Court Ruling Could Lower Phone Costs
In a ruling that could help lower phone and Internet access costs for consumers and businesses, a federal appeals court on Wednesday upheld federal regulations that exempt America Online Inc. and other Internet service providers from paying local phone companies when their customers dial up to go online.
The ruling by the U.S. 8th Circuit Court of Appeals in St. Louis also preserves Federal Communications Commission rules aimed at slashing billions of dollars in charges from the access fees that long-distance carriers such as AT&T; Corp. and MCI Communications Corp. pay local phone companies to connect toll calls.
The decision means that tens of millions of Web surfers can continue to enjoy flat-rate Internet service and not have to worry about per-minute charges.
It also sets the stage for more reductions in the long-distance costs for business and residential phone users, because access fees make up about 5% to 8% of telephone toll charges.
Finally, the ruling may fuel greater interest in routing long-distance phone calls via the Internet, because access fees aren’t currently imposed on such calls.
Though the ruling stopped short of adopting the long-distance industry’s view that access charges are still $10 billion too high and should be lowered to equal the cost of connecting long-distance calls, government and industry officials hailed the decision.
“This is a big victory for Internet users and local phone subscribers,” said Jack Nadler, a Washington communications lawyer who represented the Internet Access Coalition, a watchdog group in the case. “What was at stake here was the whole pricing structure of the telephone network.”
“We are very pleased that the court found the FCC has the ability to fashion appropriate rules to ease the transition for consumers from monopoly to competitive markets,” FCC Chairman William E. Kennard said in a statement.
The decision is a setback for GTE Corp. and the five regional Bell telephone companies, which have filed more than two dozen lawsuits in state and federal courts challenging various FCC local-phone reforms.
But some critics say long-distance carriers may choose to pocket the $1.7-billion reduction in access fees the FCC has already ordered, instead of further slashing long-distance rates, which have already fallen more than 40% over the last decade.
“The FCC has not been sufficiently vigorous in enforcing these rate reductions and making sure that they are passed on to everybody,” said Mark Cooper, telecommunications policy director of the Consumer Federation of America. “We would like to see a more direct pass-through of rate cuts.”
The legal fight over the so-called access fees that long-distance phone companies are required to pay local carriers arose from a complex federal initiative aimed at maintaining affordable “universal” phone service for the poor and for phone subscribers living in costly-to-wire rural areas.
The politically charged issue--which attracted so many litigants in the federal appeals case that it took the court 26 pages of its 79-page decision just to list the parties--has touched off a firestorm of debate over the best way to subsidize local phone service.
Some have argued that the subsidy should be funded by a wider variety of telephone fees or even new taxes. Others, such as BellSouth Corp. and Bell Atlantic Corp., argued that industries that rely on the telephone network, such as Internet service providers, should be required to pay access fees and other phone subsidies.
But the FCC has exempted online service providers from paying the fees, siding with the Clinton administration’s contention that the Internet can grow and fuel greater global commerce if it is kept free of regulatory red tape.
The U.S. 8th Circuit Court of Appeals concluded in its ruling that the FCC was within its rights to exempt ISPs, saying that such a position “does not discriminate in favor of” the online providers, “which do not utilize [local phone carriers’] services and facilities in the same way or for the same purposes as other customers who are assessed per-minute interstate access charges.”
“This ruling basically maintains the status quo,” said SBC Communications spokesman Steve Hart, echoing the disappointment of other local phone carriers. “We would not expect any change in rates as a result of the decision.”
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