FCC Raises IP-Telephony-Regs Issue

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Washington -- While the federal government has steered away
from regulating the Internet so far, companies that provide telephone service routed
through Internet networks could eventually have to pay fees that help to support the
nation's phone system.

A Federal Communications Commission report to Congress,
released April 10, said some Internet-telephone companies might have to pay local phone
companies the same access fees that traditional long-distance phone providers pay. Those
access fees are supposed to subsidize local phone companies, so that they can keep their
prices low.

While the FCC did not come to any definitive conclusions,
it opened the door to future regulation of companies that provide
"phone-to-phone" Internet-telephone connections.

As well as access fees, the agency said it will consider in
the future whether these companies should pay into the universal-service fund, which
subsidizes phone prices in rural and high-cost areas.

The FCC report to Congress was prompted by Sen. Ted Stevens
(R-Alaska), whose vast and rural state is one of the primary beneficiaries of the USF.

Provided by a small group of companies, the FCC said
"phone-to-phone" Internet connections -- where both users are talking into
telephones, but the call is routed through the Internet instead of through public-switched
networks -- are essentially the same as traditional phone services.

"Clearly, [these are] long-distance companies dressed
up in Internet clothing," said John Schneidawind, a spokesman for BellSouth Corp.

Still a nascent industry, Internet long-distance telephone
calls are far cheaper than regular long-distance calls. For example, one company, IDT
Corp. of Hackensack, N.J., charges just five cents per minute, all day. But if these
companies have to pay access fees, their prices are sure to rise.

Internet-telephone calls can work through a variety of
equipment, including phone-to-phone, computer-to-computer and phone-to-computer. To make a
call through some systems, users need special software.

Currently, about 0.5 percent of telecommunications traffic
is conducted through the Internet.

Internet-industry observers have cautioned that the growth
of the still-developing Internet-telephony business would be hampered if it is regulated.

"We project that voice over Internet protocol will
replace traditional telephony in five years. IP lines will not only carry voice, but also
cable and video," said Sarah Hofstetter, vice president of corporate communications
at IDT. "If voice isn't part of that, we lose the ability to integrate into
everything else."

Other companies that provide Internet-telephone services
include Qwest Communications Inc., AT&T Corp. and ICG Communications.

Whether the FCC will require these companies to pay access
fees has not yet been fully decided.

In his statement about the report, FCC chairman William
Kennard noted, "A more definitive determination demands that we have a better factual
record."

But local phone companies are expected to push this issue.
Several have indicated that they will file petitions with the FCC, asking them to issue a
general ruling on phone-to-phone Internet telephony, or to consider specific-company
cases.

Jan Joebel, a spokeswoman for the Internet Access
Coalition, said that while her group would like the FCC to refrain from regulating any
aspect of the Internet, she can understand the commission's dilemma.

"It looks like a regular phone call. How can you not
say that is a phone call?" Joebel asked.

States News Service

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