Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Path: utzoo!utgpu!water!watmath!clyde!rutgers!ames!sdcsvax!ucbvax!SIMTEL20.ARPA!W8SDZ From: W8SDZ@SIMTEL20.ARPA.UUCP Newsgroups: comp.dcom.modems Subject: Telenet analysis(1) of FCC access fee proposal Message-ID: Date: Sat, 15-Aug-87 16:50:00 EDT Article-I.D.: SIMTEL20.KPETERSEN.12326762799.BABYL Posted: Sat Aug 15 16:50:00 1987 Date-Received: Sun, 16-Aug-87 10:06:20 EDT Sender: daemon@ucbvax.BERKELEY.EDU Distribution: world Organization: The ARPA Internet Lines: 293 Telenet Communications Corporation 12490 Sunrise Valley Drive Reston, VA 22096 THE FCC PROPOSAL TO IMPOSE ACCESS CHARGES ON ENHANCED SERVICE PROVIDERS ISSUE ANALYSIS I. Background Under the FCC's rules adopted in the Second Computer Inquiry (often called Computer II) in 1980, computer-based services such as value-added networks; database services; timesharing and other remote computing services; electronic mail; and voice messaging services were defined as "enhanced services," and firms providing such services to the public were "enhanced service providers" (ESPs). The FCC's rules provided that enhanced services were not a common carrier activity, ESPs could not be regulated as carriers at either the federal or state level, and, thus, ESPs did not pay carrier access charges. In contrast, long-distance common carriers (e.g., AT&T, MCI, and US Sprint) paid carrier access charges for their use of the local exchange dial network to access their customers. Carrier access charges were introduced in tandem with the AT&T divestiture to replace the longstanding system of "settlements and division of revenue" wherein revenues for long- distance telephone service were allocated within the pre-divestiture Bell System and shared with the independent telephone companies. II. Summary of the FCC's Proposal As stated in the attached Notice of Proposed Rule Making (NPRM), the FCC now proposes to apply its carrier access charges to all enhanced service providers (ESPs) who utilize local exchange dial lines to originate or terminate interstate traffic. The FCC's "enhanced service" definition, as discussed above, would encompass value-added networks (VANs) such as Telenet and any type of host-based services provided to external users for a fee. III. Financial Impact on Telenet and PC Pursuit Customers The FCC's rate structure for carrier access charges includes two components: "traffic-sensitive" (TS) and "non-traffic sensitive" (NTS) rate elements. The TS charge varies from one exchange to another, averaging 3.12 cents per minute nationwide. The NTS charge is currently fixed at 4.33 cents per minute for "terminating" access and 0.69 cents per minute for "originating" access. Although most ESP networks, such as Telenet, primarily involve dial-in rather than dial-out traffic (i.e., they operate in an "originating" mode), under the FCC access charge rules ESPs would be charged the higher "terminating " NTS rate. "Originating" rates are only available for traffic that also terminates using dial access -- which ordinary long distance (MTS) calls do, but most ESP traffic does not. Thus, under the FCC's proposal, most ESPs would be subject to total charges of 3.12 + 4.33 = 7.45 cents per minute, or $4.47 per hour, for dial-in or dial-out access to the ESP's network. IV. Policy Arguments A number of compelling arguments can be made against the FCC's access charge proposal. These include the following: A. Impact on Information Services Industry 1. The access charge proposal would greatly increase the cost of on- line computing and information services --hitting users of low-cost services (especially in the home and educational markets) particularly hard. Development of the market for such low-cost services would be stifled, depriving U.S. consumers of affordable information services. In addition, access charges would have a devastating affect on the Bulletin Board System (BBS) community due to the cost-increase caused by access charges. 2. Access charges would have serious indirect effects on the emerging "information economy" and upon U.S. competitiveness in world markets. Such charges would affect the viability and capability of the information service infrastructure that supports U.S. industrial and commercial activities. 3. Access charges would also have a direct negative effect on the U.S. balance of trade. The information services industry is a bright spot in the U.S. industrial trade picture, but its vitality, and thus its ability to continue strong export sales, would be harmed by undermining its domestic market. 4. Contrary to the FCC's claim, ESPs and their customers would experience massive "rate shock" if access charges were applied to them -- just as in 1983, when the FCC noted this effect and decided not to take such action. 5. Imposition of interstate access charges by the FCC would be an open invitation for the state PUCs to do likewise for intrastate ESP traffic. This would further increase the adverse financial impact upon ESPs and their users. In addition, the FCC proposal has undesirable re- regulatory implications, particularly at the state level. B. Impact on Telephone Rates There would be virtually no offsetting benefit to the consumer if access charges were imposed on ESPs. There would be no change in the price of local exchange services, and due to the enormous volume of MTS/WATS traffic relative to ESP traffic, there would be only a tiny potential reduction --estimated at less than one percent -- in the price of long distance voice service. C. Discrimination 1. The FCC proposal singles out computer services from all other non- carrier users who pass interstate traffic through the local exchange. This is clearly discriminatory. Moreover, there is no rationale for sweeping any users of the network into the access charge pool. 2. The massive increase in the cost of VAN service would lead large data communications users to consider alternative means of meeting their needs. Large users with high traffic densities would implement private networks which -- although perhaps more costly than their current VAN service -- would avoid access charges. To the extent VANs lost traffic from such users, their overall unit costs would increase. This would impact small users who have no alternative but VAN service, thereby exacerbating the large-vs-small user discrimination. ACTIONS FOR PC PURSUIT CUSTOMERS FCC Procedures and Recommended Actions for Telenet Customers and Their Users As indicated in the attached NPRM, the FCC's access charge proposal is the subject of a new rulemaking proceeding, CC Docket 87-215. The FCC has scheduled two rounds of written comments in this docket. The Comment period has been extended to September 24 with Reply Comments due on or before October 26. Both before and after these filing dates, any interested parties may discuss the issues with the FCC Commissioners and staff. In addition, interested parties should consider contacting their Congressional delegations and members of the House and Senate Telecommunications Subcommittees since members of Congress can also influence the FCC on behalf of their constituents. A. Written Comments Letters should be addressed to The Honorable Dennis Patrick, Chairman, Federal Communications Commission, Washington, DC 20554, with copies to the Secretary, Mr. William J. Tricarico; the Chief, Common Carrier Bureau, Mr. Gerald Brock; and to each of the other three Commissioners: Commissioner James Quello Commissioner Mimi Weyforth Dawson Commissioner Patricia Diaz Dennis On the letter, indicate "RE: CC Docket 87-215". In addition, we strongly recommend that you send copies of your comments/reply comments and/or any correspondence to the FCC on this matter to your Congressman, your two Senators, and the Chairmen of the House and Senate Telecommunications Subcommittees. (The names and addresses of your Congressional representatives can be obtained from your local library, Chamber of Commerce or your local Democratic or Republican headquarters.) A cover letter should be attached, stressing the importance of this issue and asking the Member of Congress to express his/her concerns to the FCC. The subcommittee chairmen are: The Honorable Edward J. Markey, Chairman Subcommittee on Telecommunications and Finance Committee on Energy and Commerce U.S. House of Representatives Washington, DC 20515 The Honorable Daniel K. Inouye, Chairman Subcommittee on Communications Committee on Commerce, Science and Transportation U.S. Senate Washington, DC 20510 xxxx Please also forward a copy to Telenet's Regulatory Affairs Dept. (12490 Sunrise Valley Dr., Reston, VA 22096), so that we will be aware of it in our lobbying efforts. B. Lobbying Interested parties may discuss the issues in this docket with the FCC Commissioners and staff at any time prior to the FCC's issuance of a "Sunshine" notice stating that it plans to consider the matter at its next Public Meeting --which will probably occur sometime in November or December. It is perfectly appropriate to contact the FCC now if you have any questions about this matter, but meetings and telephone calls for the purpose of lobbying your views are generally most effective after the two rounds of written comments are completed -- i.e., after October 26. If you choose to follow-up your letter with a telephone call, such contacts should be focused on the four Commissioners, the Common Carrier Bureau Chief, and the Chief of the Bureau's Policy Division. Their phone numbers are: Chairman Dennis Patrick 202-632-6600 Commissioner James Quello 202-632-7557 Commissioner Mimi Dawson 202-632-6446 Commissioner Patricia Dennis 202-632-6996 Gerald Brock, Chief, Common Carrier Bureau 202-632-6910 Thomas Sugrue, Chief, Policy Division, Common Carrier Bureau 202-632-9342