Internet dial-up fees to continue

The Associated Press
Monday November 06, 2000

SAN FRANCISCO – State utilities regulators have tentatively agreed to continue charging California’s leading phone companies more than $150 million per year for the Internet dial-up calls their customers make. 

If approved, the proposed California Public Utilities Commission decision could mean higher rates for Internet dial-up service say some service providers. 

Under the “reciprocal compensation” payment system initiated by the Federal Telecommunications Act of 1996, phone companies are reimbursed for completing calls made by customers of other companies. 

Large phone companies want Internet calls classified as long distance to defray the annual cost. Internet calls in California are often completed using smaller phone companies because they charge lower rates. 

An administrative law judge of the state PUC determined that Internet dial-up connections are local calls and reciprocal payments between phone companies should continue. Smaller phone companies say their financial livelihood relies on such reimbursements. 

“If we can’t recover the cost from Pacific [Bell], we either eat that, or become less profitable and less competitive, or we have to charge our receiving customers,” said John Sumpter of Stockton-based Pac-West Telecomm Inc. 

Larger carriers such as Verizon Communications and Pacific Bell say the current system is unfair because they are left paying virtually all the bills for the connections. Pacific Bell estimates it will pay $135 million in reciprocal fees this year in California and calls such fees an “unsustainable cost burden.” 

Some large phone companies argue that Internet phone calls last much longer than ordinary phone use and fees for keeping customers connected add up fast.