December 2, 1997

EFFICIENT SERVICE OR TAKE-OVER BID ON THE INTERNET?

by Andy Oram
American Reporter Correspondent

CAMBRIDGE, MASS.—Since the earliest days of computer networking, when Fidonet or UUCP correspondents dialed each other up at night and exchanged batches of email, computer users have depended on telephone lines to carry their traffic. And this has set up a tense, adversarial relationship between those who provide data networks and those who provide voice networks. While painful for the companies in those fields, competition benefits the public because both sides are spurred to find new technological breakthroughs in the services they offer.

Only in recent years have the data networks become a big enough business to attract the attention of the telephone companies, but already the unhappy love/hate symbiosis has led to several conflicts over policy. Now, some ISPs think that telephone companies are trying to take over the technology of Internet service, and ultimately to control that service.

The newest skirmish grows from a conflict in the fall of 1996, when several local telephone companies complained in a report about the number of calls they handle from homes and small businesses to Internet Service Providers—calls that place an unusually high burden on the telephone network because they last much longer than voice calls. Although critics pointed out at the time that there was no immediate crisis, the phone companies worried about future congestion and asked the FCC for access charges that would have forced metered usage. The Internet providers and their supporters essentially said, “Your network is handling our calls inefficiently. Don’t complain and jack up prices; make a more efficient network that’s designed for data!”

And one might think from a quick glance that the phone companies have now done that. Bellcore, under contract from some Bell phone companies, has come up with a proposal that would offload ISP traffic to another network, completely changing the relationship between the ISP and the phone company.

The phone companies are not doing this as a public service. Local exchange companies will lose lucrative ISP traffic to cable modems if they don’t offer robust connections. Something is needed fast. But the Bellcore solution reflects the traditional monolithic attitudes held by phone companies.

The proposed solution is to cut down as much as possible on the time the data call is on an analog wire. It would switch calls directly to another, fully digital network built by local telephone companies. Thus, an individual phoning his or her ISP’s number would go right into a modem at the phone company’s central office and handed over in digitized form to the ISP.

The authors of the proposal enthusiastically describe its benefits for the ISP, because it removes much of the burden of handling calls. But ISPs don’t want it. It puts all control at the telephone company’s office, including all opportunities for technological innovation.

In effect, the Bellcore plan turns ISPs into resellers. If the plan were implemented, ISPs would handle messy, labor-intensive work like billing and customer service. In return they’d get a small cut from the telephone companies’ take. As other competitors to telcos have found, you don’t get much profit margin as a reseller and have little to offer your customers.

The plan, interestingly, also assumes a single, unified phone network. There’s no evidence that incumbent phone companies are considering the possibility of the competition called for in the Telecom Act. Fred Goldstein, a policy expert working for Internet provider BBN, says, “The plan isn’t legal, and there’s no regulatory basis for it.”

Goldstein has no trouble with telephone companies offering this kind of switching service as an option to ISPs. But the Bellcore plan implies it would be applied universally.

As voice and data service gradually merges, there will be more and more impetus toward a single unified network. But it’s up to regulators to introduce competition into this network so that the public can benefit from innovation and competitive pricing.


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