==================================================== ################ ############# ################ ## # ## ############# ## ### # ### ### # # # ## # ### ### ## # # # # # # # # ## # # # # ## ## # ## # # # ## ## ## # # ### # ## # # # # # # # ## # ## # # # # ## ### ### ### ### # # # ## # ### # ==================================================== Free Speech Media, LLC Computer Professionals for Social Responsibility March 17, 1996 Number 24 ==================================================== Compiled, written, and edited by Coralee Whitcomb Please direct comments and inquiries to cwhitcom@bentley.edu. ==================================================== For more information on Computer Professionals for Social Responsibility, please write CPSR@CPSR.ORG or call 415-322-3778. ==================================================== The Telecom Post is posted to several distribution lists and is also available from the CPSR listserv. To subscribe, send to LISTSERV@CPSR.ORG with the message SUBSCRIBE TELECOM-POST YOUR NAME. Unsubscribtion requests should be sent to the list from which you receive the Telecom Post unless you purposely subscribed to it through CPSR in which case you would write to LISTSERV@CPSR.ORG with the message UNSUBSCRIBE TELECOM-POST. ===================================================== The Telecom Post is posted more or less weekly. My apologies for cross-posts. Archived issues are now available at http://www.cpsr.org/dox/telecom-post/ ====================================================== TOPICS 1. Modem Tax - Rumor or Reality? 2. The Coming Bell Charges 3. The FCC is Off and Running 4. Universal Service 5. State Regulator Establish Principles 6. Copyright Legislation 7. Telecommunications Policy Roundtable - NE Report MODEM TAX - RUMOR OR REALITY? If you want to comment to the FCC you must do so by APRIL 8. For several years a rumor has swept over the land that a tax was to befall us for using digital communications. Just as this rumor became accepted as an urban legend - it might become true. I do not understand the situation very well. The economics of the NII are going to be very complicated. Interconnection between competing companies is going to lead to zillions of obscure costs and charges attempting to balance the scales - many of which will affect the way we ultimately view this medium. If you look closely at your phone bill, you will find an "access charge" listed on the long distance portion. This charge is from the local phone company to the long distance company for the use of local lines to originate and complete long distance calls. It replaces the pre-divestiture practice of cross-subsidizing costs - overcharging business and long distance calls in order to keep costs down for residential service. Access charges amount to a substantial portion of the income enjoyed by local phone companies - around 40% of long distance costs. A second type of charge is the Subscriber Line Charge. This charge is meant to cover the costs of keeping the infrastructure adequate to meet the demand and is a flat, per line fee. Finally, there are interconnection costs meant to cover the connection of one carrier to another. In today's world there are two kinds of phone companies, facilities-based and resellers. Facilities-based own their own infrastructure, resellers lease lines at wholesale prices from the facilities based bunch. At the moment Internet Service Providers (ISPs) and Cable companies are considered Enhanced Service Providers (ESP) and not subject to many of the regulatory requirements placed on phone companies. This "modem-tax" issue has been triggered due to the ability, with products such as "WebPhone", to make long distance calls over the Internet. With the advent of the ability to verbally communicate long distance digitally, long distance phone companies figure they're missing out on the revenue from long distance calls - analog or digital. And local phone companies are losing the resulting access fee. America's Carriers Telecommunication Association (ACTA), is a group of independent long distance companies to serve the needs of small businesses. Its membership includes 130 companies involved in telecommunications. Along with the LECs, ACTA is upset about the increasingly available means of bypassing the traditional phone system and its charges. ACTA compares the charges as $.22/minute long distance phone v. $.033/minute Internet. It has filed a petition with the FCC asking for a determination on just what kinds of communications are permissible over the Internet. There are lots of kinds of communications traveling over the Internet - voice, ASCII, binary attachments, MIDI, video, etc. It's all digital. But the implication of the ACTA filing is that digital traffic should be monitored and all voice bytes charged as long distance calls. Local phone companies are complaining that digital communications hog bandwidth since callers are apt to stay on the line longer - forcing them to expand their infrastructure. If digital long distance communications are not providing an access fee, it becomes a matter of voice calls subsidizing digital calls. Reconciling this discrepancy means ISPs would be the logical place to require usage fees. And who would ultimately pay those fees, the costs of the additional reporting + a little profit? Like I said - it's complicated. Is this a matter of real unfairness to the phone companies - or is this the first step into a deregulated environment? A discussion list poster drew an enlightening comparison to the advent of many private innovations and the resistance they met from the entrenched interests; Edison's incandescent lamp and the gaslight companies, FedEx and the post office, Walmart and small town America. We've committed to a new set of rules - will we be able to let go of the old ones? COMING BELL CHARGES Customers for Access Rate Equity (CARE), a coalition of consumer groups concerned with impending rate hikes by local phone companies warn that if the FCC does not take action quickly, rate hikes might reach $485 million this summer. The increase would be seen in higher long distance access charges. What effect does that have on competition in the local loop? If long distance carriers must spend more to deliver their primary service and they must buy excess capacity from the Baby Bells to build new, competitive, local phone service - how fast do you suppose real competition is likely to develop? The FCC has until June 30 to act on something called the X factor in order to prevent these hikes from taking place. To date, regulation has kept a lid on charges by tying profits to actual costs. (Rate of Return, ROR) Local phone companies have chafed under this setup and fought hard for a price cap method of determining charges. Establishing a price cap works for them because their expenses are decreasing and ROR would have required a corresponding decrease in rates. Of course, it's us, the ratepayer, who ultimately foots the bill - however it's determined. In case all of this has left you feeling sorry for the Baby Bells - A New Jersey study found that current access fees return far more to the local phone companies than needed to subsidize residential (flat fee) service. It claims that since the 1984 divestiture, local exchange companies have collected $60.9 billion more in access fees than they spent on new construction. 60% of these fees were paid by AT&T. The complexity of this issue is going to drive many of us to simply sigh and write the check each month. It's my feeling that this is where we run the greatest risk of shutting down the empowerment potential of this network. The electronic activism that developed over this legislation is just the start of what might become true citizen participation. The Internet was designated an ESP to allow a "fledgling" technology to take hold. Has it had enough time? AND THE FCC IS OFF AND RUNNING March 8 initiated the start of the FCC's marathon rulemaking year. All eyes will be on FCC Chairman Reed Hundt to see how he manages to pull of this Herculean task. The March 8 _Washington Telecom Week_ reports that he intends to "very aggressively interpret the Act" and is already showing signs of a willingness to step outside its mandates. Hundt has made some big claims. He's suggested that he will be able to implement the Telecommunications Act ahead of schedule and that he will get unanimous consent from all five commissioners on each rulemaking. This big talk has received both skeptical and critical response from Congress - probably triggering a higher level of scrutiny than would have been the case. Universal Service is one of the first items on the agenda. He is a strong advocate for public school and library hook-ups. But coming on the heels of his proclamations - any personal agenda setting will likely meet a high level of resistance. UNIVERSAL SERVICE The Joint Board to define Universal Service has been formed. This board is charged with the hammering out the details of 1) the definition of the services that will be supported by Federal universal service support mechanisms; 2) define those support mechanisms; and 3) otherwise recommend changes to FCC regulations to implement the universal service directives of the 1996 Act. The Joint Board consists of 8 members. Chairman Reed Hundt (chair of the Joint Board) Commissioner Andrew Barrett Commissioner Susan Ness Sharon Nelson, Washington State Utility and Transportation Commission Laska Schoenfelder, South Dakota Public Utility Commission Ken McClure, Missouri Public Service Commission Julia Johnson, Florida Public Service Commission Martha Hogorty, Missouri Public Counsel (the consumer advocate) On March 8, the FCC released the Notice of Proposed Rulemaking (NPRM) on the establishment of the board. Comments from the public will be accepted until April 8. The NPRM covers the three tasks listed above as well as the particulars with regard to the "Snowe-Rockefeller" provision. Snowe-Rockefeller provides for discounts to public schools, libraries and rural health centers. While much will be decided by the joint board, state regulatory agencies will be left with the job of determining the rate of discount. Who is to provide that discount? It is expected the Internet service providers and cable companies will claim exemption because they don't fall into the exact definition of who is to grant these discounts. Since the bulk of this service will be local, it does fall squarely on the shoulders of the local exchange carriers (LECs) without the benefit of access fees and cross-subsidies. With the chaotic restructuring of bundled services and pricing, the telecomm field is not going to be easy to figure out for a while. If the discount is to be taken straight out of the hide of the LECs we can expect to see a slow and painful road ahead for the beneficiaries of universal service. LEC resistance will be lowered if a universal service fund is developed to help subsidize the discounts. It will fall on the state regulatory agencies to create these funds. STATE REGULATORS ESTABLISH PRINCIPLES The National Association of Regulatory Utility Commissioners (NARUC) has established four policy principles to be used in the state-level implementation of the Telecommunications Act. They are: *states must retain flexibility to implement local competition and pricing policies consistent with local market conditions *to ensure the expeditious development of competition in all telecommunications markets and avoid regulatory gridlock, general national principles should be articulated and federal one-size-fits-all policy should be avoided. *consistent with the Act's intent to transition towards a market-based telecommunications industry, federal policies should compliment, and not impede or duplicate, state efforts to foster local competition. *to avoid creating an opportunity for forum shopping by the industry, the FCC and the states should work together to develop policies which are compatible and allow for state creativity and innovation to facilitate competition and preserve universal service. COPYRIGHT LEGISLATION The NII Copyright Protection Act of 1995 (HR 2441) will be proceeding through its paces over the next few weeks. The library community has developed a large and diverse coalition of groups (Digital Future Coalition) to fight the provisions held in the House bill and an identical Senate counterpart (S 1284). These provisions are meant to enhance copyright protection in electronic media. They are based on a White Paper released by the Commerce Department last fall. The House has concluded its hearings and will now move on to marking up the bill. The Senate Judiciary Committee will probably have one day of hearings later in the month. The library community is concerned over provisions in the bill that alter the current Fair Use Doctrine as codified at Section 107. Fair Use governs the limited copying currently allowed in paper media for personal use and transmittal purposes. A second serious issue is the liability of libraries and educational institutions for copyright infringement by users of their computer networks. The current wording makes it unlawful to browse through online digital libraries - Internet and non-Internet. It could also be interpreted to criminalize simple browsing. The Association for Computing Machinery (ACM) has submitted a letter to Rep. Carlos Moorhead, Chairman of the Subcommittee on Courts and Intellectual Property, of the House Judiciary Committee. The letter points out that legislation risks placing a serious chilling effect on academic and scientific research due to the liabilities involved in transmitting documents. They ask that technical means be used to protect copyright holders, that each institution remain free to devise a strategy appropriate for their purposes and that Congress refrain from imposing single law to cover all cases. More information on this issue can be found at http://guess.worldweb.net/dfc and http://www.acm.org/usacm/. TELECOMMUNICATIONS POLICY ROUNDTABLE - NE REPORT The first meeting of TPR-NE was attended by about 15 people from various backgrounds. The bulk of the meeting was a discussion as to the kind of action a group like this would take. Would we put our energies into a public education campaign or would we be more of a specialized surgical strike force, responding with testimony and official comments directly to the policymakers. The decision to go one way or another was not resolved. A quick set of phone calls to the various agencies put us on the various lists to be notified when public hearings or actions are to be taken. We will be notified by the Department of Public Utilities, the Attorney General's office and the Cable Commission. The people I spoke to at these offices reported that they were still in a "wait and see" mode with regard to the Telecommunications Act.