IP: THE FCC, INTERNET SERVICE PROVIDERS AND ACCESS CHARGES

[David Farber <farber () cis upenn edu>]

                    FEDERAL COMMUNICATIONS COMMISSION         
  FACT SHEET
     
                                                                                      February 1997


        THE FCC, INTERNET SERVICE PROVIDERS AND ACCESS CHARGES


This fact sheet offers informal guidance on an issue that has generated a
great deal of public interest.  For more
specific details about the proceedings currently before the Commission,
please visit our web site
(http://www.fcc.gov) or public reference room or call our duplicating
contractor for a copy of CC Docket Numbers
96-262, 94-1, 91-213 and 96-263.


The Federal Communications Commission (FCC) has requested public comment on
issues relating to the charges
that Internet Service Providers (ISPs) and similar companies pay to local
telephone companies.


On December 24, 1996, the FCC opened a proceeding to reform the system of
interstate access charges.  Each
long distance telephone call you make includes per-minute fees that your
long distance carrier pays to the
originating and terminating local telephone companies over whose facilities
that call also travelled.  Those fees,
which are designed to recover the costs to local telephone companies for use
of their facilities, are referred to as
"access charges."   


As part of this proceeding, the FCC sought comment on the treatment of ISPs
and other "enhanced  service
providers" that also use local telephone companies' facilities.  Since the
access charge system was established in
1983, enhanced service providers have been classified as "end users" rather
than "carriers" for purposes of the
access charge rules, and therefore they do not pay the per-minute access
charges that long-distance companies
pay to local telephone companies.  


This issue is being considered on two different tracks.


I. Notice of Proposed Rulemaking on Access Charge Reform


The  Notice of Proposed Rule Making (NPRM) on Access Charge Reform seeks
comment on proposals to
restructure the entire system of access charges paid to local telephone
companies.  The Commission is seeking to
make the access charge system more consistent with the development of local
competition in the telephone
industry, and with principles of economic efficiency.  


As part of this process, the Commission considered whether enhanced service
providers, such as ISPs, should be
required to pay interstate access charges.  The 
____________________________________________________________________________
__Office of Public
Affairs, Public Service Division, 1919 M Street NW, Washington, D.C., 20554
        202-418-0200/TTY 202-418-2555


Commission tentatively concludes that ISPs should not be subject to access
charges as currently constituted.  If
you want to learn more about this issue you should read paragraphs 282
through 290 in the Notice of Proposed
Rulemaking (the rest of the document covers other issues).  You can also
access this document on the FCC's Web
site, or you can obtain this section of the document by calling our fax on
demand system at 202/418-2830 and
requesting document number 4824.  


The final deadline for comments on the Notice of Proposed Rulemaking is
Friday, February 14, 1997.  


You can submit formal comments by delivering or mailing five copies to:
Federal Communications Commission,
Office of the Secretary, Room 222, 1919 M Street, NW, Washington, D.C.
20554.   You can also send informal
comments via email.  If your email concerns the question of whether Internet
and other enhanced service providers
should pay access charges, it should be addressed to <isp () fcc gov>.  If your
email concerns other issues in the
Access Reform NPRM, it should be addressed to <access () fcc gov>.


II.  Notice of Inquiry On Internet and Interstate Information Services


In a Notice of Inquiry (NOI) launched with this same Access Reform
proceeding, the FCC is seeking to identify what
policies would best facilitate the development of the high-bandwidth data
networks of the future, while preserving
efficient incentives for investment and innovation in the underlying voice
network.  The NOI does not make any
specific proposals, but seeks comment generally on the implications of
information services such as Internet
access for the telephone network.


If you want to learn more about this issue you should read paragraphs 311
through 318, the NOI contained within
the Access Reform document.  You can also obtain this document from the
FCC's Web site, or you can obtain this
section of the document by calling our fax on demand system at 202/418-2830
and requesting document number
4824.  


The deadline for comments on the Notice of Inquiry is March 24, 1997.  Reply
comments, submitted in response to
the initial round of comments, will be accepted through the close of
business on April 23, 1997.  


You can submit formal comments by delivering or mailing five copies to:
Federal Communications Commission,
Office of the Secretary, Room 222, 1919 M Street, NW, Washington, D.C.
20554.   You can also send informal
comments via email by addressing them to <isp () fcc gov>.




    Frequently Asked Questions on Internet Services and Access Charges


Q:      Does the FCC regulate the rates charged by Internet Service Providers
(ISPs)?


A:      No.  ISPs are considered "enhanced service providers" under FCC rules.
The FCC does not regulate the
rates that enhanced service providers charge to their subscribers.


Q:      How does the FCC regulate the rates that local telephone companies charge
to ISPs?


A:      ISPs purchase local phone lines so that customers can call them.  Under
FCC rules, enhanced service
providers ISPs are considered "end users" when they purchase services from
local telephone companies.  Thus,
ISPs pay the same rates as any other business customer, and these rates are
set separately in each state.  By
contrast, long-distance companies are considered "carriers," and they pay
interstate access charges regulated by
the FCC.  


Q:      How are access charges different from the rates ISPs pay now?


A:      Today, ISPs typically purchase "business lines" from local phone
companies.  Business lines usually include
a flat monthly charge, and a per-minute charge for making outgoing calls.
Because ISPs receive calls from their
subscribers rather than making outgoing calls, ISPs generally do not pay any
per-minute charges for their lines,
which is one reason many ISPs do not charge per-minute rates for Internet
access.  Access charges, by contrast,
include per-minute fees for both outgoing and incoming calls.  The rate
levels of interstate access charges are also
in many cases higher than the flat business line rates ISPs pay today.


Q:      Have local phone companies requested authority from the FCC to charge
per-minute rates to
ISPs?


A:      Since 1983, there has been an ongoing debate about whether enhanced
service providers should be
required to pay access charges, based on the contention that these companies
use local networks in the same
manner as long-distance carriers.  In June 1996, four local telephone
companies (Pacific Bell, Bell Atlantic, US
West, and NYNEX) submitted studies to the FCC concerning the effects of
Internet usage on these carriers'
networks.  The companies argued that the existing rate structure did not
reflect the costs imposed on local
telephone companies to support Internet access, and that Internet usage was
causing congestion in part of the
local network.  In connection with these studies and other pleadings,
several local phone companies have asked
the FCC for authority to charge interstate access charges to ISPs, although
they have not filed a formal petition for
rulemaking.


Q:      Is the FCC considering allowing local phone companies to impose access
charges on ISPs?


A:      The FCC has requested public comment on whether ISPs should pay current
access charges, and more
generally on how Internet and interstate information services that use local
telephone networks should be treated. 
The FCC's initial proposal is that ISPs should not be required to pay
current access charges, but the Commission
has made no final decisions.


Q:      On what issues is the FCC asking for public comment?


A:      In the Notice of Proposed Rulemaking, the FCC is asking for comment on
whether ISPs and other enhanced
service providers should pay the access charges now paid by long-distance
companies.  


        In the Notice of Inquiry, the FCC is asking for comment on how to create
incentives for companies to make
the most efficient use of the telephone network for Internet and other
information services, and on the impact of
different rate structures for ISPs on network usage and deployment of new
technologies.


        For more specific questions, see the Access Reform document itself.  The
NPRM and NOI are part of the
same document, which is available on the FCC Web site at
<http://www.fcc.gov/isp.html>.


Q:      What is the difference between a Notice of Inquiry (NOI) and a Notice of
Proposed Rulemaking
(NPRM)?


A:      A NOI is the earliest step in the FCC's process and typically asks
questions in an effort to gather enough
information to make informed proposals on a given topic.  A NPRM is a
request for comment on specific proposals
made by the Commission.  After the FCC reviews the comments filed in
response to an NPRM, the FCC can issue a
Report and Order adopting new rules.


Q:      Is the FCC worried about the effects of different pricing structures on
the ISP industry, and on
usage of the Internet?


A:      Yes.  The Commission expressed concern about the effects that imposition
of access charges could have
on the competitive ISP marketplace, and also noted that the Internet would
likely not have grown so rapidly in recent
years if most users had been required to pay per-minute rates for Internet
access.  At the same time, local
telephone companies have argued that per-minute rates would more accurately
reflect the costs that ISPs impose
on the network, and would provide sufficient revenues to fund network
upgrades needed to more efficiently
handle data traffic.  


Q:      What are the deadlines for filing comments?


A:      For the NPRM, which asks whether ISPs should pay current access charges,
the final deadline is February
14, 1997.


        For the NOI, which asks for comment more generally about the implications
of Internet and interstate
information services, the comment deadline is March 24, 1997, and the reply
deadline is April 23, 1997.


        Please note that both sets of deadlines have been moved back from what was
originally established in the
Access Reform document released in December 1996, in response to petitions
for extensions of time to file
comments.


Q:      How do I file comments on this issue?


A:      You can submit formal comments by delivering or mailing five copies to:
Federal Communications
Commission, Office of the Secretary, Room 222, 1919 M Street, NW,
Washington, D.C.  20554.   Your comments
must include the docket numbers,  96-262, 94-1, 91-213, and 92-253.  More
information on filing formal comments is
available on the FCC Web site at <http://www.fcc.gov/ccb/>.


        Because of the importance of these issues to the Internet community, the
FCC has also established an email
box for informal comments at <isp () fcc gov>.


Q:      Will comments filed by other parties be available for review?


A:      Formal comments are available for review in the FCC Reference Center in
Washington DC.  In addition, we
will make available on the FCC Web site at <http://www.fcc.gov/> any copies
of formal comments we receive in
electronic form.  


Q:      Is the FCC considering "surcharges" or "taxes" for use of the Internet or
online services?




A:      No.  The FCC has sought comment on whether ISPs should be treated as end
users or carriers, and has
proposed initially to keep the current system in place.  The debate involves
charges levied by local phone
companies, not government taxes.


Q:      Is this the "FCC modem tax" that has been floating around the Internet in
various forms for
several years?


A:      The "modem tax" referred to a proposal in 1987 to require enhanced
service providers to pay interstate
access charges, which at that time were significantly higher than they are
today.  The 1987 proposal was
abandoned in 1988.  The current Access Reform proceeding is entirely
separate, and the FCC has specifically
proposed not to require enhanced service providers to pay access charges.  


Q:      What is the next step in the process?


A:      The Commission will review the comments filed in response to the NPRM and
NOI.  The FCC has expressed
its intention to issue a Report and Order on reforming the interstate access
charge system by May 1997.  As for
the NOI on Internet and interstate information services, the record does not
close until late April.  Based on that
record, the Commission will decide whether at a later date to issue an NPRM
seeking comment on specific
proposals.  The Commission also held a public forum on Access and Bandwidth
on January 23, 1997, in order to
more fully address questions relating to the implications of Internet
services for the telephone network.  The
transcript of the forum and related materials are available on the FCC Web
site at
<http://www.fcc.gov/bandwidth/>.












        ---FCC----