Originally created 04/11/98

No FCC action to impose fees on Internet phone services



WASHINGTON -- Companies that offer long-distance calling over the Internet could end up paying to support the nation's telephone system just as traditional phone companies do. But not yet.

The Federal Communications Commission, in a report to Congress Friday, said Internet phone services seem more like telecommunications services, -- which are regulated, than like Internet services, which are not. But because information is lacking, the FCC said, it is not ready to conclude that the Internet service should be regulated as a telecommunications service.

Such a finding could require IDT Corp., Qwest Communications, Level III and other Internet phone companies to pay fees to support affordable telephone service. That would result in higher rates.

Some Internet telephone services "bear the characteristics of telecommunications services, but we do not, however, believe it is appropriate to make any definitive pronouncements in the absence of a more complete record," the report said. But the door was left open to future regulation, FCC officials said.

Internet long-distance calls can be made on personal computers or on the telephone with calls being routed over the Internet or other some other data network. Quality is patchy, however, and special software is sometimes needed.

Less than one-half of 1 percent of all telephone time is taken up by Internet calls.

In most cases, Internet phone companies -- just as traditional phone companies -- rely on local phone companies to begin and end calls. Long-distance companies pay local companies fees for this service. A portion of the fees goes to support affordable phone service.

Under pressure from the Clinton administration and other opponents of regulation, the FCC watered down language in an earlier staff report that recommended classifying these Internet services as telecommunications services.

"The very difficult questions posed by new technologies don't lend themselves to talismanic decision making," FCC Chairman Bill Kennard, said in an interview. Still, he added: "We can't dodge these questions forever."

He said the FCC would try to resolve whether Internet phone companies should be forced to pay fees when the commission responds to specific complaints and petitions. Kennard said the FCC would not open a proceeding on its own to regulate Internet phone companies. Last week, FCC officials, speaking on condition of anonymity, said the FCC would move forward on its own.

Sen. Ted Stevens, R-Alaska, chairman of the Senate Appropriations Committee, had asked the FCC to report how it intends to overhaul a labyrinth of subsidies that support affordable phone service.

And the administration had urged the FCC to soften the stance taken in the earlier staff report. "Any proposal to regulate Internet telephony as a `telecommunications service' would raise contentious issues," Larry Irving, assistant secretary for communications and information at the Commerce Department, wrote in a letter to Kennard.

Separately, the FCC's report, as expected, did not recommend that America Online Inc. and other providers of Internet service pay access fees, as local phone companies and others have argued they should. Internet service companies say they indirectly pay the fees now when they buy network services from traditional phone companies.