California Internet Service Providers Association: Bill to Boost Internet Costs Moves Forward - H.R. 4445 Reciprocal Compensation Adjustment Act of 2000 - Brief Article

ISP Business, Oct, 2000

The House Telecommunications, Trade and Consumer Protection Subcommittee passed a bill that upsets the current regulatory framework for the Internet, could boost Internet access costs by up to 33 percent and allows Baby Bells to keep the money, said the California Internet Service Providers Association (CISPA).

H.R. 4445, the "Reciprocal Compensation Adjustment Act of 2000" sponsored by Billy Tauzin (R-LA) exempts the Baby Bells from the cost of helping their customers reach Internet service providers. However, the bill would not require the Baby Bells to refund the cost savings to consumers.

"Our customers will end up paying the bill. We would have to raise our rates by about 33 percent," said Peter Engdahl, president of Snowcrest, an Internet service provider (ISP) that specializes in serving small rural communities. "Many of our customers would be unable to pay those extra costs." According to Engdahl, rural Internet users will be hit hardest by the passage of H.R. 4445.

About 90 percent of Internet users have dial-up Internet access, which means they reach their ISP using a regular phone. When Baby Bell customers use the network of a competing phone company to reach their ISP, the Baby Bells are required to help pay for that call. The fee is called reciprocal compensation.

The bill ends reciprocal compensation by replacing it with a "bill and keep" accounting structure, in which the Bells would bill their customers and keep the funds without compensating the smaller phone companies who complete millions of calls each month for them. The subcommittee rejected an amendment offered by Heather Wilson (R-NM), which would have required a GAO study to determine whether H.R. 4445 will increase costs for consumers. The bill ends the practice of treating Internet calls as local calls. As "local" phone companies, Baby Bells will no longer be responsible for helping their customers log on-line.

"Right now, when consumers pay their local phone bill each month, that covers the cost of the phone calls that connects them to their Internet service provider. The Baby Bells want to offload the cost of those calls to their customers," said David Simpson, counsel for CISPA. "To do so, they're willing to upset the current regulatory framework for the Internet."

According to Simpson, the preservation of widespread, low-cost Internet access is dependent on three current policies: (1) states have the authority to treat Internet calls as local for compensation purposes, (2) current federal policy doesn't distinguish between Internet calls and regular phone calls, and (3) when consumers pay their phone bill, that covers the cost of the call that gets them to their Internet service provider. This bill overturns all three of those principles.

"H.R. 4445 brings big changes to the Internet, just to profit the Baby Bells," said Simpson. "Obviously, we're against singling out Internet calls. They're no different than any other phone call and changing that policy will open a can of worms."

"There's no way consumers benefit from shifting billions of dollars to the Baby Bells. Based on the track record, those dollars would stay in the pockets of the Bells," said Mark Cooper, research director at the Consumer Federation of America, in a Friday media conference. "Right now the states are handling this issue, if we drag this to the federal jurisdiction we go down the road to per-minute fees. That's the whole logic of the federal approach."

Thirty-three states and two federal courts have told the Baby Bells that they must continue to pay their reciprocal compensation bills. The bill will go to the House Commerce Committee.