calls over their data networks.

The Federal Communications Commission (FCC) traditionally has had a hands-off policy when it comes to regulating the Internet. But it will hold its first hearing tomorrow in an effort to decide whether it needs to step into an issue that has the potential to transform the industry.

In Washington state, regulators next year are expected to rule for the first time whether the technology falls under their authority. A federal judge found that the Washington State Utilities and Transportation Commission was better-suited to make such a decision.

The stakes in the debate are huge. Federal and state governments could lose billions of dollars in revenue from regulatory fees if calls moved onto the Internet no longer are subject to the charges. And if the FCC chooses not to regulate Internet calls, it could raise questions about the future of the Universal Service Fund, a $6 billion federal program funded by telephone fees that subsidizes phone service in rural areas and Internet service for schools.

...Local and long-distance companies are migrating quickly to the new technology to avoid the cost of maintaining separate voice and data networks. Nortel Networks, the Canadian telecommunications equipment maker, estimates local telephone companies could cut costs of running a network by 30 percent by shifting to an Internet-based network. "The market is absolutely moving in the direction of the convergence of these networks," Nortel executive Martha Bejar said.

Long-distance companies also hope to reap huge savings by using the Internet to bypass local telephone networks. Long-distance companies pay local companies $25 billion a year in "access charges." The fees cover the cost of connecting long-distance customers to the local network. The long-distance companies say they should not have to pay access charges for Internet calls.

FCC Chairman Michael Powell had been reluctant to jump into the debate. As recently as October, he said the agency would launch a notice of inquiry, an agency proceeding designed to invite public comment on an issue without reaching a decision. But Powell this month suggested in a letter to Sen. Ron Wyden, D-Ore., that the agency could issue a final rule within 12 months.