Once again, an issue that could jack up the rates for Internet usage will be examined by California state regulators this week.
On Thursday, the state's Public Utilities Commission is scheduled to vote on a dispute involving Pacific Bell and Pac-West Telecomm, a small, Stockton-based telephone company. At issue in the case are fees paid to smaller phone carriers who provide connections to Internet service providers (ISPs) by large carrier like Pac Bell.
The key question in the case is whether calls to ISPs should be treated as long-distance calls -- as Pacific Bell argues -- or as local calls. Earlier rulings by the commission have treated these calls as local in nature, thus allowing ISPs to avoid paying hefty long-distance charges and other fees for hooking their subscribers up to the Internet. Internet enthusiasts say these additional fees could dramatically increase the cost of Internet usage and slow the booming growth of the new medium.
Pac Bell and other Baby Bells argue, however, that massive Internet usage has clogged up their aging networks, making it difficult for them to deliver quality voice and data service. The companies have in the past proposed plans for raising Internet-usage fees to cover the construction of a new digital network dedicated exclusively to Internet use.
Pac Bell petitioned the commission to reconsider its ruling made in October to leave the so-called "interconnect fees" intact, despite a ruling from the Federal Communications Commission that such calls should be treated as long-distance. If the commission accepts Pac Bell's proposal on Thursday, it will come back at a later date for a lengthy discussion on how to structure such Internet calls.
A spokesman for Pacific Bell said last week that even if the company's petition won the approval of the body, there would be no immediate change in Internet fees, since the issue would have to be debated further.
Changes in the makeup of the commission could affect the outcome, although nobody knows for sure which way it will go. The five-member panel currently has two spots vacated by appointees of former Gov. Pete Wilson. Those two appointees voted in favor of the ISPs last year.
Gov. Gray Davis has yet to name permanent replacements. Davis sent two top advisors -- Tal Finney, gubernatorial policy director, and Loretta Lynch, head of the governor's Office of Planning and Research -- to serve briefly on the board last week when the matter was supposed to be voted on. The vote was delayed to allow the new members to study the issue.
Most calls to ISPs start with local Baby Bell carriers such as Pac Bell. Under the current law, companies like Pac-West get a fee from Pac Bell for completing the call to the ISPs. The law was designed to bolster competition in the local phone markets.
But that hasn't happened the way lawmakers originally envisioned, and now Pac Bell claims the law is an unfair subsidy, and most Internet calls are long-distance in nature anyway. The company began withholding the fees from Pac-West two years ago and has accumulated about $50 million in an escrow account. Pac-West is petitioning the commission to make Pac Bell pay the fees.