IP: ISDN Rate Hearings Thrown For A Loop >Microsoft Offers

[Dave Farber <farber () central cis upenn edu>]

SAN FRANCISCO EXAMINER


09/27 ISDN Rate Hearings Thrown For A Loop >Microsoft Offers Fast, Cheap
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  San Francisco Examiner
  By Louis Trager
  Copyright 1996


  Just when state regulators thought the final arguments over raising ISDN
Internet access rates had sounded, a technological bombshell exploded.
  During a debate described as a "culture clash between Bellheads and
Netheads," the Public Utilities Commission learned Thursday that Microsoft
Corp's newest operating system allows users to replicate the high-speed of
ISDN lines at a fraction of the cost.
  According to arguments heard by the PUC, users of Windows NT 4.0, can
link four ordinary phone lines to four modems on their computer to
duplicate the ISDN connection speed.
  Such users would pay Pacific Bell about $60 a month for 24-hour-a-day
World Wide Web, e-mail, fax and corporate network connections at 128
kilobits per second.
  By comparison, if Pac Bell's bid for a rate increase were approved, ISDN
access would cost about $900 a month. Now, the Windows NT gambit threatens
to jam the phone network and gobble up scarce phone numbers.
  Frustrations, complications
  The 11th hour revelation shows the frustrations and complications of
regulating Pac Bell's charges and services during the prolonged transition
from its longtime monopoly to an era of deregulated competition.
  David Frankel, president of Jetstream Communications, a home-office
equipment company in San Jose, tried to reassure commissioners. He said
few consumers would pay for four modems, and whatever premium charges
Internet service providers imposed, in order to use the Windows NT for
virtual ISDN access.
  But PUC Chairman Gregory Conlan pondered whether the commission would
have to reopen its completed hearings in order to take testimony on the
issue.
  "People are smart," he said. "They're going to figure out the cheapest
costs."
  The information that emerged Thursday is not part of the formal evidence
in the case and therefore can't properly be considered in the decision.
  Barring a delay, Administrative Law Judge Kim Malcolm said she expected
to write a proposed decision within a few weeks and thought the commission
would act on it before the end of the year.
  Speed a necessity
  ISDN lines transfer data four to five times faster than traditional
modems. The speed isn't just a matter of convenience; without it,
multimedia and other data-fat uses simply aren't practical.
  And though other fast network connections are coming - notably ADSL and
cable hookups - they aren't going to be as widespread and economical as
ISDN for years.
  The PUC proceeding in The City sees the cable TV industry lined up with
Pac Bell in favor of rate increases, and consumer groups allied with big
computer companies in trying to prevent or moderate any rise.
  "It illustrates the culture clash that exists between the computer
industry and the telecommunications industry," said Robert Larribeau Jr.,
representing the California ISDN Users Group.
  Commissioner Jessie Knight said the tough case required regulators to
weigh Pac Bell's financial arguments against "helping the roll-out of a
new technology."
  Pac Bell contends that current, PUC-controlled prices make the service
unprofitable to operate.
  Robert J. Mazique, senior counsel at corporate parent Pacific Telesis
Group, suggested that ordinary phone subscribers were subsidizing the
shortfall.  But under questioning by Commissioner Josiah Neeper, Mazique
said the company was making up the difference.
  Pacific Bell wants to raise rates by $8 a month to $32.50 for consumers
at home and $33.75 for business, plus hourly usage fees.
  More important to moderate and heavy users, the company would stop
providing unlimited usage during non-business hours and start charging
based on time after 20 hours a month.
  75 percent use less
  Three-quarters of customers use less than that amount, the company says.
Off-peak hours over the cap would be billed at up to about 60 cents per
hour.
  A $125 installation charge would remain in effect, though some argued
that six monthly installments should be allowed.
  Opponents want rates held down, in order to advance California's
high-tech future - and, not coincidentally for Pac Bell adversaries Intel
Corp. and Compaq Computer Corp., sell more computer hardware.
  Pac Bell has only 92,000 ISDN customers, 10,000 of them consumers, out
of a California customer base of 16 million. Mazique acknowledged the
company had no financial incentive to push the service now, but promised
that would change if rates rose.
  Critics don't believe Pac Bell is losing money on the service.
  Some want the company to offer consumers unlimited service for $29.95,
as the local phone company in Roseville does. Others, recognizing that
users need some incentive to relieve the phone network by turning off
their service overnight and while they're away from the computer, suggest
a much more liberal cap of 200 uncharged hours.
  Conlan repeatedly questioned whether Pac Bell's increase was justified
by its costs, on top of an average $18.40 expense to provide regular phone
service.
  Russell Teasdale of the business-systems firm Internex in Santa Clara,
said independent analysts in other states had found the added cost was
less than $10 a month.
  Pac Bell's charges are by no means the heaviest tolls on ISDN users.
  They must own relatively sophisticated PCs, costing at least $1,500, and
ISDN modems, costing a few hundred dollars more.
  In addition to Pac Bell's ISDN line, they also must pay a service
provider approximately $30 a month for Internet access. Unlike ordinary
access that carries a monthly fee as much as one-third less, with
unlimited usage included, all time on ISDN service is charged
additionally.