CALIFORNIA CRUNCH Pacific Telesis documents woes of Internet traffic >BY BETH SNYDER, Switching & Transmission Editor

Pacific Telesis put its foot down last week-on top of Internet service providers. The Bell regional holding company offered its own extensive study detailing the havoc caused by Internet traffic on California's public switched network.

The conclusion: Upgrading the voice network to accommodate ISPs is expensive, necessary and should be compensated. Pacific Bell will lose $500 million in revenue over the next 10 years to pay for network upgrades, the carrier claims.

Federal regulation is to blame for the problems, PacTel officials said.

"The [enhanced service provider] exemption must be eliminated immediately and be replaced with a modest usage fee," said Steven Hubbard, head of wireless and Internet strategy for PacTel. "Such a subsidy acts like a drug. Even though [the ISPs] may want to get off it, they can't.

In California, interexchange carriers pay 1.4¢ a minute for access, although the average access charge across all RHC territories is about 3.8¢.

Pacific Bell officials' idea of a modest fee is 1¢ a minute for ISPs, although they believe the 1¢ rate may be where the Federal Communications Commission is headed as it tackles access reform, Hubbard said. Among other findings, the study asserts that a 1¢ a minute charge would result in about 80% of dial-up users paying less than an additional $5 a month for access.

The study was conducted during a two-week period in January at 38 randomly selected switching centers supporting ISPs from 880,000 dial-up Internet calls.

The RHC conducted the research as part of a nationwide filing with the FCC, which elicited comments from carriers, ISPs and Internet user groups in deciding on future access charges as part of the Telecom Reform Act of 1996.

Groups like the Internet Users Coalition and the Internet Access Coalition, as well as long-distance carriers, filed petitions and papers asking that access charges for ISPs continue to be excused. However, the two sides do agree on one thing: Internet traffic should be carried on data networks, not voice networks.

One part of the Internet Users Coalition filing reads, "The development of high-bandwidth, open architecture data networks is of paramount importance to Internet users, but imposing new charges on ISPs or Internet users will not help promote this goal.

Joe Savage, vice president at Ryan Hankin Kent in San Francisco, said that while both sides have their points, he likes the FCC's general idea of moving to a more competitive market.

"If I had a gripe about this, it would be that it's regulated as opposed to letting the market determine who pays what," Savage said. "If there was a fully competitive local loop access, the ISPs could shop around.

Pacific Bell has taken a few hits not only about opening up competition, but also about selling Internet service through its own subsidiary even while it complained about the negative effect on its network.

Hubbard defended the carrier, saying the strategy to aggressively sign up Internet customers was a long-term goal. "We thought to not be in the market would be strategically crazy," he said. "We took the long view that this current imbalance is not going to last."