Internet providers have had it pretty good when it comes to Big Brother. Since 1983, the Federal Communications Commission has protected Internet access providers and other so-called enhanced service providers from access charges, the hefty fees that long-distance carriers must fork over to local phone companies in order to complete calls. Back then, the FCC was concerned that such charges could choke off the development of new technology.
This arrangement could soon come to an end. Some local carriers are furiously lobbying the FCC to lift the Internet exemption, arguing that Net surfers should pay for the strain they are placing on the local phone network. Internet interests counter that the monopoly local phone companies merely want to line their pockets before upgrading their systems. "They don't want to take the risk of investing without a guaranteed return," complains James Q. Crowe, chairman of MFS Communications Co., an alternative local carrier that owns Internet provider UUNet Technologies Inc.
FIRST STEP. Both camps must give. Local companies have no choice but to invest in network upgrades to handle the explosion of Internet traffic. But they should not expect to bill inflated access charges--currently running about 6 cents a minute--to pay for it.
At the same time, Internet providers and Web surfers can't expect special treatment forever. With 11 million American households online, the Internet no longer needs nurturing. Internet service providers may have to end their offers of unlimited access for a flat monthly rate and start billing based on usage.
That would be a sensible first step toward preventing the network overload that nonstop Web surfing threatens. Local phone networks are engineered based on the assumption that the average voice call lasts three minutes. When Internet users dial up from a modem over their phone lines, they stay on an average of 20 minutes--and often log on for hours. With those lines tied up, the system can become congested, making it impossible for some calls to get through or even for some households to get a dial tone. Local phone companies in Web-happy areas, such as Pacific Bell, which serves Silicon Valley, have already seen trouble spots when Internet traffic spikes. As more Americans log on, other carriers can expect the same.
Why not just add access charges and let Internet service providers pass on the cost to consumers? For one thing, access charges are intentionally inflated in order to subsidize low local phone rates in rural areas. The FCC is working on rules to bring those charges closer to actual costs, but even after they come down, access fees for Internet use still wouldn't make sense. That's because data calls do not need the dedicated lines used for analog voice calls. Ideally, Internet traffic should be peeled off and sent over a separate, more cost-efficient data network. But if local phone companies get their wish and are able to collect access charges for Internet traffic, they'll have less incentive to invest in data networks.
CABLE GUYS. Technologies are at hand to solve the problem. Digital subscriber line technologies (DSLs), for example, send data over the copper wire at a different frequency than voice calls. When those signals reach the local switch, Internet traffic can be handed off while voice calls continue on the traditional voice network. Another option: If Internet providers have already installed their own data networks, they can pay for the software necessary to divert Internet traffic to their facilities.
Regardless of who pays for the network upgrades, pricing will have to change to reflect usage. Whether the customer is an Internet provider or a teenager surfing the Web, a heavy user should pay more than an occasional browser. "These guys shouldn't get a free ride," argues Jeff Ward, vice-president for policy at Nynex Corp.
Local carriers can't stall on making the necessary network upgrades for long. New competition is emerging from wireless companies and from cable operators, which are starting to roll out fast modems that provide Internet access over cable. In the end, that budding competition may do more to solve this problem than government regulators ever will.